The Great Sriracha Feud | The Only Hot Sauce Billionaire | 1

0:08It's 2022 in the Playa Vista neighborhood of Los Angeles, inside the kitchen of the Gulp restaurant and brew pub. Restaurant manager Chris Sessa hunches over his phone, streaming a video. Sessa's second-in-command peers over his shoulder. They cock their heads to hear the video over the controlled chaos of the kitchen. Khoifong Foods says it was forced to suspend production of its iconic sriracha sauce because of a lack of its key ingredient, chili peppers, the company blaming severe weather for the shortage. Sessa pauses the video. Well, that explains it. For weeks, Sessa has been worrying about keeping sriracha in stock.

0:48The spicy, garlicky condiment has become an essential ingredient at Gulp. They use it in multiple dishes, including their best-selling appetizer, sriracha deviled eggs. Sessa's second-in-command rubs his hand on the back of his neck. It drips with sweat from the heat of the kitchen. What are we going to do? Well, how many bottles do we have left? Almost 20. Sessa grimaces. Sounds like a lot, but the restaurant goes through six to ten bottles a week, so they don't have long before they run out. Hey, what about Tabasco or Cholula? Oh, come on, get real. There's no way customers are going to go for that.

1:25It's sriracha or nothing. Never seen people go so nuts about a hot sauce. Well, let's hope Wee Fang gets more chilies, and soon. I don't think the drought's going away before we get through those last twenty bottles. I know, I'm just joking. I hope they find another chili supplier. there gotta be others out there. Yeah, maybe. Look, worst case scenario, we pull sriracha deviled eggs from the menu. Yeah, the customers would just love that. This is so messed up. We got hooked on a hot sauce and that hot sauce is completely dependent on a special kind of chili and now we're all paying the price. He strides over to his office, barking over his shoulder.

2:05Just keep looking for someone who has sriracha. Meanwhile, I think I'm going to go pray Huifong get some rain and some more chilies. Heard that. What Sessa doesn't know is that Huifong Foods isn't being completely honest. There's another reason for its production problem. A bitter standoff that's cut Huifong Foods from its most reliable chili supplier. But what started this feud? And can it be put to rest before a slew of competitors sweep in?

2:47So, you just realized your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy. Just use Indeed. See, when it comes to hiring, Indeed is all you need. Stop struggling to get your job posts seen on other job sites. Indeed's sponsored jobs help you stand out and hire fast. With sponsored jobs, your post jumps to the top of the page for your relevant candidates so you can reach the people you want faster. And that makes a huge difference. According to Indeed data, sponsored jobs posted directly on Indeed have 45 % more applications than non-sponsored jobs. Plus, with Indeed-sponsored jobs, there aren't any monthly subscriptions, no long-term contracts.

3:36You only pay for results. How fast is Indeed? Well, in the minute I've been talking with you, 23 hires were made on Indeed, according to Indeed data worldwide. Look, there's no need to wait any longer. You can speed up your hiring right now with Indeed. And listeners of Business Wars will get a$75 sponsored job credit to get your jobs more visibility. That's at Indeed.com slash BW. Just go to Indeed.com slash BW right now and support our show by saying you heard about Indeed right here on Business Wars. That's Indeed.com slash BW. Terms and conditions apply. Hiring? Indeed is all you need. This message is brought to you by Apple Card.

4:24So you left your wallet in the car. Or was it at home? No need to panic. With your iPhone, you can tap to pay using Apple Card with Apple Pay and earn unlimited daily cash back when you do. Apple Card is ready when you need it. Subject to credit approval, Apple Card issued by Goldman Sachs Bank USA, Salt Lake City Branch. Terms and more at AppleCard.com.

4:52From Wondery, I'm David Brown, and this is Business Wars.

5:19The rise of Huifong Foods and its signature sauce, sriracha, is like something out of a fairy tale. Huifong founder David Tran immigrated to the United States from Vietnam in 1979. He started making sriracha a year later, shortly after arriving in Los Angeles. He delivered the product to Asian markets around the city in an old van. And with a quality product sold at a low price point, within decades, Sriracha grew from a niche product to the third most popular hot sauce in America, with a truly devoted fan base. In 2022, Trans Sriracha was estimated to have brought in roughly$150 million in sales, and it's thought to be found in one out of every ten American kitchens.

6:07Weifong Foods had a simple domestic production process sourcing its key ingredient, red jalapenos, almost exclusively from Underwood Ranches in Ventura County, California. It was a beautiful marriage, too. As sriracha grew, so did Underwood Ranches. The two founders, David Tran of Weifong Foods and Craig Underwood of Underwood Ranches, had a good thing going. They foresaw a long future together. Until one day, they didn't. Our new two-part series will explore what went wrong and how a bitter feud upended the American hot sauce market. This is Episode 1, The Only Hot Sauce Billionaire.

