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- [00:02]
A
Wondering. It's 2022 in the playa Vista neighborhood of Los Angeles. Inside the kitchen of the Gulf restaurant and Brew Pub, restaurant manager Chris Sessa hunches over his phone, streaming a video. Sessa's second in command peers over his shoulder. They cock their heads to hear the video. Over the controlled chaos of the kitchen, Koi Fong Foods says it was forced to suspend production of its iconic sriracha sauce because of a lack of its key ingredient, chili peppers. The company blaming severe weather for the shortage. Sessa pauses the video. Well, that explains it. For weeks, Sessa has been worrying about keeping sriracha in stock. The spicy, garlicky condiment has become an essential ingredient at Gulp. They use it in multiple dishes, including their best selling appetizer, Sriracha deviled eggs. Cesa's second in command rubs his hand on the back of his neck. It drips with sweat from the heat of the kitchen. What are we gonna do? Well, how many bottles do we have left? Almost 20. Cesa grimaces. Sounds like a lot. But the restaurant goes through six to 10 bottles a week, so they don't have long before they run out. Hey, what about Tabasco or Cholula? Oh, come on, get real. There's no way customers are gonna go for that. It's sriracha or nothing. Never seen people go so nuts about a hot sauce. Well, let's hope Hui Fong gets more chilis and soon. I don't think the drought's going away before we get through those last 20 bottles. I know. I'm just joking. I hope they find another chili supplier. There gotta be others out there. Yeah, maybe. Look, worst case scenario, we pull Sriracha deviled eggs from the menu. Yeah, the customers would just love that. This is so messed up. We got hooked on a hot sauce, and that hot sauce is completely dependent on a special kind of chili. And. And now we're all paying the price. He strides over to his office, barking over his shoulder. Just keep looking for someone who has sriracha. Meanwhile, I think I'm gonna go pray Hui Fong get some rain and some more chilies. Heard that. What Sessa doesn't know is that Hui Fong Foods isn't being completely honest. There's another reason for its production problem. A bitter standoff that's cut Hui Fong Foods from its most reliable chili supp. But what started this feud? And can it be put to rest before a slew of competitors sweep in?
- [02:47]
B
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A
And managers, you use software for your business every day. You use one piece of software to manage your customers, another to manage your employees, another to manage your finances, and the list goes on. You buy these pieces independently and hope they fit neatly together like a puzzle. And then you find out the hard way that they don't and you end up with a mess at the heart of your business operations. Does any of this sound familiar? Well, fortunately, Zoho offers a solution to this chaos. It's called Zoho One. Zoho One is a suite of around 50 pre integrated business applications that fit together beautifully. So instead of dealing with disparate software from multiple vendors with multiple contracts and price points, you deal with one vendor with all the pieces of the business software puzzle neatly put together, offered at a very attractive price. If this sounds interesting to you, you gotta check out Zoho 1 at Zoho 1, that's z o h o dot o n e with Zoho, you're not just licensing apps, you're licensing Peace of mind from wondering I'm David Brown and this is Business Wars. The rise of Huy Fong Foods and its signature sauce, Sriracha, is like something out of a fairy tale. Hui Fong founder David Tran immigrated to the United States from Vietnam in 1979. He started making Sriracha a year later, shortly after arriving in Los Angeles. He delivered the product to Asian markets around the city in an old van and with a quality product sold at a low price point. Within decades, Sriracha grew from a niche product to the third most popular hot sauce in America, with a truly devoted fan base. In 2022, Trans Sriracha was estimated to have brought in roughly $150 million in sales, and it's thought to be found in 1 out of every 10American kitchens. Huy Fong Foods had a simple domestic production process, sourcing its key ingredient, red jalapenos, almost exclusively from Underwood Ranches in Ventura County, California. It was a beautiful marriage, too. As Sriracha grew, so did Underwood Ranches. The two founders, David Tran of Huy Fong Foods and Craig Underwood of Underwood Ranches, had a good thing going. They foresaw a long future together. Until one day they didn't. Our new two part series will explore what went wrong and how a bitter feud upended the American hot sauce market. This is episode one the Only Hot Sauce Billionaire A personal note here. One of my favorite lessons about storytelling is that every great story begins once upon a time. Maybe not literally, but metaphorically. The story you're about to hear is full of similar lessons, like this one. Every business empire starts as a corner shop. Again, don't take the maxim literally, but think about it. By focusing on a specific market, in this case Asian Americans, David Tran built the credibility and revenue base he needed to expand. Zaracha became a household name by first becoming a fan favorite. That's the sort of thing that's possible when you set out to own a niche before you try to conquer a whole category. But be careful with that early taste of success, because as we're about to hear, the initial recipe may have to be tweaked more than a bit along the road to the big time. It's the mid-1970s northeast of Ho Chi Minh City, Vietnam. David Tran stands in a chili field. A warm breeze rustles the leaves of the plants. Tran is 30 years old. His older brother stands across from him, looking worried. Tran tries to reassure him.
