The pepper farmer, the hot sauce king, and the $23 million betrayal that broke Sriracha
Huy Fong Foods destroyed its 28-year partnership with the farmer who grew every jalapeño in the bottle. Then it watched the sauce turn orange.
Somewhere on Reddit right now, someone is retelling the story of how Huy Fong Foods betrayed the farmer who grew every jalapeño in every bottle of Sriracha. The details vary slightly with each retelling, but the bones are always the same: a shell company incorporated in secret, drone footage of proprietary harvesting equipment obtained under false pretences and handed to competitors, an ambush meeting sprung while the farmer was on holiday in Hawaii. A California appellate court laid all of this out in a 2021 judgment. The internet has been performing it as a morality play ever since.
The comments beneath each version follow a script so reliable it has itself become part of the story. A recommendation for Underwood Ranches' competing sriracha appears near the top, then a request for where to buy it, then an accusation that the whole thread is astroturfed. The sceptics have a point about the retelling: each cycle twirls the villain's moustache a little tighter, sharpens the betrayal, softens the farmer. But the court record, which anyone can read in full, needs no embellishment.
A handshake deal worth millions
Craig Underwood's family has farmed Ventura County since 1867. In 1988, a seed supplier connected him with David Tran, a Vietnamese refugee who had arrived in Los Angeles nine years earlier and started selling hot sauce from the back of a blue Chevy van, making $2,300 in his first month. Tran needed someone to grow red jalapeños. Underwood wrote him a letter. Tran contracted him for 50 acres.
What followed was one of American agriculture's stranger symbioses. Within a few years, Underwood had become Huy Fong's exclusive pepper supplier, and the two men's businesses grew in tandem with an almost biological intimacy. By 2016, Underwood Ranches had expanded from 400 acres to 3,000, with more than three-quarters devoted to jalapeños for a single customer. Huy Fong, meanwhile, had gone from a van operation to $150 million in annual revenue without spending a dollar on advertising. The two families broke bread together, watched each other's children grow up, discussed succession plans. When Irwindale sued Huy Fong in 2013 over pepper fumes irritating nearby residents, Underwood testified on his partner's behalf.
The arrangement ran on trust rather than paper. For the first decade, the parties used written agreements. After that, handshakes. Huy Fong paid Underwood by acreage under cultivation rather than by the weight of peppers produced, a structure that shared the risk of bad harvests. This informality, the California Court of Appeal later noted, was itself evidence of a confidential relationship, one that imposed legal duties of disclosure. Duties Huy Fong would spectacularly fail to honour.
What happened in November 2016
The moves that destroyed the partnership began a year before anyone at Underwood Ranches noticed. In 2015, Tran quietly incorporated a new company called Chilico. He tried to poach Underwood's COO, Jim Roberts, the man who had engineered the specialised machinery and harvesting techniques behind Huy Fong's pepper yields. Roberts declined and chalked it up to crossed wires. The following year, Huy Fong asked to fly drones over Underwood's harvest, a first in their long partnership. Underwood agreed, stipulating the footage was for internal use only. What he did not know was that Huy Fong had already signed a contract designating Chilico as its new exclusive pepper supplier.
On 1 November 2016, the two sides met and agreed that Underwood would cultivate several thousand acres for the coming season. Huy Fong committed to roughly $18 million in prepayments. Nine days later, with Underwood on holiday in Kauai, Huy Fong summoned Roberts to their Irwindale factory on the pretext of collecting equipment. When he arrived, they informed him he now worked for Chilico. Roberts refused. Tran demanded that Underwood sell peppers at $500 per tonne. Underwood's costs averaged $610. The alternative, Tran said, was Chinese pepper mash at $300 per tonne. If Underwood wouldn't comply, the $18 million would be withheld. Roberts was offered the job again. He refused again.
Underwood was locked in. The farm had signed long-term leases, some running into the 2030s, on land acquired at Huy Fong's urging. Eighty per cent of its revenue flowed from a buyer now demanding it operate at a loss or lose everything.