6:58A personal note here. One of my favorite lessons about storytelling is that every great story begins once upon a time. Maybe not literally, but metaphorically. The story you're about to hear is full of similar lessons, like this one. Every business empire starts as a corner shop. Again, don't take the maxim literally, but think about it. By focusing on a specific market, in this case Asian Americans, David Tran built the credibility and revenue base he needed to expand. Sriracha became a household name by first becoming a fan favorite. That's the sort of thing that's possible when you set out to own a niche before you try to conquer a whole category.

7:41But be careful with that early taste of success because, as we're about to hear, the initial recipe may have to be tweaked more than a bit. along the road to the big time.

7:58It's the mid-1970s, northeast of Ho Chi Minh City, Vietnam. David Tran stands in a chilly field. A warm breeze rustles the leaves of the plants. Tran is 30 years old. His older brother stands across from him, looking worried. Tran tries to reassure him. Sometimes in life you have to take a risk if you want to get ahead. I know. Think of it this way. My idea is a solution to a problem. The chili market is in the toilet right now. We won't even break even if we sell all these peppers. But if we turn them into a sauce, then we can charge a higher price point and turn a profit. I get that. But why would anyone want to buy your sauce?

8:39Tran puffs out his chest. All the guys in my unit liked it. Until recently, Tran was serving in the South Vietnamese Army, where he worked as a cook. Hot sauce is a popular condiment in Vietnam, but most families make their own rather than buying a commercially made one. As an army cook, Tran didn't like the sauces that were available for purchase. He found them bland, lacking heat. So he, too, decided to make his own. It was a hit amongst his fellow soldiers, and now Tran wants to make a commercial version. But his brother is skeptical. Tran puts his hand on his brother's shoulder. I really think this could be a more stable business for us.

9:21I just don't want to overreact because of one bad year. What if the chili market rebounds next year and the price per bushel is great? I'm saying we can free ourselves from that yo-yoing. When chili peppers are low, we make the money back by selling sauce. And when the price of peppers go up, we still keep our price point low, which brings more customers willing to give it a try. Tran's brother nods. You're right, you're right. Let's try. Tran and his brother embark on their new hot sauce endeavor. Tran develops several different sauces. The whole family gets involved. Tran's brother continues to grow the chilies.

9:57His father-in-law collects and washes Gerber baby food jars left behind by American servicemen to hold the sauce. His brother-in-law fills the bottles. Tran labels each lid with a drawing of a rooster, a nod to the year of the zodiac in which he was born. Tran sells the bottles to out-of-work folks looking for a source of income, who in turn sell the sauce door-to-door. And the business is going well. But the political situation in Vietnam has become untenable for Tran and his family. After the end of the war and the transition to a socialist system, the Vietnamese government starts pressuring the ethnically Chinese population to leave the country.

10:38Tran's family is of Cantonese origin. By late 1978, Tran feels like he's made enough money that he can afford to leave and start over in a new country. There's just one problem. The Vietnamese government doesn't allow refugees to leave with financial assets. But Tran thinks he has a solution. People are allowed to leave with food for their journey, so Tran hides 100 ounces of gold in cans of condensed milk. This should give them the equivalent of more than$300 ,000 today to start their new lives. Let me tell you, there's a common theme in many a business war. See, entrepreneurs have a different mindset, an unusually creative gift for spotting opportunity where others may see a wall.

11:32Trans move to stash gold in milk cans? Clever, for sure. But it was something else, too. Something like survival entrepreneurship. When constrained by bureaucracy, capital, or borders, founders often find unconventional paths forward. Maybe this is what separates entrepreneurs from employees. Bending the rules? Breaking them? You be the judge. But remember, you get caught, you pay the price. And you never heard this from me, okay? To increase the family's odds of getting at least some of the gold out without getting caught, the family breaks into four groups. Each takes a different ship out of Vietnam.

12:17Tran and his wife are on separate boats. In December 1978, Tran boards a freighter ship named Huy Phong that's bound for Hong Kong. The guards don't think to look inside his cans of milk, and he safely gets the gold on board. After eight months in a refugee camp in Hong Kong, Tran heads to the United States in the summer of 1979. He reunites with his wife in Boston. She's also held on to her goal. The two of them are excited to see snow for the first time, but Tran's not sure what to do in Massachusetts. And when he speaks to his brother-in-law, who landed in Los Angeles, he learns that they grow chili peppers in California.

13:00him. If they move there, Tran can get back into the hot sauce game. So, in January 1980, Tran and his wife move across the country to Los Angeles. The next month, using some of the gold he brought with him, Tran founds Weifong Foods. He sources the peppers from local markets and sells the sauce himself, going door-to-door to restaurants in Chinatown. He makes$1 ,000 profit in his first month. First month, a thousand bucks. Now that's validation. You know, too many startups confuse scale with success. With any new launch, what matters early on isn't some idealized notion that you may have about success.