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C
Sometimes in life you have to take a risk if you want to get ahead. I know. Think of it this way. My idea is a solution to a problem. The chile market is in the toilet right now. We won't even break even if we sell all these peppers. But if we turn them into a sauce, then we can charge a higher price point and turn a profit. I get that, but why would anyone want to buy your sauce?
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A
Tran puffs out his chest.
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C
All the guys in my unit liked it.
- [08:18]
A
Until recently, Tran was serving in the South Vietnamese army, where he worked as a cook. Hot sauce is a popular condiment in Vietnam, but most families make their own rather than buying a commercially made one. As an army cook, Tran didn't like the sauces that were available for purchase. He found them bland, lacking heat. So he too decided to make his own. It was a hit amongst his fellow soldiers, and now Tran wants to make a commercial version, but his brother is skeptical. Tran puts his hand on his brother's shoulder.
- [08:53]
C
I really think this could be a more stable business for us. I just don't want to overreact because of one bad year. What if the chili market rebounds next year and the price per bushel is great? I'm saying we can free ourselves from that yo yoing. When chili peppers are low, we make the money back by selling sauce. And when the price of peppers go up, we still keep our price point low, which brings in more customers willing to give it a try.
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A
Tran's brother nods.
- [09:17]
C
You're right. You're right. Let's try.
- [09:21]
A
Tran and his brother embark on their new hot sauce endeavor. Tran develops several different sauces. The whole family gets involved. Tran's brother continues to grow the chilies. His father in law collects and washes Gerber baby food jars left behind by American servicemen. To hold the sauce, his brother in law fills the bottles. Tran labels each lid with a drawing of a rooster, a nod to the year of the Zodiac in which he was born. Tran sells the bottles to out of work folks looking for a source of income, who in turn sell the sauce door to door. And the business is going well. But the political situation in Vietnam has become untenable for Tran and his family. After the end of the war and the transition to a socialist system, the Vietnamese government starts pressuring the ethnically Chinese population to leave the country. Tran's family is of Cantonese origin. By late 1978, Tran feels like he's made enough money that he can afford to leave and start over a new country. There's just one problem. The Vietnamese government doesn't allow refugees to leave with financial assets. But Tran thinks he has a solution. People are allowed to leave with food for their journey. So Tran hides 100 ounces of gold in cans of condensed milk. This should give them the equivalent of more than $300,000 today to start their new lives. Let me tell you, there's a common theme in many a business war. See, entrepreneurs have a different mindset. An unusually creative gift for spotting opportunity where others may see a wall trans moved to stash gold in milk cans. Clever for sure. But it was something else too. Something like survival, entrepreneurship. When constrained by bureaucracy, capital, or borders, founders often find unconventional paths forward. Maybe this is what separates entrepreneurs from employees. Bending the rules, breaking them. You be the judge. But remember, you get caught, you pay the price. And you never heard this from me, okay? To increase the family's odds of getting at least some of the gold out without getting caught, the family breaks into four groups. Each takes a different ship out of Vietnam. Tran and his wife are on separate boats. In December 1978, Tran boards a freighter ship named Hui Fong that's bound for Hong Kong. The guards don't think to look inside his cans of milk, and he safely gets the gold on board. After eight Months in a refugee camp in Hong Kong, Tran heads to the United States. In the summer of 1979, he reunites with his wife in Boston. She's also held onto her goal. The two of them are excited to see snow for the first time. But Tran's not sure what to do in Massachusetts. And when he speaks to his brother in law who landed in Los Angeles, he learns that they grow chili peppers in California. If they move there, Tran can get back into the hot sauce game. So in January 1980, Tran and his wife move across the country to Los Angeles. The next month, using some of the gold he brought with him, Tran founds Huifong Foods. He sources the peppers from local markets and sells the sauce himself. Going door to door to restaurants in chinatown. He makes $1,000 profit in his first month. First month, 1,000 bucks. Now that's validation. You know, too many startups confuse scale with success. With any new launch, what matters early on isn't some idealized notion