🌶️ Sriracha: From Smuggled Gold to Hot Sauce Billions | 5

Summary

The Best Idea Yet: 🌶️ Sriracha: From Smuggled Gold to Hot Sauce Billions | Episode 5

Hosts: Nick Martell and Jack Crivici-Kramer
Podcast: The Best Idea Yet by Wondery
Episode Duration: ~46 minutes

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Introduction

Nick Martell and Jack Crivici-Kramer dive into the fiery journey of Sriracha sauce, exploring its transformation from a humble Vietnamese refugee’s passion project to a global condiment sensation worth billions. This episode unpacks the entrepreneurial spirit, strategic decisions, and cultural impact behind one of the most beloved hot sauces in the world.

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David Tran’s Early Life and Journey to America

The story begins in Sak Trang, South Vietnam, in the early 1970s. David Tran, a 25-year-old of Chinese descent, works as an army cook amidst the escalating Vietnam War. On April 30, 1975, with the fall of Saigon, David faces political upheaval and anti-Chinese sentiment under the new Communist regime.

In 1978, propelled by worsening conditions and rising persecution, David makes the life-altering decision to flee Vietnam. He embarks on a perilous journey aboard the freighter Hui Fong, which means "gathering prosperity" in Chinese. [11:01][B]: "The Hui Fong empire has been run by one guy, David Tran."

Upon arriving in Hong Kong in January 1980, David is eventually reunited with his family in Los Angeles, a city vibrant with diverse culinary influences but lacking authentic Southeast Asian hot sauces.

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Founding Hui Fong Foods and Creating Sriracha

Settling in Los Angeles’ Chinatown, David identifies a market gap: the absence of a thick, flavorful chili sauce akin to those from Southeast Asia. Drawing on his agricultural background, David leverages his knowledge of food preservation to create a shelf-stable chili sauce using fresh jalapeño peppers, sugar, salt, garlic powder, vinegar, and preservatives.

Key Quote:

Nick Martell [16:02]: "These are actually the same plants. They're just left on the vine a little bit longer. And that deepens the flavor and turns the peppers a fire engine red."

Using improvised packaging—recycled Gerber baby food jars—David begins producing and selling his sauce directly to Asian restaurants and markets. This grassroots approach fosters a loyal customer base within the immigrant community.

Notable Success:

Nick Martell [20:34]: "Within the first month, Huy Fong Foods clears $1,000 of profit. That's about $3,900 today."

David’s commitment to affordability ensures his sauce remains accessible, operating under the mantra "a rich man’s sauce at a poor man’s price."

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Zero Marketing Strategy and Organic Growth

A standout element of Hui Fong Foods' success is its zero marketing approach. Unlike competitors who invest heavily in advertising, David opts for direct sales and word-of-mouth. This strategy not only minimizes costs but also cultivates an authentic brand image deeply rooted in community trust.

Key Insight:

Jack Crivici-Kramer [25:17]: "Huy Fong doesn't do any advertising at all. It's all direct sales to Asian restaurants and Asian markets. That's TR still to this day."

This organic growth model proves effective as the sauce gains popularity beyond Chinatown, eventually permeating mainstream American cuisine.

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Supply Chain Challenges and Strategic Partnerships

As demand escalates, David faces significant supply chain challenges. The reliance on fresh, ripe jalapeños, though integral to the sauce's distinctive flavor, complicates consistent supply due to perishability and sourcing difficulties.

Critical Partnership: David receives a pivotal partnership offer from Craig Underwood of Underwood Ranches—a reliable supplier with the capability to provide consistent, high-quality peppers. This 26-year partnership ensures a steady supply, allowing Hui Fong Foods to scale operations and maintain product quality.

Quote:

Nick Martell [30:27]: "David refuses to Jack the price up even when demand for his product goes crazy."

This partnership not only stabilizes the supply chain but also enables David to keep prices low, reinforcing customer loyalty.

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Expansion, Challenges, and Maintaining Authenticity

By 1996, Hui Fong Foods expands to a sprawling 170,000 square-foot facility, marking a significant leap in production capacity. However, growth brings new challenges:

1. Environmental Hazards: In 2007, a severe drought devastates pepper crops, threatening the supply chain. David's proactive communication with customers during shortages reinforces trust and loyalty.

   Quote:

   Nick Martell [34:01]: "Customers, they like, find a replacement and never come back. But the way that David carries himself, that had a real impact."

2. Supplier Disputes: In 2016, a fallout with Underwood Ranches over pepper pricing disrupts the supply chain, leading to noticeable changes in Sriracha's flavor. Competitors and alternative brands emerge, but David pivots by sourcing from Mexico, maintaining production despite climatic adversities.

3. Community Relations: David navigates local opposition due to the pungent smell from large-scale production, addressing concerns transparently to preserve community relations.

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Global Recognition and Billion-Dollar Valuation

Despite challenges, Hui Fong Foods achieves phenomenal success. By 2019, annual sales reach $150 million, securing a 10% share of the U.S. hot sauce market, positioning Sriracha as a household staple.

In 2023, following persistent demand and limited supply influenced by ongoing climate issues, the company's valuation soars to $1 billion, crowning David Tran as the world's first hot sauce billionaire.

Notable Quote:

Jack Crivici-Kramer [40:34]: "David credits his Sriracha's loyal fans as the secret to his success."

David attributes this success to unwavering customer loyalty and product consistency, underscoring the importance of prioritizing customer satisfaction over short-term profits.

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Hosts’ Takeaways and Insights

Nick Martell:

“Advertising is what you pay for. Publicity is what you pray for. Yes. Now, Jack, you can't always plan for earned media success like David got, but if you start noticing that you got it, you can definitely lean into it.”

Nick emphasizes the value of organic publicity over paid advertising, highlighting how genuine success stories can propel a brand without traditional marketing expenditures.

Jack Crivici-Kramer:

“Sriracha Put co's before pros, Nick. What I mean is, Sriracha put customers before profits. Co's before pros.”

Jack underscores David’s customer-centric approach, illustrating how prioritizing customer needs and maintaining product integrity can lead to enduring success and brand loyalty.

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Best Facts Yet: Spicy Edition

• Production Scale: At peak efficiency, Hui Fong Foods produces 18,000 bottles of Sriracha every hour, totaling nearly 4,000 gallons every 60 minutes.