By January 2017, the planting window had closed. Underwood emailed Tran: no plants in the nursery, no peppers coming. Huy Fong turned to other farmers and, according to the court record, showed them the confidential drone footage to teach them Underwood's methods. Underwood fired 45 people and absorbed $14.5 million in losses over two years.
Why cheaper peppers cost more
A wheat field stretching to the horizon produces impressive yields right up until a single rust fungus arrives. Then it produces nothing. Ecologists call this the monoculture trap, and Huy Fong engineered a commercial version of it with precision, then walked straight into it.
Over 28 years, the company had induced Underwood to shed every other crop, acquire thousands of acres of new land, and develop bespoke harvesting technology calibrated to jalapeños and nothing else. Economists have a term for the resulting power dynamic. Monopsony, the buy-side mirror of monopoly, describes a market where a dominant purchaser can dictate prices because the supplier, having sunk irreversible costs into serving that buyer, has nowhere else to go. Research from Princeton's Lucas Zavala has found that in concentrated agricultural markets, farmers receive roughly half of what their produce is actually worth. The sunk costs of leases, equipment, and years of soil preparation create what the literature calls "asset fixity." The farmer cannot simply pivot. Huy Fong knew this. The court found that it exploited it.
But monopsony has a less-discussed failure mode: what happens when the dominant buyer discards a supplier whose knowledge cannot be replaced. Underwood had spent three decades learning to coax jalapeños to the precise ripeness, the vivid crimson, the exact sugar-to-heat ratio that made Sriracha taste the way it did. This expertise was not written down anywhere. It lived in the angles of harvesting blades, in planting schedules adjusted by microclimate, in the accumulated intuition of a farmer who had handled the same crop on the same soil for longer than most careers last. Huy Fong treated this knowledge as a commodity. It was not.
David Ortega, an associate professor of food and agricultural economics at Michigan State, made the telling observation to Manufacturing Dive that competing hot sauce brands did not experience equivalent shortages during the same period. The drought explanation that Huy Fong offered was not entirely wrong, but it was incomplete. Other companies sourced peppers from the same regions and kept their shelves stocked. The missing variable was Underwood.
Orange sauce, empty shelves
The damage took a few years to become visible, which may have encouraged Huy Fong to believe it had made the right call. For the first year after the split, the company got by on stockpiled mash and cheap Mexican jalapeños bought during a glut. Then the glut ended. Drought struck northern Mexico and the American southwest. And the replacement farmers, lacking Underwood's decades of site-specific knowledge, could not produce peppers of consistent quality.
Huy Fong halted production in 2020, again in 2022, declared an "unprecedented inventory shortage" in 2023, and stopped the lines once more in 2024 because its chile supply was, in the company's own phrasing, "too green to proceed with production." The sauce that had once gleamed a confident red shifted towards a sickly orange-green. Bottles disappeared from supermarket shelves and surfaced on eBay for $150. During one stretch of the shortage, two 17-ounce bottles sold for $160 on Amazon.
Huy Fong's Amazon sales fell 49 per cent year on year, according to data from Jungle Scout. Competitors swarmed. Sky Valley Sriracha's unit sales climbed 193 per cent. Yellowbird surged 374 per cent. Tabasco, Trader Joe's, and a flock of smaller brands all launched sriracha variants to fill the gap. A company that had reached $150 million in annual revenue and 10 per cent of the American hot sauce market on pure word of mouth was now ceding ground to brands most consumers had never heard of a year earlier.
Craig Underwood, still farming in Ventura County at the age of 82, told NBC Los Angeles in 2023 that his own jalapeño crops were thriving and that Huy Fong would have no shortage if the partnership still existed. His competing brand, Dragon Sriracha, launched in 2019, saw sales triple during the Huy Fong crisis, and by late 2023 had secured shelf space in 24 Costco locations.