that you may have about success. It's a whole lot more simple. It's whether someone will hand you real money for what you've made. Sure, the profit may be small, but look, it's proof someone values your product. Everything else can be scaled later. You've got the future in front of you. Tran grows from there. He has a very clear idea of who his primary customer is. Recent Asian immigrants trade restrictions prevent many of the ingredients popular in various Asian countries from being imported to the U.S. tran knows that many immigrants will be looking for replacements that they can buy in local stores. By making his hot sauce in the United States with ingredients he can find locally, he can fill that niche. Tran's business sense pays off. His sauce gains a strong foothold among the Asian American community. It's found in Asian restaurants and markets that cater to Asian customers. It's a steady business, just like his business back in Vietnam. But then Tran gets an idea. It's the early 1980s, and Tran is sitting in a restaurant in Los Angeles. A TV in the corner of the restaurant is on, and a local news anchor is relaying a story about the Olympics. The Summer Games are scheduled to be played in Los Angeles in 1984. It's a big deal for the city, but Tran is only half listening. He's jotting notes on a paper napkin, making a to do list for the week ahead. Huy Fong Foods is still a small family operation, and Tran wears a lot of hats for his company. The server brings over his food. She places the steaming plate in front of Tran.
- [15:11]
D
Can I bring you anything else? More water? Some ketchup?
- [15:15]
C
No, thank you.
- [15:16]
A
I. He trails off, his mind racing.
- [15:19]
C
Actually, some stick sauce would be great.
- [15:23]
A
No problem. The server returns with a bottle. It gives Tran an idea. What if he made a new hot sauce? A new one. One that's still distinctly Asian in its flavor profile and will still sell well with Asian customers, but also have broader appeal. A sauce that non Asian Americans would use, similar to steak sauce or ketchup. He studies the label on the bottle, his eyes catching on the word Heinz and the smaller font noting the 57 varieties of products Heinz makes. He could call his sauce tran 84, a nod to the 1984 Olympics and the cross culture mixing he's hoping to achieve. He scarfs down his food, excited to get to work developing his new hot sauce. If he does this right, this could be big. But Tran's about to discover a business liability, and it's one that will lead him to the person who will seem like the answer to his prayers. At least for a while. After telling hundreds of stories about business battles throughout history, I've learned one constant truth. Having the right support systems in place can make or break a new venture. Trust me, it was a battle even I faced on my business journey. That's why AT and T business makes so much sense for entrepreneurs today. When you're building something from scratch, or even just at the point where you're ready to grow, you need a provider that makes things easy. With AT and T business, you can have reliable, protected Internet connection you can count on, so you do not miss a beat. Building your dream might take time and a lot of work, but that doesn't mean it can't be a little easier. Wake up to the power of ATT Business and turn your vision into reality. Business.att.com hey, let's talk about something we've all experienced the stress of job hunting and hiring. Whether you're looking to hire or get hired, timing is everything. And that's where Indeed comes in. When it comes to hiring, Indeed is is all you need. Their Sponsored Jobs feature is fantastic. It helps job posts stand out by jumping to the top of the page, getting them in front of the right candidates faster. And you know what? The numbers don't lie. According to Indeed data, sponsored jobs posted directly on Indeed have 45% more applications than non sponsored jobs. And there are no monthly subscriptions or long term contracts either. You you only pay for results. Want to know something else amazing in the minute I've been Talking to you 23 hires were made on Indeed, according to Indeed Data Worldwide. That's how efficient their platform is. Look, there's no need to wait any longer. Speed up your hiring right now with Indeed and listeners of Business wars will get a $75 sponsored job credit. To get your jobs more visibility at indeed.comBW just go to indeed.comBW right now and support our show by saying you heard about Indeed on this podcast. That's indeed.combw terms and conditions apply. Hiring Indeed is all you need. It's 1988 in Rosemead, California, an eastern suburb of Los Angeles. David Tran stands in front of an idling truck outside of the new Huy Fong Foods factory. His sister in law, Donna Lam, who also works for Huy Fong, stands across from him. The driver of the truck sits with his head resting on his fist, waiting for them to finish their conversation. Tran gestures at the back of the truck, which is filled with red jalapeno peppers.
