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

Episode Date: November 12, 2024

Chances are you’ve got a bottle of Sriracha chilling in your fridge right now, but have no idea who invented it — or the spicy story of how he made it happen. Entrepreneur David Tran fled Vietnam in the late 70s, smuggling gold bars into the US to start his venture - selling hot sauce out of a van. Little did he know his thick, spicy red jalapeño concoction would make him the world’s first hot sauce billionaire…without ever spending a single dollar on advertising (FYI: Kraft dropped $750M on marketing alone in 2023). For over 40 years, David’s stayed laser-focused on making “a rich man’s sauce at a poor man’s price.” But when massive pepper shortages threatened the entire business, he faced a choice more painful than Tabasco on a paper cut. Find out how David puts “Co’s before Pro’s” (customers before profits)...and why Sriracha is the best idea yet.Follow The Best Idea Yet on the Wondery App or wherever you get your podcasts. You can listen to new episodes early and ad-free on Wondery+. Join Wondery+ in the Wondery App, Apple Podcasts or Spotify. Start your free trial by visiting www.wondery.com/links/the-best-idea-yet/ now. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Wondery Plus subscribers can listen to the best idea yet early and ad free right now. Join Wondery Plus in the Wondery app or on Apple podcasts. It's 2011. Nick, you and I are roommates living in our shared apartment in the East Village 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 train will arrive in four minutes. Okay, 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. My contribution to that apartment was that I would always pair the meal with a movie. 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 were 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 There were technically four roommates, but we always said that we were really five, right? Ahhhh. Because there was one more individual in our tiny East Village apartment and they weren't paying rent. I have to give you all the credit actually, yeah. You introduced to us the fifth member of the team.

It was a product. It was bright red. It had a cult following and it ranks at around, ehhh, 2200 on the Scoville scale. I think we're talking about Sriracha. Sriracha. Rooster sauce. LA ketchup, baby. A half-used bottle is probably sitting in the little shelf on the door of your fridge right now. 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. You know the bottle. The white printed logo, it's fading and the cap is crusted over

with red chunks of fiery molten deliciousness. Sriracha, it brightens up your burritos, it electrifies your eggs, it rizes up your rice. Yeti's Sriracha's other competitive advantage, what is it Jack? The price. Yeah, it's the price. At about $5 a bottle, it is a cheap product.

It is. It's a condiment for the common man. Sriracha has saved countless quantities of budget meals for working families and broke college kids. Nothing elevates a pizza bagel quite like Sriracha. But the story of how this super sauce hit a billion dollar valuation is as unbelievable as the product is delicious.

And it centers around the brand most synonymous with Sriracha, a low key operation at a Southern California called Hui Fong Foods. Hui Fong Foods didn't actually invent Sriracha. Interesting. But they did single-handedly introduce it to American Palates. I like it.

And for the company's entire 44 year existence, the Hui Fong Empire has been run by one guy, David Tran. David Tran. Now David's entrepreneurship story actually starts in South Vietnam. 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. In fact, David's 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 Franks.

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

Hey, Jack, go grab those pizza bagels. From Wandery and T-Boy, I'm Nick Martel. And I'm Jack Kraviche Kramer. And this is the best idea yet. The untold origin stories of the products you're obsessed with. I'm Nick Martell. And I'm Jack Kraviche Kramer. 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. I got that feeling again They changed the game in one move Here's how they broke all the rules It's time to win big! Don't miss your chance at the $7.4 million grand prize,

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Our story starts in Sok 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. 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 Soc Trang to finish school and avoid getting dragged into the front lines. 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.

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 cinnamon, maybe a bit of star anise, Nick? Yeah, it's like the whole McCormick spice cabinet, Jack.

David serves as an army cook for five years, but then on April 30th, 1975, Saigon falls to the North Vietnamese army, and suddenly the war is over. The U.S.-backed capitalists in the South have lost. 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 about all of this. But for David, he's just relieved the war's 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? Alfalfa, tons of Alfalfa. No, it's gotta be chili peppers, right? It's chili peppers. It's chili peppers.

David helps his brother farm the chilies and bring the crops to the market. But soon, they discover a problem like 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. 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.

