Most of Craig Underwood’s life has revolved around farming in Moorpark, California. As a second-generation farmer, Craig built his career working alongside his father on the family farm before striking out on his own to create Underwood Family Farms and Underwood Ranches. At the center of his journey is one of America’s most beloved condiments: sriracha.
For years, Underwood Ranches was the key supplier of chili peppers to America’s largest sriracha sauce manufacturer. Craig’s expertise in farming helped fuel the meteoric rise of the spicy condiment, which became a staple in kitchens nationwide. But a devastating falling-out between Underwood Ranches and the manufacturer resulted in lawsuits, financial hardship, and ultimately, the disappearance of sriracha from store shelves. Most Americans don’t know the story behind why their favorite hot sauce became a scarcity, but it’s a David-and-Goliath tale worth telling.
On this episode of “Only The Strong Survive,” Craig Underwood joins host Dan Kahn to share the full story. From the rise of sriracha to the bitter breakup and its aftermath, Craig’s journey highlights hard-fought lessons from the frontlines of farming and entrepreneurship. Here are our top six takeaways from the conversation:
-What really happened when sriracha fell off our shelves
-Farming is a lot more difficult and complex than many think.
-You need to find where your customers are and go there.
-The ability to change directions and pivot business models is vital.
-Find good people, hire them and treat them right.
-Perseverance pays off.
The Sriracha Fallout: A Battle of Epic Proportions
For years, Underwood Ranches supplied chili peppers to Huy Fuong, and played a pivotal role in making sriracha a household name based on a handshake deal. But when a disagreement escalated into a legal battle, everything changed.
“We had been growing peppers for years,” says Craig. “But after the fallout, we found ourselves asking, ‘What do we do now?’ It was a huge blow financially and emotionally. We knew we had to pivot to survive.”
This legal dispute not only affected Underwood Ranches but also led to sriracha shortages, leaving consumers scratching their heads about why their favorite condiment was suddenly so hard to find.
Farming Ain’t Easy
Many people, from watching too many Hallmark Channel movies, have a somewhat idyllic notion of farm life. However, life on the farm isn’t easy, and it is a lot of hard work. Turning a farm into a profitable business is just as hard. The competition is cutthroat, the margins are thin and the hours are long.
“From when I first started farming with my dad, there has been a huge change. Farming has gotten a lot more difficult. There are a lot more regulations. There are food safety regulations and labor standards and on and on,” says Craig. “All of those regulations cost us a lot of money, but we don’t necessarily get paid for them. It is just part of what we do. Plus, people expect food to be cheap. If the price of a head of lettuce goes up 25 cents in the store, they notice it.”
Go Where Your Customers Are
Underwood Family Farms is unique as it sells its produce directly to customers. Another differentiator is that it doesn’t have the luxury of being an e-commerce with its highly perishable products. Craig notes that to make this model work, you have to go where your customers are. For Underwood Family Farms, that has meant tapping into the explosion of farmer’s markets and even starting their own.
“We started going to farmer’s markets around 1995 or 1997, somewhere around there. My wife opened the Camarillo farmer’s market back in that period, and she worked there for 14 years. Rain or shine, it didn’t matter. She was always out there,” says Craig. “Now, we go to 15 different farmer’s markets. They have become oversaturated in some markets. Market managers always want to open new markets, and that cuts into the business of old ones. We have to be pretty selective about where we go.”
Pivot When Needed
One of the takeaways from Craig’s entrepreneurial journey is that he pivots when needed. After a major falling-out growing peppers for one of the largest suppliers of sriracha hot sauce, Craig decided to make his own sauce. The move wasn’t easy, but it gave him another income stream and put his expertise in pepper production to good use.
“I have questioned that decision over the years,” says Craig with a laugh. “A few months after the breakup, we thought we had been growing the peppers, so why don’t we make the sauce? It is a lot more complicated than we realized. First of all, we had to come up with a recipe, but that was probably the easiest part. We had to come up with a design for the bottle and go through all the regulatory approvals with the FDA and the state of California. We also had to get a canner’s license.”
Good Employees Matter
That major fallout led to an expensive lawsuit, a substantial loss of income and tough times for Craig and the Underwood Ranches business. Things looked bleak, but Craig had always treated his employees well. In return, many of his long-time employees stuck by his side, including Chief Operating Officer Jim Roberts. Finding good employees who are also good people and treating them right had paid off.
“In the cowboy culture, they would call that ‘riding for the brand,’ and Jim truly does. Frankly, the next few years were so difficult that I have to give a lot of credit to all of the people who worked for us,” says Craig. “You know, there were no more bonuses for that time period. Every week, we were worried about if we could make payroll at the end of that week.”
Perseverance is the Key to Success
Part of that ability to constantly pivot when needed is an ethos of perseverance. Craig credits most of his success to putting his head down and figuring out how to move forward in difficult times. Without that spirit, he would have hung up his hat long ago.
“When you say only the strong survive, I would say perseverance is one of the keys to success. When my dad was in partnership with my uncle, at one point, the bank said that they couldn’t afford to take out a loan because they owed too much money. That was a critical point,” says Craig. “In the ‘80s, it was a really difficult time, so we had to bring in a consultant to help us get out of the mess. In the ‘90s, we got involved in a business that was kind of difficult, so again, the bank put some pressure on us to pay them. And then the separation from David, you know that was pretty dramatic as well. So, we have somehow persevered.”
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