- [19:27]
C
Are you looking at these chilies? They're bruised and mushy. They're not acceptable.
- [19:32]
D
I agree they're not perfect, but that doesn't make them not acceptable.
- [19:38]
A
Since Tran developed his new sauce a few years ago, sales have continued to grow. He didn't wind up calling it Tran 84. Instead, he decided to call it Sriracha, after the coastal town in Thailand that inspired the flavor profile. The sauce hasn't broken into the mainstream yet, but it is steadily growing in popularity amongst Asian American customers. In fact, just last year he moved production into this 240,000 square foot factory.
- [20:08]
D
We don't have enough chilies to keep production going if we don't use these chilies. Are you really willing to shake shut down production over some slightly mushy peppers?
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C
What do I always say? Make a great product and profit will follow. If we use overripe chilies, our product won't be great. That is worse than shutting down production.
- [20:27]
D
Did it ever occur to you that your standards for the chilies are just too high?
- [20:32]
A
Although business has been going well for Tran, there's been one consistent problem finding a dependable supplier for the red jalapenos, which are Sriracha's key ingredient. When he started Huy Fong Foods, Tran sourced them from small markets, but those are no longer big enough to keep up with his current scale of production. And there aren't many suppliers who grow red jalapenos. Most farmers pick them when they're still green, and the red jalapenos are more delicate, which makes them harder to transport listeners. Let me interrupt with a question here. What would you do? Tran's convinced that one bad batch could do more damage than a missed shipment. When you're building a brand, consistency is currency. Customers might forgive delays, but they won't forget bad quality. Protect your reputation like it's your margin, because eventually it will be long term. Success isn't built on just more. It's all about the better. But then there's the flip side, right? It won't taste better if it never reaches the table. Hey, no one said this would be easy.
- [21:42]
C
We just need to find the right supplier.
- [21:45]
D
We've tried almost all the suppliers out there. You're never happy.
- [21:49]
C
So we keep looking. We cannot compromise on this.
- [21:52]
A
Lamb closes her eyes and takes a deep breath and then wraps on the driver's side window. The truck driver startles and then rolls down the window.
- [22:01]
D
These are too bruised. Tell your boss we can't accept them.
- [22:06]
A
The driver gives her a curt nod and shifts the truck into gear, pulling out, taking their rejected chilies with him. Tran may have won this argument with Lam, but he hasn't solved the bigger problem. For we Fong Foods to continue to grow, he has to find a reliable source for the fragile red jalapenos. Luckily for tran, about 80 miles away in Ventura county, there's a farmer looking for a new crop to sell. It's 1988, and Craig Underwood walks into a seed supply store. Underwood has grown an array of crops over the decades, everything from blueberries to fennel to parsnips. But throughout the 1980s, after changes to California's water use policy, big agriculture has made big inroads in the state. So Underwood has pivoted to growing a more niche product, baby vegetables and salad greens. But now the factory farms are coming after those markets, too. Large farms are taking their full size carrots and cutting them into smaller pieces, marketing them as baby carrots. Underwood can't compete with the big boys, so he's looking to pivot once again. If he can't, he's worried that his family farm, which dates back to the 1860s, isn't going to make it into the 21st century. He may be a fourth generation farmer, but at the rate things are going, he may be the last generation in his family to farm. As he talks through the situation with a seed supplier, the proprietor tells him he's heard about a hot sauce company in LA looking for red jalapenos. Underwood is intrigued. He's grown chili peppers before, albeit not red jalapenos, but he Thinks he can do it. He does a little more research and then writes a letter to David Tran. In the letter, he pitches growing the red jalapenos that Tran needs. Tran takes Underwood up on his offer. He has nothing to lose at this point. Since he hasn't found a pepper supplier he likes, he agrees to a deal with Underwood for 500 tons of peppers, roughly 50 acres worth. A few months later, Underwood delivers acceptable peppers on time, but another supplier doesn't. So Tran increases his order with Underwood for the next year. Over the next 18 years, the relationship continues to grow. Huifong Foods buys a steadily increasing number of chilies from Underwood every year. And Tran's goal of creating a hot sauce with wide appeal increasingly comes true. By 2001, Huy Fong Foods is selling approximately 6 million pounds of sauce and bringing in $12 million a year in revenue. In