David Tran and Sriracha's $1B+ Journey

How a Vietnamese refugee took a Southeast Asian recipe and turned it into a $1B+ hot sauce brand.

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Today, we will talk about Huy Fong’s Sriracha and how Vietnamese-American David Tran created a $1B+ hot sauce brand.

Also this week:

• Netflix’s Live Sports Plunge

• Jersey Mike’s $8B Buyout

• …and them fire posts (including RFK Jr.)

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(The Delicious) Source: Huy Fong

I love hot sauce. Just a bit of heat at every meal. Some capsaicin to get the endorphins going. Feel a little bit alive as the morning caffeine wears off. My go-to hot sauce is definitely Sriracha. It’s not the heat-iest hot sauce in the world but gives the exact zing I’m looking for.

Now, I’m probably a little biased because the founder of Huy Fong’s Sriracha sauce is a Vietnamese refugee (of Chinese descent) who fled from Communist Vietnam to America in mid-1970s.

The story hits home as my parents also fled the country during the Vietnam War. My mom and her family climbed onto a US naval ship on April 30, 1975 (that was the Fall of Saigon and the same day as that famous photo of people rushing to a helicopter on top of the US embassy) while my dad — a young surgeon during the War — had previously left the country when New Zealand doctors he worked with arranged for him to fly to Aukland to study medicine.

Also, I have a fascination with Asian consumer products that blow up in the West such as Hello Kitty, Toyota Corollas and unagi nigiri (the one item which has shockingly not blown up is heated Japanese toilet seats; these are the best and should be everywhere).

Huy Fong is now a $1B+ brand selling hundreds of millions of dollars of Sriracha products a year. Notably, Huy Fong has no sales team, no trademark and spends basically nothing on marketing or advertising. Its three moneymakers are the flagship hot sauce, sambal paste and a chunky chili garlic concoction that goes impossibly hard. 

Allow me to regale you with the full Sriracha story by taking us back to Thailand in the 1930s. We begin in a coastal city named — wait for it! wait for it! — Sri Racha. At that time and place, a housewife named Thanom Chakkapak created a heaty paste of chili peppers, distilled vinegar, garlic, sugar and salt.

Variations of this recipe have travelled across the globes in the decades since. One such remix was created by David Tran in the neighbouring country of Vietnam.

Born in the South of Vietnam in 1945, Tran was one of 9 children. He lived in a small town before moving to the bustling city of Saigon in his late teens. The first real business he learned was selling chemicals. By his early-20s, Tran was recruited into the South Vietnamese army (which was fighting Communists along with over 500,000 American troops). He worked as a chef and — using knowledge from his chemicals background — started dabbling with chili sauces stored in baby food Gerber bottles.

The experience led him to a great arbitrage opportunity. Buy chilis when prices are low. Prepare them for long-term storage and then re-sell the product when chili prices are back up.

“I thought of making [Sriracha sauce] because the pricing of the fresh chili…jumps up and down a lot,” Tran explained in an oral history with UC Irvine. “If I can make it [when prices are low] and keep it fresh, when the [price of chilis] goes up…we would have [a] market.”

Tran stayed in the country following the aforementioned Fall of Saigon but laid low with his family. Soon, tensions between Communist China and Communist Vietnam reached a boiling point. In late 1978, China started massing troops on the border with Vietnam. The Vietnamese government responded by kicking out thousands of people of Chinese descent (China invaded the north of Vietnam in February 1979 and a month-long war ensued; its the last full-on land war that either country has fought).

In December 1978, Tran fled Saigon with 100 ounces of gold, per Forbes. Worth $20,000 at the time ($100,000 in 2024 dollars), Tran stashed the bars in cans of condensed milk. He and his family joined more than 3,000 other refugees on a Taiwanese boat called the — wait for it! — Huey Fong (which translates to "Gathering Prosperity”). The boat would inspire the business name Huy Fong Foods.

Tran ended up on the East Coast of America in Boston. He was 33 years old and excited to experience snow during the winter. But the snow never came and he couldn’t find work. So, he called his brother — who had found his way to Los Angeles — and asked if people were selling hot sauce.

There wasn’t anything notable, so Tran moved to the West Coast. Beginning in the early-1980s, Tran brought his Sriracha recipe, swapping out chilis for a local ingredient: jalapeños. He filled recycled baby jars and sold product out of a Blue Chevy Van, making $2,300 the first month.

He started it all by getting a bank loan (I’m joking, no he didn’t). He started it all by raising venture capital (hahahha, nah, I’m playing). He started it all by crowdfunding the idea on IndieGoGo (ok, that’s not funny…no he didn’t).

He actually started it all with some of that $20,000 in hidden gold bars! Absolutely legendary startup capital move and I will never complain about financing again until I experience having to flee a country with 2 stacks of high society in dairy containers.

