Huy Fong's Sriracha hit revenue of $150m+ a year...with no sales team, no trademark and $0 in ad spend.
Its creator is Vietnamese-American David Tran, making the sauce's success a tale of immigrant hustle and a product that literally sells itself.
Here's the story🧵
1/ The Sriracha story traces back to the 1930s.
In a Thai town called Sri Racha, a housewife named Thanom Chakkapak created a paste of chili peppers, distilled vinegar, garlic, sugar and salt.
Variations of this recipe have travelled across the globes in the decades since.
2/ One variation was created by David Tran, a major in the South Vietnamese army.
In 1978, the Tran family joined 3k+ refugees and fled Communist Vietnam on a Taiwanese boat called the Huey Fong (means "Gathering Prosperity”). The boat inspired the business name Huy Fong Foods.
3/ Tran landed in the US and ended up in LA.
At the time, Sriracha was absent from California. So Tran brought his recipe, swapping out chilis for a local ingredient: jalapeños.
He filled recycled baby jars and sold product out of a Blue Chevy Van, making $2.3k the first month.
4/ To really make the product stand out, Tran slapped a Rooster logo on everything he sold.
Why? He was born in 1945: The Year of the Rooster.
He would later design the famous squeeze bottle and added a green cap as a sign of "freshness".
5/ The sauce's popularity took off in the early-1980s among Asian restaurants and grocers. He kept upgrading manufacturing to meet demand:
◻️ 1980: a 5k sq ft building in Chinatown LA
◻️ 1987: a 68k sq ft warehouse in Rosemand, CA
◻️ 2010: a 650k sq ft warehouse in Irwindale, CA
6/ Sriracha's success has come with:
◻️ No sales team (Tran has mostly maintained the same 10 distributors and wholesale pricing from the 80s)
◻️ No ads (Sriracha's cult-like status comes from "word of mouth")
In 2019, sales hit $150m (10% of the US hot sauce market).
7/ With so few ingredients, Tran prioritizes the best ones to win the market.
Timing fresh jalapeños is tough: the ripening window (green to red) leaves no room for error.
Due to the harvesting seasons, Huy Fong may make a whole year's supply of Sriracha in a 10-week span.
8/ For 28 years, Huy Fong was able to maintain its exacting quality standards with one exclusive jalapeño supplier.
In 2017, the partners had a falling out. Huy Fong now sources from 3 suppliers.
Its factory runs 16hrs a day and it goes through 100m pounds of chilis a year.
9/ Interestingly, Tran never trademarked "Sriracha" (he did trademark the green cap and rooster, though).
This is the reason why so many competing brands -- from Heinz to Tabasco -- have a "Sriracha" sauce.
10/ Tran doesn't care about competitors:
"I never worry about [other brands] because we're too busy making it. I can't make enough of my product to meet the demand, so let them have it and work together for the consumer."
Or brands using the name:
"It's free advertising."
11/ One competitor is back in Thailand: The Winyarat family purchased the original recipe in 1984 and creates "Sriraja Panich".
It uses Thai cayenne peppers instead of jalapeños but has struggled to make in-roads in the US.
12/ The universal appeal of Huy Fong's Sriracha is encoded in the label, which includes 5 languages.
In the US, the sauce has clearly achieved cult status (and was even named Bon Appetit's "Ingredient of the Year" in 2009).
13/ Investors have been knocking on Tran's door for decades.
In November 2020, Choulala hot sauce was acquired by spicemaker giant McCormick & Co. for $800m (on $92m sales).
A similar price / sales multiple (~9x) for Huy Fong easily nets a $1B+ valuation.
14/ Tran doesn't need the money. His motto is "a rich man's sauce at a poor man's price" (he caps retailer selling price <$10).
"My American Dream was never to become a billionaire. We started this b/c we like fresh, spicy chili sauce.”
His children will keep the legacy going.
15/ Follow @TrungTPhan for other glorious business stories.
PS. I wrote this thread because my parents told my sister I need more "Viet" content.
Here’s another Viet story for you, my great-grandfather was Vietnam’s leading nationalist at the turn of the 19th century and also sported a legendary beard: en.m.wikipedia.org/wiki/Phan_B%E1…
19/ FINAL NOTE: When Huy Fong moved to Irwindale, the City of filed a lawsuit alleging that the sauce-making released "odors and eye-watering airborne irritants".
A judge threw out the case in 2014 and now Huy Fong lets people tour the factory to judge for themselves.
20/ We are def talking about Sriracha on the next episode of the Not Investment Advice (NIA) podcast.
Throw me all your questions ("Is it OK to drink Sriracha?") and I'll answer them:
If you are the person that did the un-aligned letters for the previous eBay logo, please contact the research app team. We are huge fans of how un-aligned the “e” is with the “y”.Bearly.AI
This article offers up reasons for popularity of simple font logos (mostly Sans Serif):
— Easier to standardize ads across mediums
— Improves readability (especially on mobile)
— The “brand” matters more than the logo velvetshark.com/why-do-brands-…
Berkshire Hathaway board member Chris Davis once asked Charlie Munger why Costco didn’t drop the membership card.