• Product Line: Despite its popularity, the company maintains a focused product line, currently offering only three sauces: Sriracha, Sambal Oelek, and Chili Garlic, catering specifically to cooking needs rather than general condiments.

• Space in Space: Sriracha has even found its way to the International Space Station, enhancing astronaut meals with its spicy kick. However, transporting liquids to space remains prohibitively expensive, with a 28-ounce bottle costing nearly $16,000.

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Conclusion

David Tran's journey with Sriracha exemplifies the essence of entrepreneurship—resilience, strategic thinking, and an unyielding commitment to quality and customer satisfaction. By identifying market gaps, fostering loyal communities, and navigating challenges with integrity, Hui Fong Foods has solidified Sriracha’s place in both American and global culinary landscapes.

Final Insights:

• Publicity Over Advertising: Leveraging authentic growth through word-of-mouth can be more impactful and sustainable than traditional marketing.

• Customer-Centric Approach: Prioritizing customer needs fosters loyalty and long-term success, even in the face of adversity.

Sriracha's story is a testament to how one individual's vision and dedication can transform a simple idea into a cultural and economic phenomenon.

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Transcript

[A]

Wondery subscribers can listen to the best idea yet, early and ad free right now.

[B]

Join Wondery in the Wondery app or on Apple podcasts.

[A]

Wondery.

[B]

It's 2011, Nick. You and I are roommates living in our shared apartment in the East Village.

[A]

Of New York in a tiny four bedroom apartment up a four floor walk up above the beauty bar where you could literally hear people making drinks at three in the morning. You could even hear the L train from that apartment. Remember, man, the next Brooklyn bound L.

[B]

Train will arrive in four minutes.

[A]

Ok, but my favorite part about that apartment was every Sunday night, without fail, all four of us would get together and we would cook our family meal.

[B]

My contribution to that apartment was that I would always pair the meal with a movie.

[A]

Yes, it was a wonderful combination. And then you had some specialties, Jack. You did an eggplant parm, you did a chicken parm, you did a lot of parm deviations. But the surprise about that apartment, Jack, was that there we're technically four roommates, but we always said that we were really five, right? Ah, because there was one more individual in our tiny East Village apartment and they weren't paying rent.

[B]

I have to give you all the credit, actually.

[A]

Yeah.

[B]

You introduced to us the fifth member of the team. It was a product, it was bright.

[A]

Red, it had a cult following and it ranks at around 2200 on the Scoville scale.

[B]

I think we're talking about Sriracha.

[A]

Sriracha rooster sauce, Louisiana ketchup, baby.

[B]

A half used bottle is probably sitting in the little shel on the door of your fridge right now.

[A]

I mean, Sriracha was one of the first alternative condiments. It was kind of like ketchup that had studied abroad in Asia and learned how to surf. It was just cooler.

[B]

You know, the bottle, the white printed logo, it's fading and the cap is crusted over with red chunks of fiery molten deliciousness.

[A]

Sriracha. It brightens up your burritos, it electrifies your eggs, it rizzes up your rice yeti. Sriracha's other competitive advantage. What is it, Jack?

[B]

The price?

[A]

Yeah, it's the price.

[B]

At about $5 a bottle, it is a cheap product. It's a condiment for the common man. Sriracha has saved countless quantities of budget meals for working families and broke college kids.

[A]

Nothing elevates a pizza bagel quite like Sriracha.

[B]

But the story of how this super sauce hit a billion dollar valuation is as unbelievable as the product is delicious.

[A]

And it centers around the brand Most synonymous with Sriracha, a low key operation at a Southern California called Hui Fong Foods.

[B]

Huy Fong Foods didn't actually invent Sriracha.

[A]

Interesting.

[B]

But they did single handedly introduce it to American palates.

[A]

I like it.

[B]

And for the company's entire 44 year existence, the Huifong empire has been run by one guy, David Tran.

[A]

David Tran. Now, David's entrepreneurship story actually starts in South Vietnam.

[B]

David was a refugee after the Vietnam War. He was stateless for part of his life, but he created a sauce which served as his personal passport.

[A]

In fact, David Sriracha has gone from a small batch operation delivering homemade hot sauce and recycled jars to a global phenomenon worth billions. It's the third most purchased hot sauce in the United States, just behind Tabasco and Frank's.

[B]

It helped David Tran become the world's first hot sauce billionaire. And he pulled it off without any marketing spend whatsoever. On the other hand, Kraft Heinz spent $750 million on marketing just in 2023. You'll hear stories of daring escape of a startup working literally out of the back of a van.

[A]

You'll hear a smuggling scheme involving condensed milk and a dust up between two old friends that has the potential to change everything about Sriracha as we know it.

[B]

This is a wild story. We'll tell you why Sriracha is the best idea yet.

[A]

Hey Jack, go grab those pizza bagels from Wondery and Teaboy. I'm Nick Martel.

[B]

And I'm Jack Carvecci Kramer.

[A]

And this is the best idea yet. The untold origin stories of the products you're obsessed with and the bold risk takers that brought them to life.

[B]

I got that feeling again. Something familiar, but new. We got it coming to you. I got that feeling again. They changed the game in one move. Here's how they broke all the rules.

[A]

This episode is sponsored by Abbott. Let's talk about a small thing that can make a big difference if you have diabetes. The Freestyle Libre 3 Plus sensor. It's amazing to see how the sensor gives you real time glucose readings so you can see the impact of every meal and activity to make better choices. The Freestyle Libre 3 Plus sensor can help you live life with diabetes on your terms. You can try it for free at FreestyleLibre US offer available for people who qualify. Visit MyFreestyle US to see all terms and conditions. Certain exclusions apply for prescription only safety info found @freestylelibre us.

[B]

Our story starts in Sak Trang, South Vietnam, a province nestled in the lush Mekong delta. It's hot and dusty in the dry season and hot and wet in the rainy season. The year is 1970, and David Tran is 25 years old, the third eldest of nine kids.

[A]

As a teenager in the 1960s, David worked a retail job along with his older brother selling chemicals in Saigon. But the Vietnam War, it was happening more or less in their backyard. So as the war escalated, David went back home to Sak Tranq to finish school and avoid getting dragged into the front lines.

[B]

One night, David's trying to get some sleep. Suddenly there's a loud knocking on the door. It's the military police. They've been going house to house looking for young men of draft age to join the South Vietnamese Army. And now it's David's turn.