David and his brother don't have the option of subsidies, but they do have a different secret weapon. Interesting. Thanks to their time working in chemical retail, David knows how to use a couple basic food preservatives. Yes. Which means he can take their chilies and turn them into a shelf-stable, long-lasting sauce. 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. 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. It's a Tuong Oat startup, which actually means chili sauce in Vietnamese. 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.

I'm sorry, Jack, pause the pod for a moment. David's first company relied on old, used, recycled baby food jars from G.I. Joe. 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. 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. You can hear the clink of the baby food jars while he's riding his bike over the potholes. Well, after three years in, David's small business is actually a modest success, even under communist rule. And if life had remained stable for David, we probably wouldn't be talking about it today.

Good point. 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. 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. David decides enough is enough. So in 1978, he's able to get his wife and kid and then 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. Wow. 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. Oh, and it's not a chili sauce recipe. More on that in a bit. 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 Fang, which means gathering prosperity. But for the 3,000 people aboard the Hui Fang, 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 3000 people and they're just floating. Jack, I got annoyed at Delta the other day because we were taxing for like 13 minutes. And then finally, in mid January, they're allowed to disembark. Wow.

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, 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? Yeah, it's true.

In fact, taking more than $10 out of Vietnam was prohibited by the Vietnamese government. But refugees were allowed to bring food. Interesting. 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. Oh, what would they find in those little cans he hid away? $20,000 in gold.

Yetis, for context, that's about $90,000 in today's money. 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. This guy's a risk taker, but it's a calculated risk. Let's hope it pays off. Okay, time for a major change of scenery. We're going to skip past the grueling months of asylum applications. The paperwork.

The waiting. 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. Finally! And just like nearly a million other Asian and Pacific Islanders at the time, the trance

settle in Los Angeles. David 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 in time for Magic Johnson's arrival with the Lakers. 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. 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. This sounds like the perfect market fit, but somehow Asian restaurants in the area don't have authentic chili sauce. 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's been around since 1859, and Frank's has been around since 1920. Well, Frank's is made with cayenne peppers, and Tabasco is made with, you know, Tabasco has been around since 1859, and Frank's has been around since 1920. Well, Frank's is made with cayenne peppers, and Tabasco is made with, you know, Tabasco peppers. These two hot sauce companies are basically the Coke and Pepsi of the market. It's a duople, a simple two-party system.

But neither one remotely resembles the thick, the flavorful, the saucy sauces of Southeast Asia. It's a huge void in the market. And besties, as Nick and I like to say, the market is like a ball pit. Because if there's a void in the market, then something's gonna fill it. 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. And now Yetis, we know what you're thinking here. Uh-huh, 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. 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. One month! Are you kidding? This guy's in lean startup mode before the lean startup is even a thing. He's doing a lean startup before Andreessen met Horwitz. 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. Yet this is where things get wild. Cause 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! 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. Smuggle low, sell high, works every time. He decides to name his business after the freighter that carried him out of Vietnam, Huy Phong. Huy Phong, yet is the world's most disruptive hot sauce is named after a refugee ship. We did say it means gathering prosperity. We did.

Which is what every business owner hopes for and which David seems to be finding here in the US. Now Jack, I 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. 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. Nice. 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. 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. This man is an entrepreneur, baby. Oh yeah. And he's feeling it. It's 1980. This is a huge year for them, Jack. If this was a movie, this would be our montage moment. Jack, can you paint a picture for us? Every day, Nick, David is getting up at 4 a.m.

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 in. 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. 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. You can almost picture David in those early days. 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 beached down on the van. He peels off down a side street and into a back alleyway behind an Asian grocery. Oh, I like this. 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. I think what you're saying, Jack, is that David's hot sauce in a baby jar with the Zodiac logo finds product market fit immediately. His theory was right.

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. Within the first month, Hoifong Foods clears a thousand dollars of profit. Okay. That's about $3,900 today. This hot sauce is a profit puppy man. This is pretty good profit for a startup, especially since this sauce is only

selling for two dollars a pop. So he's literally selling thousands of jars at the launch. That is hockey stick growth that a software startup would dream of. 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. His motto? A rich man's sauce at a poor man's price. But the true test is whether customers will return. Oh good point.

And they do. Sales pick up each month, and David figures it's time to move on from the baby jar look, so he designs a new bottle. And that will be the look that doesn't change for the next 40 years. Now Jack, I've always been wondering this.