13:47It's a whole lot more simple. It's whether someone will hand you real money for what you've made. Sure, the profit may be small, but look, it's proof someone values your product. Everything else can be scaled later. You've got the future in front of you.

14:07Tran grows from there. He has a very clear idea of who his primary customer is. Recent Asian immigrants. Trade restrictions prevent many of the ingredients popular in various Asian countries from being imported to the U.S. Tran knows that many immigrants will be looking for replacements that they can buy in local stores. By making his hot sauce in the United States with ingredients he can find locally, he can fill that niche. Tran's business sense pays off. His sauce gains a strong foothold among the Asian American community. It's found in Asian restaurants and markets that cater to Asian customers.

14:48It's a steady business, just like his business back in Vietnam. But then, Tran gets an idea.

15:00It's the early 1980s, and Tran is sitting in a restaurant in Los Angeles. A TV in the corner of the restaurant is on, and a local news anchor is relaying a story about the Olympics. The summer games are scheduled to be played in Los Angeles in 1984. It's a big deal for the city. But Tran is only half listening. He's jotting notes on a paper napkin, making a to-do list for the week ahead. Weifong Foods is still a small family operation, and Tran wears a lot of hats for his company. The server brings over his food. She places the steaming plate in front of Tran. Can I bring you anything else? More water?

15:38Some ketchup? No, thank you. I... He trails off, his mind racing. Actually, some steak sauce would be great. No problem. The server returns with a bottle. It gives Tran an idea. What if he made a new hot sauce? A new one, one that's still distinctly Asian in its flavor profile and will still sell well with Asian customers, but also have broader appeal. A sauce that non-Asian Americans would use, similar to steak sauce or ketchup. He studies the label on the bottle, his eyes catching on the word Heinz and the smaller font noting the 57 varieties of products Heinz makes. He could call his sauce Tran 84, a nod to the 1984 Olympics and the cross-culture mixing he's hoping to achieve.

16:31He scarfs down his food, excited to get to work developing his new hot sauce. If he does this right, this could be big. But Tran's about to discover a business liability. and it's one that will lead him to the person who will seem like the answer to his prayers, at least for a while.

16:57Ready or not? Yep, the holidays are coming and I'll be honest, I love having friends and family over, but I don't love realizing at the last minute that my serving pieces look like they've been through one too many dinner parties or that the guest room is more college dorm chic than holiday cozy. Know what I mean? Well, that's where Wayfair comes in. We just ordered some new serving plates, a new wreath for the door, a set of crisp new sheets, and suddenly the house feels just about guest ready. Even better, it didn't feel like a chore. It felt fun. But I've been here before, I'll be honest. My secret?

17:31The Wayfair app. What I love most is how Wayfair has literally everything you need. That's no exaggeration. I was surprised to find high quality cookware that's perfect for hosting those big family dinners. And let me tell you something, delivery was a breeze, free and fast, even for the larger items. Whether you're looking to spruce up your kids' rooms with festive touches or need new bedding for the guest room, Wayfair's got you covered. From Christmas trees and wreaths to inflatables for the yard, they're truly a one-stop shop for holiday prep. And the best part? There's something for every style and every budget.

18:07I can't wait to tackle more of my holiday home goals with Wayfair. It just makes getting ready for the season so much easier. Leaving more time to enjoy with the family. That's what it's all about. Get organized, refreshed, and ready for the holidays for way less. Head to Wayfair.com right now to shop all things home. That's W-A-Y-F-A-I-R dot com. Wayfair. Every style. Every home. When planning for your future, you want someone with a history of keeping their word year after year. For nearly 160 years, Pacific Life has been a trusted name in the industry. But that isn't just a number. It's experience that matters.

18:48It's 160 years of promises held, helping generations retire with confidence, protect their loved ones, and plan for whatever comes next. Whether you're looking for life insurance, employee benefits, or retirement income solutions, When your future is on the line, you want history on your side. And believe me, Pacific Life has been there, always there through changing times, always focused on your needs. Ready to secure your tomorrow? Ask a financial professional how Pacific Life can help you feel prepared for what's next. Pacific Life Insurance Company, Omaha, Nebraska, and in New York, Pacific Life & Annuity, Phoenix, Arizona.

19:24Because with Pacific Life, you're not just planning for the future, you're partnering with trusted experience.