[A]

But in a way, David gets lucky, because instead of heading to the front as a combatant, he actually gets the biggest break of his life. Because David is made a cook in the army, he's stationed mainly in Saigon, which is sheltered from battle for most of the war. At night, he can hear the bombs and the gunfire, but honestly, they seem pretty far away. And by day, he gets to visit the markets to buy ingredients for the meals that he's serving. And those Saigon markets, they are bursting with aromas that frankly, we could probably smell from this podcast studio. Jack, can I interest you in a little cilantro, maybe some clove, a little.

[B]

Cinnamon, maybe a bit of star anise? Nick?

[A]

Yeah, it's like the whole McCormick spice cabinet. Jack.

[B]

David serves as an army cook for five years, but then on April 30, 1975, Saigon falls to the North Vietnamese army and suddenly the war is over. The US backed capitalists in the south have lost.

[A]

Now this sets a whole bunch of changes in motion. The Communist government takes over. Saigon gets renamed to Ho Chi Minh City, and obviously people have big feelings.

[B]

About all of this, but for David, he's just relieved the war is over. Five years of army life have left him basically broke. He's gotten married to a nurse during the war, and they have a baby on the way, which is amazing. But there's a lot of pressure for him to now support his growing family. Oh, yeah, happily, David stayed close to his older brother, the same one he followed to Saigon as a teenager to work in the chemical store. This brother owns some farmland just northeast of the city, and guess what he grows there?

[A]

Alfalfa. Tons of alfalfa. No, it's gotta be chili peppers, right? It's chili peppers.

[B]

It's chili peppers. David helps his brother farm the Chilies and bring the crops to the market. But soon they discover a problem most farmers face on the regular market volatility.

[A]

Market volatility. Yetis during harvest season, your crop is everywhere and the price is super low. During scarce times, the price might be high, but you just don't have enough product. And it's exactly this situation that devastated American farms during the Great Depression. And it's why the US government has been paying farm subsidies to farmers since 1933.

[B]

David and his brother don't have the option of subsidies, but they do have a different secret weapon.

[A]

Interesting.

[B]

Thanks to their time working in chemical retail, David knows how to use a couple basic food preservatives.

[A]

Yes.

[B]

Which means he can take their chilies and turn them into a shelf stable long lasting sauce.

[A]

It's like that scene in every movie, Jack, where like some random character's got a random talent that suddenly saves the end of the day. Like, I think that's half the characters in Goonies.

[B]

Yeah, they get past the booby traps because the girl can play the organ. Suddenly, David and his brother are no longer in the chili business. They're in the chili sauce business.

[A]

It's a too long haute startup, which actually means chili sauce in Vietnamese.

[B]

But they don't have the means for fresh packaging. The business is so small, so young, so bare bones, that they repurpose Gerber baby food jars left behind by American soldiers.

[A]

I'm sorry, Jack, Pause the pod for a moment. David's first company relied on old used recycled baby food jars from GI Joe.

[B]

That's what I'm saying. And the entire operation becomes a family affair. David's father in law washes the jars and David processes the peppers.

[A]

And Jack, this may be my favorite visual of all. But once the sauce is made, David then delivers it by bicycle to each of the markets throughout his neighborhood.

[B]

You can hear the clink of the baby food jars while he's riding his bike over the potholes.

[A]

Well, after three years in, David's small business is actually a modest success, even under communist rule.

[B]

And if life had remained stable for David, we probably wouldn't be talking about him today.

[A]

Good point.

[B]

But then something happens that pushes David hard to make an unthinkable decision. So even as David Tran and his family are building their modest hot sauce business, life in general is getting harder. David and his whole family are of Chinese origin. And though they've been living in Vietnam for generations, the new government is stoking anti Chinese sentiment all across the country.

[A]

For thousands and thousands of Vietnamese people of Chinese descent. Rations are now limited. The government starts seizing businesses and seizing assets and forcing people to work as farm laborers. It's horrible.

[B]

David decides enough is enough. So in 1978, he's able to get his wife and kid and then her parents on the refugee boats taking people out of the country. Until finally, months later, it's time for David to join them.

[A]

Wow.

[B]

It's December. Dusk is falling over Ho Chi Minh City. David shivers as he steps onto a soot covered bus. Instinctively, he reaches into his pockets to guard his money. Only he's left all his currency behind. Luckily, he has something more valuable hidden away in his luggage.

[A]

Oh, and it's not a chili sauce recipe. More on that in a bit.

[B]

The bus rumbles away from the city and towards the seaport. He and a handful of other passengers board a tiny little sailboat to escape the country. The small boat is how you get to a much, much bigger boat. A massive Taiwanese owned freighter called the Hui Fong, which means gathering prosperity. But for the 3,000 people aboard the Huifang, prosperity seems really far away. The ship is crowded. There aren't enough bathrooms. The rough seas make passengers sick. Everyone is hungry and exhausted. And no one knows exactly where they'll be allowed to dock. So on Christmas Eve, 1978, the Hui Fong arrives in Hong Kong. But authorities won't let them dock for almost a month. They're refugees in a boat with 3,000 people, and they're just floating.

[A]

Jack. I got annoyed at Delta the other day because we were taxing for like, 13 minutes.

[B]

And then finally, in mid January, they're allowed to disembark.

[A]

Wow.

[B]

Together with thousands of shipmates, they file into a refugee camp in a converted airport. And despite all the hardship, David is thankful. His wife and kid have made it to a different refugee camp in Indonesia. And David has one more thing going for him now.

[A]

Yetis, you remember that Jack said a few minutes ago David couldn't take any money with him when he left the country? Right, Jack?

[B]

Yeah, it's true.

[A]

Yeah. In fact, taking more than $10 out of Vietnam was prohibited by the Vietnamese government.

[B]

But refugees were allowed to bring food.

[A]

Interesting.

[B]

So David brings a bunch of cans of condensed milk. But if some inspector were to crack open those cans, they wouldn't find any dairy in there.

[A]

What would they find in those little cans?

[B]

He hid away $20,000 in gold yetis.

[A]

For context, that's about $90,000 in today's money.

[B]

And David has to sit on this treasure for the next eight months. In the Camp until he can be reunited with his family. Don't touch those condensed milk cans.

[A]

This guy's a risk taker, but it's a calculated risk. Let's hope it pays off.