Clockwise from Top Left: 1) David Tran when you ask him about mayo; 2) glorious Sriracha ingredients; 3) how jalapeños ripen; 4) Tran slanging heat from a blue van.

With his hot sauce ready for market, Tran made the product stand out by slapping a Rooster logo on everything he sold. Why? He was born in 1945, which was The Year of the Rooster. He would later design the famous transparent squeeze bottle and added a green cap as a sign of "freshness".

The sauce's popularity took off among Asian restaurants and grocers. To meet the growing demand, Tran re-invested profits from the business into larger and larger manufacturing facilities:

• 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

As a reminder, Sriracha's success has come with:

• No sales team (Tran has mostly maintained the same 10 distributors and kept wholesale pricing below inflation costs as compared to the 1980s)

• No ads (Sriracha's cult-like status comes from "word of mouth")

Tran never trademarked "Sriracha", but he did trademark the green cap and rooster. This is why so many competing brands have a "Sriracha" sauce (Heinz, Tabasco). Tran say he doesn't care about the competition, calling them "free advertising". The Sriracha founder also won't budge on taste as he told the LA Times in 2013. A supplier once told Tran that his sauce was too spicy. A friend suggested to “add a tomato base” to make it sweeter.

“Hot sauce must be hot,” Tran replied (almost certainly in total disgust). “If you don’t like it hot, use less. We don’t make mayonnaise here.”

It ain't mayo son! 

The universal appeal of Huy Fong's Sriracha is encoded in the label, which includes five languages (Vietnamese, English, Chinese, French, and Spanish). In the US, the sauce achieved cult status decades ago. It graduated from “that red sauce on every table at every mom and pop Vietnamese restaurant” to Bon Appetit's "Ingredient of the Year" in 2009 to Martha Steward wings to fast food integrations to chip flavours and beyond.

In 2019, sales hit $150m (~10% of the US hot sauce market; other popular hitters are Tabasco, Louisiana and Frank's RedHot...which is delicious but really not hot sauce).

With so few ingredients, Tran prioritizes the best ones to win the market. Timing fresh jalapeños is tough: the ripening window (jalapeños go from 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.

For 28 years, Tran maintained his exacting quality standards with one exclusive jalapeño supplier in California named Underwood Family Farms. Unfortunately, the partners had a falling out in 2017 and it frankly wasn't a great look for Tran. Huy Fong was Underwood’s only major buyer and the farm planted 1,700 acres a year for the hot sauce maker. Because the picking window is so short, Underwood had to forecast its labor and equipment requirements beforehand. After the harvest season, Underwood would send a bill. The deal was never fully written out on paper and the parties partially relied on a verbal agreement. By the mid-2010s, there was disagreement over how Underwood did harvest forecasting. Huy Fong said they were being overcharged while Underwood said it was giving its best assessment. Lawsuits were exchanged and, ultimately, Huy Fong paid a $23m settlement to Underwood (which now makes its own hot sauce).

If you saw viral images of people selling Sriracha sauce on Facebook Marketplace for $100 a bottle during COVID — which I may or may not have bid on — it’s because Huy Fong was scrambling to get new suppliers as it had a shortage of product.

Huy Fong now works with three new farms and some people think the flavour has changed. Honestly, I dump so much sauce on everything that I’m probably not the best person to ask. Still slaps to me.

Another competitor is back in Thailand: The Winyarat family purchased the original Sri Racha Thai recipe in 1984 and creates a hot sauce called "Sriraja Panich". It uses Thai cayenne peppers instead of jalapeños but has struggled to make in-roads in America.

Huy Fong remains the platinum Sriracha brand and investors have been knocking on Tran's door for decades. A recent-ish deal puts Sriracha’s value into view. In November 2020, Choulala hot sauce was acquired by spicemaker giant McCormick & Co. for $800m (on sales of $92m). A similar price-to-sales multiple (~9x) for Huy Fong easily nets a $1B+ valuation. Tran’s children are shepherding the business and there’s no indication they’ll sell…but maybe.

Tran is almost 80 and says he doesn't need the money. His motto is "a rich man's sauce at a poor man's price.”

"My American Dream was never to become a billionaire,” he said in that LA Times interview. “We started this because we like fresh, spicy chili sauce.”

Me too man. Me too.

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PS. The latest episode of my Caffeinated Deep Dives podcast is all about Sriracha and the hot sauce industry including:

• Discovery of wild chilies (goes back 7000BCE)

• Capcaisan effects on the human body

• The Scoville Heat Units (SHU) system, explained

• How chilies travelled from South America to the world

• Chilies and hot sauces origins in Europe, Africa and Asia

• How the North American hot sauce industry began

Check it out at on Apple, Spotify or YouTube.