19:44It's 1988 in Rosemead, California, an eastern suburb of Los Angeles. David Tran stands in front of an idling truck outside of the new Huifong Foods Factory. His sister-in-law, Donna Lam, who also works for Huifong, stands across from him. The driver of the truck sits with his head resting on his fist, waiting for them to finish their conversation. Tran gestures at the back of the truck, which is filled with red jalapeno peppers. Are you looking at these chilies? They're bruised and mushy. They're not acceptable. I agree they're not perfect, but that doesn't make them not acceptable. Since Tran developed his new sauce a few years ago, sales have continued to grow.

20:27He didn't wind up calling it Tran 84. Instead, he decided to call it Sriracha, after the coastal town in Thailand that inspired the flavor profile. The sauce hasn't broken into the mainstream yet, but it is steadily growing in popularity amongst Asian American customers. In fact, just last year, he moved production into this 240 ,000-square-foot factory. We don't have enough chilies to keep production going if we don't use these chilies. Are you really willing to shut down production over some slightly mushy peppers? What do I always say? Make a great product and profit will follow. If we use overripe chilies, our product won't be great.

21:08That is worse than shutting down production. Did it ever occur to you that your standards for the chilies are just too high? Although business has been going well for Tran, there's been one consistent problem. Finding a dependable supplier for the red jalapenos, which are sriracha's key ingredient. When he started, Hui Fong Foods, Tran sourced them from small markets, but those are no longer big enough to keep up with his current scale of production. And there aren't many suppliers who grow red jalapenos. Most farmers pick them when they're still green, and the red jalapenos are more delicate, which makes them harder to transport.

21:49Listeners, let me interrupt with a question here. What would you do? Trans convinced that one bad batch could do more damage than a missed shipment. When you're building a brand, consistency is currency. Customers might forgive delays, but they won't forget bad quality. Protect your reputation like it's your margin, because eventually, it will be. Long-term success isn't built on just more. It's all about the better. But then there's the flip side, right? It won't taste better if it never reaches the table. Hey, no one said this would be easy. We just need to find the right supplier. We've tried almost all the suppliers out there.

22:32You're never happy. So we keep looking. We cannot compromise on this. Lamb closes her eyes and takes a deep breath and then raps on the driver's side window. The truck driver startles and then rolls down the window. These are too bruised. Tell your boss we can't accept them. The driver gives her a curt nod and shifts the truck into gear, pulling out, taking their rejected chilies with him. Tran may have won this argument with Lam, but he hasn't solved the bigger problem. For Weifong Foods to continue to grow, he has to find a reliable source for the fragile red jalapenos. Luckily for Tran, about 80 miles away in Ventura County, there's a farmer looking for a new crop to sell.

23:20It's 1988, and Craig Underwood walks into a seed supply store. Underwood has grown an array of crops over the decades, everything from blueberries to fennel to parsnips. But throughout the 1980s, after changes to California's water use policy, big agriculture has made big inroads in the state. So Underwood has pivoted to growing a more niche product, baby vegetables and salad greens. But now the factory farms are coming after those markets, too. Large farms are taking their full-size carrots and cutting them into smaller pieces, marketing them as baby carrots. Underwood can't compete with the big boys, so he's looking to pivot once again.

24:04If he can't, he's worried that his family farm, which dates back to the 1860s, isn't going to make it into the 21st century. He may be a fourth-generation farmer, but at the rate things are going, he may be the last generation in his family to farm. As he talks through the situation with a seed supplier, the proprietor tells him he's heard about a hot sauce company in L.A. looking for red jalapenos. Underwood is intrigued. He's grown chili peppers before, albeit not red jalapenos. But he thinks he can do it. He does a little more research and then writes a letter to David Tran. In the letter, he pitches growing the red jalapenos that Tran needs.

24:50Tran takes Underwood up on his offer. He has nothing to lose at this point since he hasn't found a pepper supplier he likes. He agrees to a deal with Underwood for 500 tons of peppers, roughly 50 acres worth. A few months later, Underwood delivers acceptable peppers on time. But another supplier doesn't. So, Tran increases his order with Underwood for the next year. Over the next 18 years, the relationship continues to grow. Weifong Foods buys a steadily increasing number of chilies from Underwood every year. And Tran's goal of creating a hot sauce with wide appeal increasingly comes true. By 2001, Weifong Foods is selling approximately 6 million pounds of sauce and bringing in$12 million a year in revenue.

25:45In California, the sauce becomes a staple in many commercial kitchens and on food trucks, becoming a key ingredient in sushi rolls, tacos, poke bowls, and more. And its influence is spreading beyond California. The national Chinese restaurant chain P.F. Chang's has started using it in some of their dishes. And in 2003, Walmart begins stocking the sauce in its L.A. and Houston stores. Over the years, as business grows, Huifang's relationship with Underwood Ranches becomes closer and closer. Rather than source chilies from other suppliers, largely in Mexico or China, Huifang sticks with Underwood Ranches to keep up with growing demand.