[B]

Okay, time for a major change of scenery. We're gonna skip past the grueling months of asylum applications, the paperwork, the wa, the rejected visas, the bureaucracy. Plus about six months spent in Boston, just outside Boston. January 1980. A full six months after being separated, David is reunited with his wife and son.

[A]

Finally.

[B]

And just like nearly a million other Asian and Pacific Islanders at the time, the trans settle in Los Angeles, David.

[A]

Survived the war, persecution after the war, and a harrowing months long refugee voyage to America. Imagine his feeling when he finally settles in the United States, which welcomes him in the city of Los Angeles just.

[B]

In time for Magic Johnson's arrival with the Lakers.

[A]

But Jack, here's the thing. At the moment, David barely speaks any English. And aside from his wife, kid and brother in law, he doesn't actually know a single soul in the city. So if you mention Magic Johnson to him, there's a high chance he would not know who that is. But David gets a tip from his brother in law that thanks to California's Mexican roots, the place is teeming with high quality chili peppers.

[B]

Something about being so far from home gives David some perspective. There he is smack in the middle of LA's diverse food scene, literally surrounded by fresh spicy peppers and thousands of other Vietnamese refugees, including ethnic Cantonese like himself, who have flocked to LA's Chinatown district.

[A]

This sounds like the perfect market fit.

[B]

But somehow Asian restaurants in the area don't have authentic chili sauce.

[A]

That's the shocker. And here's the reason why. Besties. At the moment, there are basically two mass market hot sauces on the shelves. First, you've got Tabasco and you've got Frank's. Tabasco has been around since 1859 and.

[B]

Frank's has been around since 1920.

[A]

Well, Frank's is made with cayenne peppers and Tabasco is made with, you know, Tabasco peppers.

[B]

These two hot sauce companies are basically the Coke and Pepsi of the market. It's a duopoly, a simple two party.

[A]

System, but neither one remotely resembles the thick, the flavorful, the saucy sauces of Southeast Asia.

[B]

It's a huge void in the market. And besties, as Nick and I like to say, the market is like a ball pit.

[A]

Because if there's a void in the market, then something's gonna fill it.

[B]

And David is perfectly positioned to see this void and to fill it. So he gets to work creating a product that will change the foodie landscape forever. David starts with fresh jalapeno chili peppers. Perfectly red, perfectly ripe. Back in his home country, these would have been Thai or Vietnamese chilies. But in Southern California, jalapenos are where it's at.

[A]

And now yetis. We know what you're thinking here. Uh, but jalapenos are green, right? And you know what? You're right. These are actually the same plants. They're just left on the vine a little bit longer. And that deepens the flavor and turns the peppers a fire engine red.

[B]

David ferments these peppers raw, which keeps the color bright. Then he adds sugar, salt, garlic powder, and vinegar. He bottles them fresh and adds a touch or two of preservatives, plus a little xanthan gum to give it thickness. And once he nails his recipe, David works fast to get his business up and running. And by fast, I mean one month.

[A]

One month? Are you kidding?

[B]

This guy's in lean startup mode before the lean startup is even a thing.

[A]

Yeah, he's doing a lean startup. Before Andreessen met Horowitz.

[B]

At first, he registers his business to the house he and his family are renting. Until the city of Los Angeles helpfully points out they're not zoned for commercial use. So David purchases a smallish production facility, a 2,500 square foot building in Chinatown. And if you're wondering how he swung such a big purchase so quickly, David's already way ahead of you.

[A]

Yet this is where things get wild. Because remember that gold he was keeping in those milk cans that we told you about? Well, something happens. Between January 1980, when he lands in Los Angeles, and February when he registers his new business, the price of gold almost triples. Cha ching.

[B]

From under $300 an ounce to $830 an ounce. Cha Ching. So David is able to sell enough gold right at the high to pay for his first hot sauce factory.

[A]

Smuggle Low Sell High works every time.

[B]

He decides to name his business after the freighter that carried him out of Vietnam, Hui Fong.

[A]

Hui Fong. Yeti's the world's most disruptive hot sauce is named after a refugee ship.

[B]

We did say it means gathering prosperity.

[A]

We did.

[B]

Which is what every business owner hopes for. In which David seems to be finding here in the U.S. now, Jack, I.

[A]

Gotta ask because everything seems to be coming together right now. You got the sauce, you got the recipe, you got the factory, you got the name.

[B]

What about the logo for the Logo. He turns to his zodiac sign, the rooster. He includes writing around it that incorporates Chinese, Vietnamese and English, which is perfect for this market of LA in the 1980s where all these languages are constantly crashing into one another. And the next thing he does, Nick, he buys a navy blue Chevy van.

[A]

Nice.

[B]

This is the logistics department. He has his business name and that sweet rooster logo painted on the side of the van. We got a picture right here. Take a look.

[A]

So, Jack, I'm looking at this picture right now, all right? He's smiling, he's pointing to the van. He's full of pride. He's walking with confidence. It's all right there, man.

[B]

This man is an entrepreneur, baby. Oh, yeah.

[A]

And he's feeling it. It's 1980. This is a huge year for them. Jackson, if this was a movie, this would be our montage moment. Jack, can you paint a picture for us every day? Nick?

[B]

David is getting up at 4am he's buying fresh red jalapenos at the produce market and he's taking them back to the plant, washing them, processing them, and mixing the sauce in an actual bucket. This is an all hands on deck family business. He's got his wife, his father in law and his brother in law all pitching. Once the bucket's full, he sets it aside to ferment. And when the batches are ready, he starts loading up the Chevy. He puts the sauce into jars and he stocks that thing up.

[A]

So he hits the streets of LA's Chinatown, going to Asian supermarkets where the families and the restaurateurs alike are shopping for their cooking.

[B]

You can almost picture David in those early days. Yeah, navigating his Chevy through LA traffic on the 110 or the 101. Boxes of hot sauce stacked high on flats in the back. As the sun beats down on the van, he peels off down a side street and into a back alleyway behind an Asian grocery.

[A]

Oh, I like this scene.

[B]

He pulls out a rack of product and carries it onto the loading dock himself. The grocery store's manager greets him and a little money changes hands. A little chit chat. Yeah, yeah, yeah. And then David jumps back into the Chevy van and heads to the noodle house three blocks down the road.

[A]

I think what you're saying, Jack, is that David, hot sauce in a baby jar with the Zodiac logo, finds product market fit immediately.

