Sriracha Licensing Information

Goals

To provide an analysis of Sriracha licensing, including the payment and royalty structure, countries they operate in, international licensing contract information, and supply chain and logistics information. This information will be used to evaluate an investment or acquisition.

Early Findings

Sriracha Hot Sauce

  • Sriracha is a hot sauce made by Huy Fong Foods. CEO David Tran founded the company 35 years ago in Los Angeles, USA. It is a spicy and tangy chili and garlic paste, named after Si Racha, a district in Thailand. The sauce is made from grinding, rather than roasting, a variety of California-grown peppers, plus salt, sugar and vinegar.
  • Sriracha has become incredibly popular with a range of spin-off products that include beer, chips, ketchup, and key chains. What is surprising given all the supplementary products is that Sriracha is not trademarked. With the number of products using the Sriracha name, the failure to trademark has no doubt meant millions of dollars have been lost in licensing royalties globally.
  • Tran has a unique perspective on this, claiming that the unfettered use of the name Sriracha has meant free advertising for a brand that does not have an advertising budget.
  • Huy Fong currently owes $23.3 million to a long-time supplier of the red jalapeno peppers. In 2019 "a Ventura County jury found earlier this month that Irwindale-based Huy Fong broke its contract with supplier Underwood Ranches and awarded a multimillion-dollar judgment after determining that Huy Fong had committed fraud by misrepresenting and concealing information." This was concerning a break down in negotiations over the supply of peppers. The former supplier has now set up its own operation in competition with Huy Fong.
  • Had trademark registration for the Sriracha name been made, Huy Fong would have been able to license the Sriracha name to all other competitors entering the market, which given the popularity of the sauce, would likely have been incredibly lucrative. The distinctive bottling trade dressing was licensed, as were other aspects of the business, but not Sriracha.
  • There have been severe consequences to the failure to trademark Sriracha, with many competitors now supplying a Sriracha Sauce as part of their inventory of products.

Summary

  • There is relatively little precompiled information available from Huy Fong Foods regarding the licensing of Sriracha Sauce and it's licensing, supply, and logistics information. However, there is a considerable amount of analysis from industry experts, media, and industry reports that discuss Sriracha. This is probably because it was unheard-of for a company of this size not to trademark such a unique product, opening the doors for its competitors.
  • There is some limited information regarding the licensing of some subsequent Sriracha Sauce products and merchandise by Hoy Fong Foods that was unable to be explored fully in the first hour of research.

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