Sriracha Case Analysis

Case Analysis: Sriracha

Mariya Pahleva, MLP187@aubg.edu

Organizational Design and Management, Dr. McGuire

May 16, 2018

Stating the problems:

In 2014, Soon after the opening of the new factory in Irwindale, California, the local residents, stated a problem with the Sriracha factory which is the devastating odors. Residents were saying that the chile air burns their eyes and noses, causes coughing, and forces them to stay indoors.

In 2016, the city of Irwindale, California filed the second lawsuit in two years against Huy Fong Foods, manufacturer of the well-known Sriracha hot sauce. Two years after Irwindale officials dropped a lawsuit against the Sriracha, the city is suing the company for more than $400,000 in unpaid fees.

In August 2017, Huy Fong Foods sued Underwood Ranches, the company that had supplied its chili peppers for over 30 years, alleging breach of contract, accusing it of refusing to give back millions of dollars’ worth of equipment and to refund an overpayment up to $1.5 million.

Analyze the Problem 

“Business strategy is all about keeping a sustainable competitive advantage over rival firms. The product originally started out as an Asian food and has now branched off into multicultural food. It has become the next condiment. However, only those interested in adding heat or additional flavor to their foods would be interested in their products.” Following the Porter’s 5 Force, the company strategic is first focused low cost and then becomes an overall low cost. “Huy Fong Foods has begun to break away from being known as a sauce for only Asian food and now is being known as a hot sauce for all cultures. Targeting all races, ages, ethnicity, really anyone who loves hot sauce.”

Huy Fong has used the same suppliers for the past 20 years. Instead of importing cheaper chilis or outsourcing production, they get all their chiles from a family farm, in order to provide a fresh, great quality and best price sauce for their customers.

According to the South Coast Air Quality Management District that has found no evidence of air quality violations, the state decided to drop the lawsuit and Huy Fong indicated with a written promise, to solve the smell issue.

Huy Fong Foods countersued, claiming that the city had embarked on a campaign of harassment against the company. Tran was considering the merits and inconveniences of relocating his factory after having invested more than $50 million in Irwindale. “Mr. Tran said he did not plan to move the operation elsewhere, not only because of the cost of building a new factory, but because he would have to find a new supplier of chiles.”