[B]

His theory was right.

[A]

Yeah, His Southeast Asian neighbors in Chinatown, they miss the flavors of home just as much as he does. And the market, it doesn't need another thick ketchup and it doesn't need another thin Tabasco drizzle liquid. What it needs is Sriracha.

[B]

Within the first month, Huy Fong Foods clears $1,000 of profit. Okay, that's about $3,900 today.

[A]

This hot sauce, it's a profit, puppy man.

[B]

This is pretty good profit for a. Especially since this sauce is only selling for $2 a pop.

[A]

That's it.

[B]

So he's literally selling thousands of jars at the launch. That is hockey stick growth that a software startup would dream of.

[A]

Now, this is a key part of David's mission. Besties. Because he's selling to his own community, he doesn't want to gouge them on the prices.

[B]

His motto. A rich man sauce at a poor man's price. But the true test is whether customers will return.

[A]

Oh, good point.

[B]

And they do. Sales pick up each month, and David figures it's time to move on from the baby Dr. Jar look. So he designs a new bottle, and that will be the look that doesn't change for the next 40 years.

[A]

Now, Jack, I've always been wondering this. Why not do a red cap? Why did he do a green cap for the sauce?

[B]

He chose it to signify freshness.

[A]

Oh, okay. I get it.

[B]

And of course, it kind of looks like a chili pepper stem, too.

[A]

I mean, Jack, this bottle, it becomes the brand. It is the rare case where the package actually outshines the logo. You know, like you recognize the shape before you recognize what's actually in it.

[B]

But I want you to notice something on this bottle.

[A]

Yeah, Jack.

[B]

A word that did not appear on the jars or on the side of his big blue Chevy van.

[A]

All right, I'm looking right above the rooster.

[B]

Can you read that word for us?

[A]

Tuong haute.

[B]

Sriracha, as we covered T Wong haute just means chili sauce in Vietnamese.

[A]

Right.

[B]

But he's added the word sriracha, even though sriracha is from Thailand, not Vietnam, and even though sriracha was invented by someone else. Remember, like, 15 minutes ago when we mentioned that David Tran didn't actually invent Sriracha?

[A]

Yeah. That was actually kind of a record scratch moment, Jack. Not gonna lie.

[B]

The credit generally goes to a woman named Tanome Chakopak. She was born a century earlier and raised along the southern coast of Thailand in a town called, wait for it. Sri Racha.

[A]

Oh. Now yet East Noam's father was a businessman whose travels took him all over Southeast Asia in the late 1800s. And he was tast sauces from Laos to Myanmar. Some were sour, some were salty. Some were kind of sweet, but none.

[B]

He said, were a perfect balance of all three. For the top chefs of the world, combining those sensations in one dish is the holy grail. So he invents a starter recipe that he hands down to his daughter. Its ingredients are chilies, garlic, vinegar, sugar, and salt. Pretty close to the ones we just listed as David Tran.

[A]

They are pretty close, Jack. Now, Tanome spends years perfecting her dad's recipe, and then she releases the sauce as Sriracha Paneetch, named for her own sleepy hometown.

[B]

And Tanom sauce, packaged in a bottle with a golden yellow label, eventually becomes the most popular sauce in all of Thailand. It spreads across Southeast Asia, making its way to, among other places, South Vietnam.

[A]

Now, it is almost certain that David would have seen that sauce on shelves, growing, or as an army cook, when he was shopping in Saigon.

[B]

And while David says he never even tried the Thai version and has no particular love for it, he still uses this Thai descriptor for his Vietnamese inspired sauce. The question is, why?

[A]

Well, the answer comes down to one thing, and that thing is marketing.

[B]

Remember, in la, David isn't just selling to Vietnamese immigrants.

[A]

Right.

[B]

He's selling to immigrants from all over China and Southeast Asia. All of them would have been familiar with Tanom Sriracha back home, same as all Americans are familiar with ketchup.

[A]

So calling his sauce Sriracha evokes the familiarity and comfort of Tanome's version, even though David isn't really trying to replicate it.

[B]

This isn't some kind of a trademark infringement. No, it's not like Tanome's family doesn't have a case here. That's because Tanome never troubled herself to trademark her sauce's name. There's a couple reasons for that, including the fact that she named her sauce for a real town.

[A]

Yeah, like Jack, you can't trademark the phrase New York pizza. You know, like, New York might have something to say about that. New York is not going to let you forget about it.

[B]

But even forgetting the geography, generic products, especially foods and condiments like ketchup, mustard, or mayonnaise, they can't legally be proprietary. They are un ownable. Which means you don't beat your competition by suing them. You beat them by making a better product.

[A]

It's like, come at me, bro. We'll put up our sauce against yours any day.

[B]

Exactly. That's how Tanoma approached her business. And that's how David Tran approaches it, too. In fact, David Tran makes a move that's extremely rare in American business.

[A]

Oh, this is great.

[B]

No marketing, zero marketing dollars. He doesn't take out any billboards, he doesn't pay for any magazine ads.

[A]

He's not putting his face on bus benches. And he's not even like doing product placements and TV shows in lovely Los Angeles.

[B]

Huy Fong doesn't do any advertising at all.

[A]

None.

[B]

It's all direct sales to Asian restaurants and Asian markets. And that's TR still to this day. I mean, have you ever seen a commercial for Sriracha, Jack?

[A]

I can't even think of a podcast ad for Sriracha. Like no one's even said the words use coupon code sriracha at checkout for 15% off. And here's the thing. Yetis that strategy of zero advertising. It totally works.

[B]

Friends are sharing it with friends. Visitors to Chinatown taste it and want a bottle or a case to bring home for themselves.

[A]

David may not have been the first Sriracha in the world, but it's the first to catch on in America because he saw that void in the market and like the ball pit we mentioned, he made sure that his product was there to fill it. Sriracha may be the ultimate word of mouth product.

[B]

Suddenly David's getting orders from all over the state. He's shuttling sauce up and down the California coast from San Diego to San Francisco. And of course, the farther the sauce travels, the more people find it and the more people.

[A]

So in 1987, Dave is able to upgrade his facilities to an estimated 65,000 square foot building about 10 miles east of Los Angeles.

[B]

That is a 26x jump in scale from his last place he manufactured from.