Why not do a red cap? Why did he do a green cap for the sauce? He chose it to signify freshness. Oh, okay, I get it. And of course, it kind of looks like a chili pepper stem too. 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. But I want you to notice something on this bottle. Yeah, Jack. A word that did not appear on the jars or on the side of his big blue Chevy van. All right, I'm looking right above the rooster.

Can you read that word for us? Tuong Oat Sriracha. As we covered, Tuong Oat just means chili sauce in Vietnamese. Right. But he's added the word Sriracha. Mm hmm. 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? Yeah, that was actually kind of a record scratch moment, Jack. Not gonna lie.

The credit generally goes to a woman named Tanom Chakrapak. She was born a century earlier and raised along the southern coast of Thailand in a town called, wait for it, Si-Ra-cha. Oh, now yeah, Tanom's father was a businessman whose travels took him all over Southeast Asia in the late 1800s. And he was tasting sauces from Laos to Myanmar. Some were sour, some were salty, some were kind of sweet. But none, 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. They are pretty close, Jack.

Now, Tenoam spends years perfecting her dad's recipe. And then she releases the sauce as Siracha Panich, named for her own sleepy hometown. And Tenoam 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.

Now, it is almost certain that David would have seen that sauce on shelves growing up, or as an army cook when he was shopping in Saigon. 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? Well, the answer comes down to one thing and that thing is marketing. Remember, in LA, David isn't just selling to Vietnamese immigrants. Right.

He's selling to immigrants from all over China and Southeast Asia. All of them would have been familiar with Tenoam Sriracha back home. Same as all Americans are familiar with ketchup. So calling his sauce Sriracha evokes the familiarity and comfort of Tenoam's version, even though David isn't really trying to replicate it. This isn't some kind of a trademark infringement. No, it's not. Like, Tenoam's family doesn't have a case here.

That's because Tenoam 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. 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. But even forgetting the geography. Generic products, especially foods and condiments like ketchup, mustard, or mayonnaise, they can't legally be proprietary. They are unownable.

Which means you don't beat your competition by suing them, you beat them by making a better product. It's like, come at me bro, we'll put up our sauce against yours any day. Exactly. That's how Tenom 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. Oh, this is great.

No marketing. Zero marketing dollars. He doesn't take out any billboards. He doesn't pay for any magazine ads. 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. Hui Fong doesn't do any advertising at all. None. It's all direct sales to Asian restaurants and Asian markets. And that's true still to this day.

I mean, have you ever seen a commercial for Sriracha? Jack, 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. Friends are sharing it with friends. Visitors to Chinatown taste it and want a bottle or a case to bring home for themselves. 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. 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 want it. So in 1987, David's able to upgrade his facilities to an estimated 65,000 square foot building about 10 miles east of Los Angeles. That is a 26X jump in scale from his last place he manufactured from. But Jack, as you're saying it, I'm getting stressed out because the scale comes with

supply chain complications. And soon David runs into a problem that threatens the very viability of Hui Feng foods. And of Sriracha as we know it. His name is Dexter Morgan, but you know him as Dexter, and nobody knows his beginnings. Enter to win a pair of tickets to the screening of the Paramount Plus exclusive series, Dexter Original Sin, on December 12th. Hosted by me, Rick Campanelli. Enter at chfi.com. From student to avenging serial killer, you never forget your first crime. Dexter, Original Sin, streaming December 13th, exclusively on Paramount+.

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. 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. 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. Ripe red peppers bruise more easily than green ones do and they don't always survive the trip, especially if they're schlepping all the way up from a farm in Mexico. Sometimes David finds he's cleaning out a wholesaler's entire supply in just one day. 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.

So David's annoyed by the inconsistency of his supply chain. Yeah. Then one day, David receives a letter with a local postmark from some place called Underwood Ranches. He opens the letter. Okay. It's from a man named Craig Underwood. Interesting.

He's an ex-military man like David and a fourth generation farmer. And what does this Craig Underwood want from this random letter, Jack? His pitch is simple. He wants to grow peppers for David. Jack, this is the coldest of cold calls. Actually, I guess technically it's a cold mailing in this case. But it's coming at the exact right time from everything we were just saying. David's looking for a consistent pepper grower. Yeah. So he agrees to the trial run sight unseen.