A story doing commercial work
Every time the saga resurfaces, the same accusation follows: someone is paying for this. The suspicion is not unfounded. People who work in social media marketing have described, with disarming candour, how straightforward it is to manufacture organic-looking engagement on platforms like Reddit. Throwaway accounts cost nothing. Upvote services cost less. The trick, according to those who do it professionally, is consistency with the surrounding community. The posts that get flagged are the lazy ones. A well-crafted retelling of a genuinely compelling story, seeded at the right moment and nudged with a few dozen purchased upvotes, is functionally indistinguishable from real enthusiasm.
Each retelling of the Huy Fong saga does, undeniably, follow a script that benefits Underwood Ranches. The farmer is virtuous and hard-working. The corporation is duplicitous. A top comment reliably mentions where to buy Underwood's sauce and how much better it tastes. But the counter-argument is equally strong: millions of Sriracha loyalists noticed the quality decline independently, the internet's content-recycling machinery amplifies any satisfying narrative without anyone buying upvotes, and this particular story has the structure of a fable. Both explanations can be partially true at the same time, and neither diminishes the underlying facts established by the court.
What matters more than settling the astroturfing debate is recognising what the story's circulation actually does. Agricultural monopsony has been identified as a serious problem by Senate committees, the Department of Justice, and academic economists for decades. Four beef packers control 85 per cent of the American market. Concentration in hog packing nearly doubled between 1980 and 2010. Yet enforcement actions remain rare, and farmers squeezed by a single dominant buyer typically have no recourse beyond litigation they cannot afford. Underwood won his lawsuit, but only after being pushed to the edge of bankruptcy, and only because Huy Fong made the peculiar decision to sue him first.
The viral retelling provides something the legal system struggles to deliver: a reputational cost that compounds. Each post, each outraged comment, each offhand mention of Dragon Sriracha erodes the market position of a company that rose entirely on reputation. Huy Fong never bought an advertisement. Its brand was built by people talking. Now people are talking about something else.
What trust could not survive
David Tran's account of the rupture is worth sitting with, even though a unanimous jury rejected it. He told Fortune in 2024 that he believed Underwood had been trying to bankrupt him and seize his sauce business. His family company had never taken outside investment, never advertised, and had remained faithful to Underwood for nearly three decades. "I helped him because he grew chili for me," Tran said. "He made money, he owned land. But it is not enough. He wanted to take over my business." His sister-in-law Donna Lam compared it to being stabbed in the back.
The appellate court upheld the $23.3 million verdict, including $10 million in punitive damages, a category of award courts impose to signal that the defendant's conduct was not merely negligent but egregious enough to warrant deterrence. The legal record leaves little room for Tran's version. But the human wreckage is more ambiguous than any judgment can capture. Two men in their seventies, both immigrants or descendants of immigrants who had built something lasting in California, both stubborn enough to take it to trial, ended a quarter-century partnership over a single afternoon's argument about price. The informality that made the relationship remarkable also left it with no mechanism to absorb disagreement. No written contract specified what would happen if one side wanted out. No exit clause cushioned the blow. When trust broke, everything broke with it.
Two trajectories, one lesson
Underwood Ranches operates on 3,000 acres today, down from 4,000 at its peak, with almost no land growing peppers. The farm has diversified into processing tomatoes, onions, carrots, and basil, contract-growing for multiple buyers. Its hot sauce line remains a small fraction of revenue. The family that nearly went bankrupt rebuilt through the oldest agricultural strategy there is: not staking everything on one field, or one customer.
Huy Fong's 650,000-square-foot Irwindale factory, the one Tran once promised Underwood they would fill with chilies together, operates sporadically and well below capacity. The company sources peppers from scattered farms across three states and Mexico, none of which can replicate what Underwood provided. Production halts have become seasonal background noise.
The global sriracha market was valued at $450 million in 2024 and is projected to reach $1 billion by 2033. Huy Fong remains the name most Americans associate with the sauce. But association is not availability, and availability is not loyalty. A generation of consumers who once reached for the rooster bottle without a second thought has been forced to try something else. Many of them have not reached back. The $23 million the court awarded can be calculated. The cost of teaching your customers that they do not need you cannot.