[A]

Oh, but Jack, as you're saying it, I'm getting stressed out because the scale, oh, that comes with supply chain complications. And soon David runs into a problem that threatens the very viability of Huy.

[B]

Feng Foods and of Sriracha as we know it. This episode is sponsored by Abbott. Let's talk about a small thing that can make a big difference if you have diabetes. The Freestyle Libre 3 sensor. It's amazing how the sensor gives you real time glucose readings so you can see the impact of every meal and every activity to make better choices. The Freestyle Libre 3 sensor can help you live life with diabetes on your terms. You can try it free at FreestyleLibre US offer available for people who qualify. Visit MyFreestyle US to see all terms and conditions. Certain exclusions apply for prescription only safety info found@freestylelibre us.

[A]

You know Jack, I think this may be my favorite part of the sriracha story because entrepreneurship can be a lonely business. But this is where David finally gets a friend after doing so much on his own.

[B]

It's Rosemead, California, in 1988. David Tran's got this new factory just outside of LA, and he's cranking out sauce like it's nobody's business until the supply chain threatens the very existence of everything he's built.

[A]

Now, remember besties, how we said David uses raw, ripe jalapenos for his sriracha? Well, that same feature that makes his sauce so delicious makes his peppers a real pain to ship, too.

[B]

Ripe red peppers bruise more easily than green ones do. And they don't always survive the trip.

[A]

Especially if they're schlepping all the way up from a farm in Mexico.

[B]

Sometimes David finds he's cleaning out a wholesaler's entire supply in just one day.

[A]

So without a reliable supplier, David's ability to keep up with all this demand is in trouble. He's experiencing the same volatility he did back when he and his brother were farmers in Vietnam.

[B]

So David's annoyed by the inconsistency of his supply chain.

[A]

Yeah.

[B]

Then one day, David receives a letter with a local postmark from some place called Underwood Ranches. He opens the letter.

[A]

Okay.

[B]

It's from a man named Craig Underwood.

[A]

Interesting.

[B]

He's an ex military man like David, and a fourth generation farmer.

[A]

And what does this Craig Underwood want from this random letter? Jack?

[B]

His pitch is simple. He wants to grow peppers for Gayden.

[A]

Jack, this is the coldest of cold, cold calls, actually. I guess technically it's cold mailing in this case, but it's coming at the exact right time. From everything we were just saying, David's.

[B]

Looking for a consistent pepper grower.

[A]

Yeah.

[B]

So he agrees to the trial run sight unseen.

[A]

I love this guy.

[B]

And when one of David's regular suppliers flakes, the understudy quickly becomes the lead actor. Promote this man one handshake deal later, Underwood Ranches becomes the sole supplier of red jalapenos for Huy Fong.

[A]

Underwood turns out to be the perfect partner for Hui Fong Foods because they're close by, they're reliable, and they grow a consistently great pepper. Is this like it's meant to be?

[B]

David and Craig create a super simple arrangement that will last for three decades.

[A]

Wow.

[B]

One farmer, one processing plant, Complete trust. David barely ever presses Craig for details on how the peppers are coming. And Underwood does his best to always deliver on time.

[A]

And this streamlines supply chain. It not only makes life easier for David and His team. It helps keep the Sriracha quality consistent and its price point low.

[B]

David refuses to Jack the price up even when demand for his product goes crazy.

[A]

Now, Jack, what kind of prices are we talking about here? In the 90s, for years, the price.

[B]

Never gets above $4 a bottle. And thanks to inflation, that's actually cheaper than the original price back in 1980 of $2 a bottle.

[A]

I guess if you got zero advertising budget, you can pull that off. Jack. Dave Atran is putting Kos before pros, is putting customers before profits. And you never really see that in business.

[B]

When he puts customers before profits, it endears his sauce even deeper to the community.

[A]

Totally.

[B]

So with the stability of demand and supply, Huy Fong Sriracha can finally go global.

[A]

Oh yeah. Yeah.

[B]

In 1996, David upgrades factories again, adding 170,000 square feet to Hui Fong's operating workspace by purchasing the factory right next door. And the new space has an incredible former tenant.

[A]

Get this, the former tenant is whammo. Like the company that made a hula hoop Slip n slides and frisbees. That kid's toy company. David takes over their space to make his hot sauce.

[B]

Can you imagine if they'd done a collab? Sriracha Slip n slide, Jack.

[A]

This is the collab we didn't know we needed, but we actually do need now. Jack, when we started using and abusing Sriracha in that East Village apartment, I thought that we were early adopters to this product.

[B]

I thought we were too. Yeah, but I guess that's men in finance bias because we were about 25 years late, apparently.

[A]

I mean, on the early adopter curve, we were like fashionably late.

[B]

Apparently by the late 2000s, Sriracha has finally reached Nick's in my palate. This is around the time it has hit the zeitgeist. American chains and fine dining restaurants alike are adding Sriracha to burgers, lobster steaks, even asparagus. Our apartment on 14th street in the East Village was going through a bottle a week.

[A]

People are dressing as Sriracha bottles for Halloween. Full disclosure, that was me. I had to order a green hat on Amazon to be the cap. Jack. Anyways, people are getting hung rooster tattoos again. This is the company with zero marketing. Weifong has more than a cult following. Weifong is a cult.

[B]

Yeah, you were part of it. But of course not. Everything's coming up rainbows and roosters. In 2007, California is hit by a scorching drought that turns the state into a dust ball. Crops wither and die in the field. It's heartbreaking for farmers. And Hui Fong's precious chili supply literally goes up in smoke.

[A]

So having that single supplier for the most critical ingredient, that means when something affects that supply chain, you don't really have anywhere else to turn. If you're a Hui Fong Sriracha, Huy.

[B]

Fong put all its peppers in one basket.

[A]

Yeah.

[B]

So they run out of peppers. With three months in the year remaining, It's a major issue. Restaurants all over the world are left without their Sriracha.

[A]

And it's an awkward conversation topic for everyone with one of those rooster tattoos, too.

[B]

But, Nick, listen to how David handles this crisis. Instead of reaching for preserved peppers or substandard peppers from the supermarket, the Huy Fong team reaches out to its major buyers one by one. And they apologize for the shortage. They don't blame anybody. They just say, I am so sorry that you don't have Sriracha on your shelves this season. Because the loyalty of their customers matters to them, and they show it pro move. And guess what? The customers, they return the loyalty right back. Hui Fong doesn't lose a single big customer during the shortage. They all patiently wait for next year's crop.