I love this guy. And when one of David's regular suppliers flakes 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 we found Underwood turns out to be the perfect partner for we found foods because they're close by they're reliable and they grow a Consistently great pepper. Is this like it's meant to be? David and Craig create a super simple arrangement that will last for three decades. Wow. 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. And this streamlined supply chain not only makes life easier for David and his team, it helps keep the Sriracha quality consistent and its price point low. David refuses to jack the price up even when demand for his product goes crazy. Now Jack, what kind of prices we talking about here in the 90s? For years the price 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. I guess if you got zero advertising budget, you can pull that off, Jack.

David Tran is putting coes before pros. He's putting customers before profits. And you never really see that in business. When he puts customers before profits, it endears his sauce even deeper to the community. Totally. So with the stability of demand and supply, Hui Fong Sriracha can finally go global. Oh yeah.

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. Get this, the former tenant is wham-o. Like the company that made a hula hoop, slip and slides, and frisbees, that kid's toy company. David takes over their space to make his hot sauce. Can you imagine if they'd done a collab? Sriracha slip and slide.

Jack, this is the collab we didn't know we needed, but we actually do need. Soracha slip and slide. Jack, this is the collab we didn't know we needed, but we actually do need. Now, Jack, when we started using and abusing Soracha in that East Village apartment, I thought that we were early adopters to this product. I thought we were too. But I guess that's man and finance bias

because we were about 25 years late, apparently. I mean, on the early adopter curve, we were like fashionably late, apparently. By the late 2000s, Sorachaacha has finally reached nicks 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. 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 Huy Fong rooster tattoos. Again, this is a company with zero marketing. Huy Fong has more than a cult following. Huy Fong is a cult. 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 fields. It's heartbreaking for farmers. And Hui Fong's precious chili supply literally

goes up in smoke. 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 Huy Fong sriracha. Huy Fong put all its peppers in one basket. 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.

And it's an awkward conversation topic for everyone with one of those rooster tattoos too. But Nick, listen to how David handles this crisis. Instead of reaching for preserved peppers or substandard peppers from the supermarket, the Hui 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. Huy Fong doesn't lose a single big customer

during the shortage. They all patiently wait for next year's crop. 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. Also, David arguably saved the business. Also, David learns from the mistake of that crisis. Yeah, good point. From this point on, Huifang adjusts their production.

They set a monthly quota and every bottle of sauce produced is sold in advance. 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. The next year, Huy Fong moves to a massive new $40 million manufacturing plant in Irwindale, California.

Jack, I'm going to have to ask you to sprinkle on some really delicious context to the size of this plant. Their new facility is the size of five Dodger stadiums. I like what you did there, man. By 2012, Hui Fong's annual sales crack $60 million. Sriracha has gone viral. David's bringing in red jalapenos 21 tons at a time. That's three African elephants worth a hot pepper. 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? Well, you'd share it for money. Usually it's because of money. But all in respect to David, he refuses. Nice. Despite probably some massive offers. Companies with cult followings like David's, they definitely get some credit 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 residents of 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. Mom, my eyes! Now eventually that whole eye burning thing gets resolved, but who eat Fong Foods takes a hit in the public eye, at least locally.

But that's nothing compared to the next bat that's going to 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? I love that part of the story check. His Underwood ranches became David Tran's sole jalapeno supplier for 30 years, but that all falls apart in late 2016. I hate to hear it. There's a fight over the price of next year's pepper crop. And within just a couple of days, a 28 year partnership is over.

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. The new sriracha is not as spicy. It tastes a little bit more muted. 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, imagine the difference, we'll never know. 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. Meanwhile, Underwood Ranch is still growing those peppers even though they're not delivering them to Sriracha. Okay. So guess what they do? What do they do?

They start making their own Sriracha. No way! They take advantage of the fact that the product is not trademarked. They just launch it under a different zodiac sign called Dragon Sauce. Oh, of course. 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. Huifang rakes in around $150 million in annual revenue in 2019, securing a nearly 10% share of the entire US hot sauce market. That makes Huifang the third in the country after only Tabasco and Franks. Again, this is a solely owned private company. Sriracha is not part of any conglomerate with a huge manufacturing and distribution relationships like Kraft frickin' Heinz. 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. Ah yeah. In 2022, a drought once again obliterates Huy Fong's supply of chilies. And this happens again in May of 2024. I mean, Jack, we actually talked about that exact incident on our daily pop biz show, The Best One Yet. We covered this story. The shortages of sriracha has actually created a lucrative secondary market for the rooster sauce. Yeah.