Let anyone shop and raise prices by 2% (still great value), thus making up for lost membership fees (and more).
Munger said the card is important filter:
▫️“Think about who you’re keeping out [with a membership card]. Think about the cohort that won’t give you their license and their ID and get their picture taken.
Or they aren’t organized enough to do it, or they can’t do the math to realize [the value]…that cohort will have a 100% of your shoplifters and a 100% of your thieves. Now, it’ll also have most of your small tickets.
And that cohort relative to the US population will probably be shrinking as a % of GDP relative to the people that can do the math [on Costco’s value].”▫️
I have a membership but have been guffing on the math for a few years tbh. They keep telling me to upgrade from Gold to Business but I’m too lazy (even if the 2-3% Cash Back on Business pays back after a few trips).
This is a long way of saying Costco’s membership price hike effective today — its first in 7 years — is annoying but when I decide to do the math in a few months, it’ll be worth it.
Anyway, here is something I wrote about Costco’s $9B+ clothing business my affinity for Kirkland-branded socks and Puma gym shirts. readtrung.com/p/costcos-9b-c…
Two notes:
▫️Meant “Executive” (not “Business”) membership
▫️Chris Davis was doing a pure thought experiment. Costco membership obvi high margin (on~$5B a year) and accounts for majority of Costco profits. Retail margin is tiny on ~$230B of annual sales (Costco would need like another $150B+ from letting anyone shop to make up membership profits)
One of the Team USA rowers who won a Gold Medal is an investment banker and actually did the “B2B SaaS Sales” joke on Linkedin. Legend.
Here’s the rest of the post (perfectly formatted to show up in the feed as a shitpost): linkedin.com/feed/update/ur…
Justin if you’re reading this and are available for consulting, the research app team would love to engage your B2B SaaS knowledge for our Q4 sales roadmapBearly.AI
The amount of work Hayao Miyazaki and Studio Ghibli team put into a film is mind-boggling.
Each typically has 60k-70k frames, all hand-drawn and painted with water color.
This 4-second clip (“The Wind Rises”) took one animator 15 months to do. Insane.
The docu “10 Years with Hayao Miyazaki” shows him talking to the animator (Eiji Yamamori) after its done.
It’s so good:
Miyazaki: “Good job.”
Yamamori: “It’s so short, though”
Miyazaki: “But it was worth it.”
The animator gets a second of joy (he’s pumped) but on to the next.
Miyazaki doesn’t use digital FX or computer graphics. He believes “that the tool of an animator is the pencil.”
On a related note, here’s something I wrote about another Japanese legend dedicated to the craft (Ichiro Suzuki) and the art of mastery: readtrung.com/p/jerry-seinfe…
New York City paid Mckinsey $4m to conduct a feasibility study on whether trash bins are better than leaving garbage on the street.
The deck is 95-slides long and titled “The Future of Trash”.
Some highlights:
▫️The official term is “containerization”, which is the “storage of waste in sealed, rodent-proof receptacles rather than in plastic bags placed directly on the curb.”
▫️Two main types of containerization: 1) individual bins for low density locales; 2) shared containers for high-density.
▫️NYC needs to clean up 24,000,000lbs of garbage a day
▫️Containerization has only become the norm worldwide in major cities in the past 15 years.
▫️New York City first considered containerization in the 1970s but never conducted a feasibility study until now (Mckinsey’s sales team has been dropping the ball)
▫️Key considerations for container viability:
• POPULATION DENSITY: NYC has 30k residents per square mile (more dense than comparable big cities)
• BUILT ENVIRONMENT: Few places to “hide” containers due to history of infrastructure development.
• WEATHER: Snow creates challenges for “mechanized collection” in the winter.
• CURB SPACE: Mostly taken up by bus stops, bike lanes, outdoor dining and fire hydrants.
• COLLECTION FREQUENCY: NYC needs to double frequency of pick-up for estimated speed of trash that bins would accumulate.
• FLEET: A new garbage truck will needs to be designed to collect rolling bins at scale.
▫️ The proposed solution (literally garbage bins and shared containers) covers 89% of NYC streets and 77% of residential tonnage.
▫️The three case studies — because you gotta have solid case studies — are Amsterdam, Paris and Barcelona.
▫️There is a slide called “Why containerization matters” and three reasons are “rats”, “pedestrian obstruction” and “dirty streets” (the 21-year intern that did this slide billed at prob $10k an hour is my hero).
The study is actually pretty interesting.
I have no idea if $4m is a rip-off to learn that “yeah, we should put garbage in bins so rats don’t eat it” but I would have happily done it for 10-20% of that budget (and come to a similar conclusion).
It is actually an interesting deck. Just the thought of a 20-year old newly grad getting billed at an obscene rate to say”rats get to garbage” is kinda funny
Four more solid slides:
— By the numbers (daily garbage = 140 Statue of Liberty a day!!)
— City comparison
— Container comparison (looks like they did select the “scalable” trash bin)
— Curb side analysis
Think Mckinsey telling NY to “put garbage in bins so rats don’t eat it and people can walk” will work out better than when it told AT&T in 1981 that cellphones would be “niche.”