California, the sauce becomes a staple in many commercial kitchens and on food trucks, becoming a key ingredient in sushi rolls, tacos, poke bowls, and more. And its influence is spreading beyond California. The national Chinese restaurant chain P F Chang's has started using it in some of their dishes. And in 2003, Walmart began stocking the sauce in its LA and Houston stores. Over the years, as business grows, Huy Fong's relationship with Underwood Ranches becomes closer and closer. Rather than source chilies from other suppliers, largely in Mexico or China, Hui Fong sticks with Underwood Ranches to keep up with growing demand. Craig Underwood also takes his job growing the tastiest peppers seriously. He tests dozens of varieties to make sure he's growing the absolute best peppers he can. And by 2006, Underwood is providing Huy Fong Foods with 95% of their peppers. But Underwood has been careful not to become too reliant on Huy Fong Foods. He's faced potentially losing his farm before, and he doesn't want to be in that position again. So he tries to maintain a diverse business. The peppers for Huy Fong make up only 25% of Underwood Ranch's total business. Underwood also grows lemons and other vegetables that he sells both wholesale and directly to consumers at farmers markets. It's an insurance policy in case We Fong doesn't renew its contract some year. Good for Underwood. But have you been thinking what I've been thinking? What about We Fong? How much does Sriracha count on Underwood? I get the appeal. A single source supply chain looks efficient until it becomes a single point of failure. You know, diversification isn't just for investors. It's for founders, too. If your entire operation relies on one vendor, one platform, or one client, you're not just running a business. You're running a risk. In 2006, Tran approaches Underwood at his farm. He has a proposal that will make the two companies even more interdependent.
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C
Hey, Craig.
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A
David. Good to see you. You ready to figure out next year's arrangement?
- [27:29]
C
Yeah. I need more peppers.
- [27:32]
A
Same as every year.
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C
Well, demand just keeps growing, and right now, peppers are a limiting factor. I know last year you were on the fence, but I wanted to ask you again about adding more acreage.
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A
Underwood takes off his cap and wipes his forehead with a bandana. I mean, you know, first I should say I'm very flattered that you trust me with such a critical part of your business, but I gotta tell you, it makes me a little nervous to increase the acreage. I mean, if I grow more peppers, then I'm gonna have to grow less of something else, you know?
- [28:01]
C
But with me, you have a guaranteed sale. Like I've always said, you grow them, I'll buy them. You don't need to worry about selling these peppers.
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A
You, I trust. But Mother Nature, that's another story. Tran shakes his head he doesn't understand. Underwood tries again. You know, look, if something happens, say there's a drought, some kind of blight hits, just a bad year, and we don't have a good yield, then it doesn't matter. If you buy every pepper we grow, there won't be enough for us to break even. Having a diverse range of crops protects my farm. Tran nods his head but doesn't say anything. Underwood leans forward. Now, look, I appreciate that you need more peppers, and I won't take it personally at all if you supplement your supply with peppers from other sources. Okay. You do what you have to do. But look, I need to look out for the farm.
- [28:54]
C
What if we pay by acreage?
- [28:57]
A
What do you mean?
- [28:58]
C
Instead of paying per ton of chili, Huifong Foods will pay per acre you grow. That way, the yield won't matter. Good year, bad year, you make the same amount of money and we'll pay up front.
- [29:09]
A
Underwood's eyes go wide. This is pretty much the dream scenario for a farmer. Are you sure you want to do that? You do understand that means you'd be taking on a big risk.
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C
It's worth it to me. I want you to grow my peppers, and I want you to grow more of them.
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A
Underwood fights back a grin as he extends his hand. Well, you've got yourself a deal. Tran shakes his hand firmly. Underwood knows this isn't a partnership in the legal sense of the word, but it feels like a big step forward in terms of his relationship with Huifong Foods. Their fates feel tied together. The better Sriracha does, the better Underwood Ranches will do. And the way Sriracha's growing, Underwood is confident it'll only go up. He's come a long way from nearly losing his farm in the 1980s, and it's all thanks to David Tran. Now he's putting all of his eggs in the Huy Fong basket. He just hopes that's not a mistake.