We went on eBay after this shortage happened and we discovered that bottles of Huy Fong sriracha were selling for 80 bucks. People are that desperate to get their sauce. Yeah. Oh, and then Jack, what about the year they had the green pepper drama? Remember that one? We covered that too. Hui Fong started using peppers that weren't fully ripened resulting in a greenish sauce that just hit different. It was like a Christmasy looking sauce. But then also that sold for premiums on eBay too, because it was kind of awesome to

look at. It was the whole caught sauce. But yet 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 collabs are deliberate marketing moves that manufacture scarcity. And that scarcity breeds excitement.

The less you can get, the more you crave it. In 2023, just one year after a major Huy Fong-Saracha shortage, the company's valuation hits $1 billion. This officially makes David Tran the world's only hot sauce billionaire. Well, he slipped back off the three-comic club one year later, but still, heck of an accomplishment. 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, my chili lover. They like it and they enjoy it. That's how I feel healthy. So I try to make it better for them. Jack, good thing he brought those gold bars on that big book. Nick, I got great news.

Hit me, Jack, what do you got? The pizza bagels are done. Yeah, I mean, at this point, you probably burned them, man. It's been like 45 minutes in 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?

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 and 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. 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'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. It's actually even better. Yet his 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? Sriracha put coes before pros. Nick, what I mean is, Sriracha put co's before pros. Nick, what I mean is Sriracha put customers before profits. Co's before pros, put it on a pillow, Jack. 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. 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. More than any business story we've ever seen, David consistently chose what was best for the customer. He made some costly short-term decisions, but they paid off in the long term in customer

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

But Jack, now it's time for our favorite part of the show, the best facts yet, spicy edition. What do we got, man? All right, when they're not experiencing a devastating pepper shortage Emotional. Hui fang foods produces 18,000 bottles of sriracha every hour. That's a lot. That's almost 4,000 gallons every 60 minutes. That's a lot of swimming pools and to this day we fang only make sauces specifically Three sauces there's sriracha, obviously.

There's Sambal Ule, which is only made 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. Now, even with the current product shortage, David Tran, he's doing just fine. He is still turning away offers to sell Hui Fong

because he wants to leave it to his kids, William and Yasi, Huy Fong's president and vice president respectively. 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. Speaking of which Jack, Tanom Chakkapok sold the recipe and the rights to of Sriracha. Speaking of which, Jack, Tenoam Chakkapok sold the recipe and the rights to her Sriracha Panique to a company called Thai Terrapose 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. Here's a closer for you. Hit me, Jack. 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.

That's a good point. 16 ounces of liquid can cost anywhere from nine to $40,000. So sending a 28 ounce bottle of huifang, it's almost $16,000. But Jack, can you really put a price on flavor? Sounds like he can. And that's why sriracha is the best idea yet. Coming up on the next episode of the best idea yet,

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, 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. Before you go, tell us about yourself by filling out a short survey at Wondery.com slash survey. If you know the best idea yet, leave it here in the comments. We want to hear it. Oh, and by the way, we'd love your rating and your review. 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, and me, Jack Gravichia Kramer. Our senior producers are Matt Beagle and Chris Gauthier. Matt Wise is our producer. Our senior managing producer is Nick Ryan, and Taylor Sniffin is our managing producer. Our associate producer is H. Conley. Research by Samuel Fatzinger. This episode was written by Katie Clark Gray and Anna Rubinova. 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 Kramarik. Fact Checking by Molly Artwick. Our music supervisor is Scott Velasquez and Juliana Garcia from Freeze On Sync. Our theme song is Got That Feelin' Again by Black Lack. Executive Producers for Nick & Jack Studios are me, Nick Martel, and me, Jack Ravici-Kramer. Executive producers are Dave Easton, Jenny Lauer-Beckman,

Erin O'Flaherty, and Marshall Louis for Wandering.