[A]

I mean, Jack, sometimes it takes just one stumble like that to kill a business. The trust is gone. Customers they like, find a replacement and never come back. But the way that David carries himself, that had a real impact. His proactive outreach, it arguably saved the business.

[B]

Also, David learns from the mistake of that crisis.

[A]

Yeah, good point.

[B]

From this point on, Huy Fong adjusts their production. They set a monthly quota, and every bottle of sauce produced is sold in advance.

[A]

By 2009, bon appetit. Named Sriracha one of its best foods of the year. Sriracha has become the celebrity of sauces. And as a flavor, Sriracha makes its way into everything from vodka to mayonnaise. And still, Huy Fong is more or less the only supplier making it.

[B]

The next year, Huy Fong moves to a massive new $40 million manufacturing plant in Irwindale, California.

[A]

Jack, I'm going to have to ask you to sprinkle on some really delicious context to the size of this plant.

[B]

Their new facility is the size of five Dodger stadiums.

[A]

I like what you did there, man.

[B]

By 2012, Hui Fong's annual sales cracked $60 million. Sriracha has gone viral. David's bringing in red jalapenos 21 tons at a time.

[A]

That's three African elephants worth of hot Peppers.

[B]

Unsurprisingly, David starts fielding offers to sell the company. But David's not interested. He tells the LA Times in one interview, this company is like a loved one to me, like family. Why would I share my loved one with someone else?

[A]

Well, you'd share it for money. Like, usually it's because of money.

[B]

But all due respect to David, he refuses.

[A]

Nice.

[B]

Despite probably some massive offers, Companies with.

[A]

Cult followings like David's, they definitely get some cred for not selling out to the man. But honestly, it's risky, because not selling out can mean you don't sell at all. Now, David over at Huy Fong Sriracha, he fares better than that. But he does face some challenges along the way. In 2013, he gets into a tiff with the residence Irwindale, the site of that big new factory, over the smell of the chili in the air. There's even an issue that the chili in the air is burning people's eyes.

[B]

Mom. My eyes.

[A]

Now, eventually, that whole eye burning thing, it gets resolved, but Huy Fong Foods takes a hit in the public eye, at least locally.

[B]

But that's nothing compared to the next fad that's gonna send shockwaves around the hot sauce world. Okay, so you remember David's jalapeno bestie, Craig Underwood? The guy who sent him that cold letter in the mail?

[A]

I love that part of the story. Check.

[B]

His Underwood ranches became David Tran's sole jalapeno supplier for 30 years. But that all falls apart in late 2016.

[A]

Oh, I hate to hear it.

[B]

There's a fight over the price of next year's pepper crop. And within just a couple days, a 28 year partnership is over.

[A]

Now, Jack, here's the strange thing about this. As customers, we have no idea that this drama is actually going on. But some super fans, they declare that they can actually taste a difference in the Sriracha. And they're curious.

[B]

The new Sriracha is not as spicy.

[A]

It tastes a little bit more muted.

[B]

So so far, between similar bottles of old and new Sriracha, I can taste the difference. So people say not only does it have a different color, but it has a different flavor. And if the flavor has changed, then I've got issues with that. Now, whether these guys have incredibly sensitive taste buds, a very sensitive palate, or they just heard that Huy Fong switched suppliers and imagine the difference, we'll never know.

[A]

And maybe they're super tasters. I mean, Sriracha does only have a few ingredients, Jack, so it is possible That a change to the main ingredient may actually affect what you're thinking.

[B]

Meanwhile, Underwood Ranches is still growing those peppers, even though they're not delivering them to Sriracha. Okay, so guess what they do.

[A]

What do they do?

[B]

They start making their own Sriracha.

[A]

No way.

[B]

They take advantage of the fact that the product is not trademarked. They just launch it under a different zodiac sign called Dragon Sauce.

[A]

Oh, of course.

[B]

And it's not just Underwood getting in on the action. Supermarket chains like Trader Joe's and Kroger's have also been making their own version. So are other hot sauce brands like Yellowbird and Tabasco. But David has a plan. After the split with Underwood, David switches to a Mexican jalapeno that's both abundant and cheap. Hui Fong rakes in around $150 million in annual revenue in 2019, securing a nearly 10% share of the entire US hot sauce market. That makes Huy Fong third in the country after only Tabasco and Franks.

[A]

Again, this is a solely owned private company, Sriracha. It's not part of any conglomerate with a huge manufacturing and distribution relationships like Kraft frickin Heinz.

[B]

Now, as we hinted at the beginning, David's main challenges these days are less about imitators and more about his supply. Sourcing peppers from Mexico has saved David money, but Mexico has been hit especially hard by a pesky little problem called climate change.

[A]

Ah, yeah.

[B]

In 2022, a drought once again obliterates Huy Fong's supply of chilies. And this happens again in May of 2024.

[A]

I mean, Jack, we actually talked about that exact incident on our daily pop biz show. The best one yet. We covered this story.

[B]

The shortages of Sriracha has actually created a lucrative secondary market for the rooster sauce.

[A]

Yeah, we went on ebay after this shortage happened, and we discovered that bottles of Hoi Fong Sriracha were selling for 80 bucks.

[B]

People are that desperate to get their sauce.

[A]

Yeah. Oh, and then, Jack, what about the year they had the green pepper drama? Remember that one? We covered that too.

[B]

Huy Fong started using peppers that weren't fully ripened, resulting in a greenish sauce that just hit different.

[A]

It was like a Christmassy looking sauce. But then also that sold for premiums on ebay too, because it was kind of awesome to look at.

[B]

It was the whole cot sauce.

[A]

But yetis, there's a funny thing here. There may actually be a silver lining to all these production shortages that Hui Fong is dealing with these days. Think about your limited runs of off white sneakers. Or like that limited run Stanley cup collab with Starbucks. These limited time only collaboration are deliberate marketing moves that manufacture scarcity. And that scarcity breeds excitement. The less you can get, the more you crave it.

[B]

In 2023, just one year after a major Huifong Sriracha shortage, the company's valuation hits $1 billion. This officially makes David Tran the world's only hot sauce billionaire.

[A]

Now he slipped back off the 3 comma club one year later, but still heck of an accomplishment.