- [30:24]
E
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- [31:15]
F
How many times have you wished you could be in two places at once? With wix, you practically can. Wix's website builder is packed with powerful AI tools to make running your business online easier. Build a full site just by talking with AI, get an AI agent to manage your sales and marketing, or work like a 10 person team, even if it's just you. So you don't need superpowers to get everything done. You just need Wix.
- [31:39]
A
Try it out for yourself@wix.com It's 2007 in Kern County, California. Craig Underwood walks with one of his managers through empty fields. The hot inland sun beats down on them. Underwood squints at his manager. So what do you think? His manager shrugs. Fields look good. This is good ground for peppers. I hear an unspoken but at the end of that sentence. Come on, don't be shy. Speak your mind. The manager looks around at the sprawling acreage. Well, how long a lease are they asking you to sign? A good long. While we're looking into the 2020s. That doesn't make you nervous? This is a lot of land for a long time. I know that. But really, it's Hui Fong Foods taking the risk. David asked us to increase our acreage by 50%. And he's willing to pay for that up front. Sure, for this year. But what about in 2022, when you're still on the hook for this land? Underwood shakes his head. I'm not worried about that. Sriracha's unstoppable. People can't get enough of this stuff. And Tran's betting big on it. He gave me a tour of the new facilities building out in Irwindale. Oh, yeah? Yeah, the place is huge. He told me it's 600,000 square feet. And he said, I need you to fill it up with chilies. And hey, if we're gonna do that, we need more acreage. The manager shrugs. Well, if you're confident that this deal with Hui Fong is gonna last and Sriracha is gonna continue to grow, then yeah, yeah, this land is great. Well, I've been working with Tran and the others at We Fong for almost 20 years. They're true to their word. Alright then, let's make the deal to lease this acreage. Underwood grins. This is a massive deal. By his estimates, he's on his way to being one of the largest jalapeno producers in the country. Not bad for a family farm. And it was all thanks to David Tran and Huy Fong Foods. Sriracha's popularity and cachet continue to grow. In January 2010, Bon Appetit magazine names Sriracha the ingredient of the year. By 2012, Huy Fong Foods is selling 20 million bottles of Sriracha each year. And it's become a cultural touchstone too.
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C
Girl, you got a body like Sriracha Every time I bring you round the.
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E
Homies wanna Sriracha flavored potato chips. Now, I'm not at all surprised that they now exist.
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A
So the real question is, are they any good?
- [34:30]
C
It's no secret that I love my Sriracha hot sauce shout outs to Jackson for sending me this. And it's also not a secret that this pairs perfectly with so many things. So for episode one, we're gonna see if Sriracha pairs well with Twinkies.
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A
In 2013, an LA Times columnist declares that Sriracha has reached rock star status. It's featured in an episode of the Simpsons. Their water bottles, shoes, skateboards and phone cases that all feature the now iconic rooster logo. In 2016. Huy Fong Foods breaks $100 million in revenue for the first time, and demand is still outpacing supply. Huy Fong is now the third biggest hot sauce brand in the country, trailing behind McElhenney, the maker of Tabasco and Reckitt. Benkeiser, maker of Frank's Red Hot Underwood Ranches, is undoubtedly a big part of that success. By 2015, Underwood is growing nearly 2,000 acres of pepper for Hue Fong, 40 times the number of acres they started back in the 1980s. And instead of making up about 25% of Underwood Ranch's revenue as it did nine years ago, Huy Fong is now responsible for around 80% of Underwood's business. The two companies have become symbiotic. It's not just that Underwood's operation is providing high quality chilis to Wee Fong Foods. It's doing so cheaply. For years, Underwood Ranch's operations manager, Jim Roberts, has been perfecting an improved mechanical harvester. The problem with most mechanical harvesters is that they don't just harvest the crop. They also pick up twigs, dirt and leaves. But Roberts has designed a harvester better than any other on the market. It not only picks the crops clean, it does so faster than the rest. This provides significant labor savings for Underwood Ranches, savings they can then pass on to Hui Fong. And keeping costs low is extremely important to Tran. He prides himself on making a quality product that's affordable. A 28 ounce bottle of Sriracha still typically sells for only around $5. That low price point is why it can be enjoyed by college students with no money and bought by commercial kitchens in bulk. Now think about this. Tran didn't believe in gouging. He believed in access. Pricing a premium product affordably. That's not a sign of weakness, it's a strategy. A low price point widens your audience, builds loyalty and and turns casual users into full blown evangelists. You know what? There's a reason Target sells Sriracha T shirts and not A one sauce shirts. In a world of markups and margin chasing, being the one who over delivers at a fair price creates a moat competitors can't easily cross. Because at the end of the day, price isn't just about profit margins. It's about perception too. In 2016, Underwood Ranches is on pace to harvest 100% of its jalapenos using Robert's mechanical harvester. A milestone for the farm. But then Underwood gets a request from Tran that one day soon will change everything. Tran asks if Hui Fong can record footage of the harvester at work. Traz never expressed interest in how the harvester works before. In fact, he rarely visits the fields. He's always just trusted Underwood to supply the chilies, and has shown little interest in Underwood's operations themselves. Underwood and his operation manager, Jim Roberts, agree to the request. Their only stipulation is that the footage only be used internally at Huy Fong and not shown to any competitor. Tran agrees, and in October, he hires a drone operator to record the harvester in action. A month later, the 2016 harvest is complete, and Underwood and Tran set out to make the deal for the next harvest. But Underwood is so confident they'll reach a deal, as they have for nearly 30 years, he's already preparing the ground. Growing peppers is a continuous process with with little downtime between harvesting one crop and planting the next. In early November 2016, Underwood and Tran reach an agreement. Tran will pay $13,000 per acre for 1700 acres of peppers. That's a total of a little over $22 million. And Tran agrees to pay 18 million of that up front. And as has been the standard for the two men for the past decade or so, they seal the deal with a handshake. They don't bother with a written contract. A few days later, Underwood heads to Hawaii for a vacation. He's on the beach with his wife, daughters and grandchildren when he receives a frantic call from his operations manager, Jim Roberts. Jim, can I call you back? I'm about to go boogie boarding with my grandkids. I'm sorry to bother you on vacation, but something really bad has happened. What? Are you okay? I'm fine. I'm fine. But our agreement with We Fong is over. Wait a minute. What? What are you talking about? I just made the deal with him right before I left. I know, but I got a call today asking me to come to their headquarters and pick up some equipment. And as soon as I got there, Tran said he'd formed a new company that his sister in law, Donna Lam, is gonna run, and they wanted me to work for it. What? A new company? And they tried to poach you? Now, obviously I said no, but that's not the biggest issue. Then Tran said he wanted to pay $500 per ton for the chilies. I told him that would have us operating at a loss, but he didn't care. No, no, no, wait a minute. There just has to be a misunderstanding. We already agreed on $13,000 per acre. Look, I'll talk to David. I think this was a setup. I think they used picking up the equipment as an excuse to get me to come in today. They knew you were out of town and they're trying to poach me. And I think with this new company, they want to bring the pepper growing in house and cut us out. I'm telling you, they're up to no good, I swear. Oh, come on. No way. That can't be true. David and I are in this together. He's always said as long as I grow peppers, he'll buy them. Look, I'll come home. We'll straighten this out. But as Underwood hangs up the phone, he feels a chill go through him. Despite the balmy Hawaii weather, he's banked his entire business on Huy Fong Foods. He trusted David Tran. But it also hits him that no one has the success Tran has had without being extremely ambitious. A small voice inside Underwood's head tells him that Tran has decided that the relationship with Underwood is no longer beneficial. But Underwood silences that voice. He knows Tran. Almost 30 years of business together means something. He'll fix this. He has to. If their deal is off, Underwood could lose the family farm to the same company that once saved it from wondering. This is episode one of the Great Sriracha Feud for Business Wars. A quick note about recreations you've been hearing. In most cases, we can't know exactly what was said. Those scenes are dramatization, but they are based on historical research. If you'd like to read more, we recommend what really Caused the Sriracha Shortage by Indrani Sen, published in Fortune, and How Vietnamese refugee David Tran Became a Hot Sauce Billionaire by Giacomo Tognini, published in Forbes. I'm your host, David Brown. Austin Rachlis wrote this story. Sound design by Kyle Randall. Voice acting by Chloe Elmore and Ivan Long. Fact checking by Gabrielle Joliet. Our producers are truly Tristan Donovan of Yellowant and Kate Young. Our managing producer is Desi Blaylock. Our senior managing producer is Callum Plews. Our senior producers are Emily Frost and Dave Schilling. Karen Lowe is our producer emeritus. Our executive producers are Jenny Lauer Beckman and Marshall Louie for wondering.
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