[B]

David credits his Sriracha's loyal fans as the secret to his success. Here's the man himself in his own words. Thank you to my product lover, machine lover. They like it and they enjoy it. That's why I feel happy. So I try to make it better for them.

[A]

Jack. Good thing he brought those gold bars on that big boat.

[B]

Nick, I got great news.

[A]

Hit me, Jack, what do you got?

[B]

The pizza bagels are done. Yeah.

[A]

I mean, at this point, you probably burned a man. What's it been, like 45 minutes in.

[B]

The oven over there? Now we've come to the end of the story of Sriracha and the man who became synonymous with its success, David Tran. Yes, Nick. What are your takeaways from this story?

[A]

Here it is, Jack. Here's my takeaway. Advertising is what you pay for. Publicity is what you pray for. Yes. Now, Jack, you can't always plan for earned media success like David got, But if you start noticing that you got it, you can definitely lean into it. David's story is so compelling, it's driven tons of coverage in outlets from Fortune to the New York Times. It's not paying the New York Times for an ad in their paper, but it's getting covered in the paper's reporting, and that is even better.

[B]

And when the news cycle isn't great for you, like when there's a shortage or when you and your longtime business partner split up, the reporting still drives awareness of your product.

[A]

It's actually even better yetis. Advertising is what you pay for. Publicity is what you pray for. All right, Jack, what about you? What's your takeaway on the story of Sriracha?

[B]

Sriracha Put co's before pros, Nick. What I mean is, Sriracha put customers before profits. Co's before pros.

[A]

Put it on a pillow. Jack.

[B]

In nearly every business, the owner of that company has an instinct to put profits before customers. Why start a business? To try to make some profits. But ironically, putting customers before profits can generate more profits in the long term.

[A]

And Jack David of Sriracha. That sounds biblical, by the way. It is the perfect case study in this. Right? Like he did that to the extreme.

[B]

More than any business story we've ever seen, David consistently chose what was best for the customer. Customer. He made some costly short term decisions, but they paid off in the long term, in customer love.

[A]

Yes, they did.

[B]

His commitment to keeping the same recipe, the same name, the same price, even the same vendors. This consistency has driven intense customer loyalty, and that's what boosts profits in the long term. That's why David was forgiven by customers during those pepper shortages.

[A]

Just like his refusal to advertise or his refusal to sell out to a big chain, it all adds to his brand's cultural cachet.

[B]

David never sold out to the man, and he never even acted like the man, not even once.

[A]

But Jack, now it's time for our favorite part of the show, the best facts yet. Spicy edition. What do we got, man?

[B]

All right. When they're not experiencing a devastating pepper shortage, emotional Hui Fong Foods produces eight 18,000 bottles of Sriracha every hour.

[A]

That's a lot.

[B]

That's almost 4,000 gallons every 60 minutes.

[A]

That's a lot of swimming pools. And to this day, Huy Fong only makes sauces, specifically three sauces.

[B]

There's Sriracha, obviously.

[A]

There's sambal uluk, which is only made.

[B]

From chilies, and then there's Hui Fong's chili garlic. Yeah, the latter two products are used in cooking actually, instead of as condiments.

[A]

Now, even. Even with the current product shortage, David Tran is doing just fine. He is still turning away offers to sell Huy Fong because he wants to leave it to his kids, William and Yassie, Huy Fong's president and vice president, respectively.

[B]

Though we've mostly focused on Huy Fong, Sriracha's American journey. Yes, they're very much an international product. Good point, Jack. Around 2019, they even made inroads to Sriracha Thailand, the birthplace of Sriracha.

[A]

Speaking of which, Jack, Tanome Chakapak sold the recipe and the rights to her Sriracha Panique to a company called Thai Terrapos foods back in 1984. Today, they still make and export that sauce internationally. And you can buy it in the United States if you want, Jack. You just gotta look for the golden yellow label.

[B]

Here's a closure for you.

[A]

Hit me, Jack.

[B]

Sriracha has been to space. Yes. Apparently taste perception is different in a zero gravity environment, which makes tasting astronaut food kind of unpleasant okay, so at the iss, the International Space Station, they take aboard spicy condiments like hot sauce, wasabi and Sriracha to make that kind of dull food a little more enjoyable. But shipping any fluid to space is wildly expensive.

[A]

That's a good point.

[B]

16 ounces of liquid can cost anywhere from 9 to $40,000, so sending a 28 ounce bottle of Hui Fong, it's almost $16,000.

[A]

But Jack, can you really put a price on flavor? Sounds like you can.

[B]

And that's why Sriracha is the Best Idea Yet.

[A]

Coming up on the next episode of the Best Idea Yet.

[B]

It's the stylish story of Levi's 501 jeans. Follow the best Idea yet on the Wondery App, Amazon Music, or wherever you get your podcasts. You can listen to every episode of the Best Idea yet early and ad free right now by joining Wondery plus in the Wondery App or on Apple Podcasts.

[A]

Before you go, tell us about yourself by filling out a short [e-mail] survey if you know the best Idea yet, leave it here in the comments we want to hear.

[B]

Oh, and by the way, we'd love your rating and your reveal.

[A]

Yeah, the best way you can help grow the Best Idea yet is to drop down and give us a five star rating, a review and follow the show. The Best Idea yet is a production of Wondery hosted by me, Nick Martel.

[B]

And me, Jack Kravitz Kramer.

[A]

Our senior producers are Matt Beagle and Chris Gauthier.

[B]

Matt Wise is our producer.

[A]

Our senior managing producer is Nick Ryan and Taylor Sniffin is our managing producer. Our associate producer is H. Conley.

[B]

Research by Samuel Thatsinger this episode was.

[A]

Written by Katie Clark Gray and Anna Rubinova.

[B]

We use many sources in our research. A few that were helpful were articles from Fortune Magazine, the Los Angeles Times, Whalebone Magazine, and an interview from the Vietnamese American Oral History Project at UC Irvine. Sound design and mixing by Kelly Kramarek.

[A]

Fact checking by Molly Artwick. Our music supervisor is Scott Velasquez and Jolina Garcia from Fries on Sync.

[B]

Our theme song is Got that Feeling Again by Blacklac.

[A]

Executive producers for Nick and Jack Studios.

[B]

Are me, Nick Martel and me, Jack Caravici Kramer.

[A]

Executive producers are Dave Easton, Jenny Lauer, Beckman, Erin O'Flaherty and Marshall Louie For Wandering.