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Links and Memes

Netflix’s Live Sports Plunge: Last Friday, Netflix hosted a fight between 27-year old YouTuber turned boxer Jake Paul and 58-year old Mike Tyson (who was one of the most controversial and famous people in the final two decades of the 20th century including an unprecedentedly dominant run in boxing, a stint in prison, a starring role for The Hangover and the transformation into a massive cultural figure).

The fight was a major test for Netflix’s ambition in live sports. In the weeks leading up to the boxing match, Netflix pushed the Tyson vs. Paul fight like crazy to its 280m+ subscribers (and over 60m+ people ended up watching it, which is crazy when you consider that the most-viewed pay-per-view (PPV) boxing match ever — Floyd Mayweather vs Manny Pacquiao — had ~5m buys).

Since launching its ad tier last year, Netflix has added 70m users on its lowest-priced option and been steadily expanding its live sports offering to create ad inventory (and acquire new customers). Rafael Nadal and Carlos Alcaraz went head-to-head in a March exhibition match. Starting in January 2025, Netflix will stream WWE Monday Night Raw and PPV events such as WrestleMania and Royal Rumble as part of a 10-year $5B deal. On Christmas Day 2024, Netflix will show two NFL games that cost $150m to acquire the rights. Longer term, Netflix could be eyeing a media deal with UFC (which currently has a 5-year, $1.5B agreement with ESPN that expires next year).

So, how did the Tyson-Paul fight turn out? The consensus take is that it was a technical disaster — similar to its live Love is Blind reunion show — with millions of viewers hit by buffering screens, low-quality images and bad sound during the undercard and main fights. The only time the live-stream seemed to work perfectly was when Tyson was interviewed in the locker room before walking away to reveal his bare ass in chaps. During the fight, Tyson was fully fatigued within 30 seconds of the first round and basically spent the rest of the fight walking around the ring while getting jabbed (it was still physically impressive at his age, especially considering that he almost died over the summer and needed transfusions to replace half of his blood).

Look, we all know the saying: father time is undefeated.

Tyson probably needed a fat bag and got paid $20m for 16 minutes of work. Paul made $40m as fighter and promoter. The “Problem Child” has turned into an S-Tier marketer. He’s improved as a boxer over the years but all of his matches in the lead-up to Tyson were against ex-celebrities or older athletes. Still, the fact that Paul parlayed those events into the most-viewed boxing match of the 21st century speaks to his marketing genius and understanding of how to play the villain (or "heel" as they call it in wrestling) to perfection.

Despite the technical hiccups and the rather meh athletic display, I think the fight was a success for Netflix based on the fact that I was glued to my phone on a Friday night sharing memes with millions of other people. Netflix, Paul and Tyson created a mono-culture experience in a world of fractured attention. Netflix did the same with the Tom Brady Roast a few months ago (that one had much less technical difficulties because the audience was about 1/3rd of the size and Brady is much more US-centric famous compared to the globally-famous Tyson).

Getting 60m viewers at the same time is no small feat in 2024. Just look at the recent Oscar’s (24m), Olympics Men’s Gold Medal Basketball Finals (20m), Grammy’s (17m) or even Biden and Trump arguing about who is a better golfer (70m). The only obvious bigger live event from a viewership standpoint was the Super Bowl (100m+ viewers).

But let me hedge my “the fight was a success” statement by noting an obvious: quantity does not equal quality. On top of the fact that we can’t fully compare Netflix’s self-reported engagement numbers, we should also consider the fact that huge engagement does not lead to cultural impact. Do you know the most-viewed Netflix films ever? It’s Red Notice, Don’t Look Up, The Adam Project and Bird Box. I’ve seen none of them. They aren’t particularly zietgeist-y. Tyson vs. Paul will fall in the same bucket. It was not Ali and Foreman during the “The Rumble In The Jungle”.

This is why Netflix has to nail its NFL Christmas Day games. The $300B+ streamer has proven that it can bring a massive live audience and now it has the most culturally relevant US sport to shove down its distribution.

Netflix will apply all of its Tyson vs. Paul learning. What are the learnings? Well, Netflix has been understandably mum about its technical issues. Thankfully, Al Gore invented the internet in the 1990s and we have experts willing to opine. Peter Yared — former CTO at CBS, who helped to live-stream the Super Bowl — dropped a bunch of knowledge on X:

Core issue for Netflix is that they operate their own content delivery network (CDN), which is not built for live [streaming]. They don't have the operating capability and vendor relationships to do large scale live streaming [yet].

In response to various comment, Yared thinks that Netflix “will get there” but will have to figure out:

• Live-streaming technology: “At this scale, Akami and Fastly are there go-go vendors, not AWS Cloudfront. But it requires having implemented their APIs and understanding how they work.”

• Better forecasting: “…since [Netflix runs its] own CDN that was initially built for edge caching, they have to make sure it can handle peak live load for upstream and downstream [traffic], and for transcoding.”

I actually don’t know what any of those words mean, but am sharing them with you readers because it makes me feel smart to find expert takes. Netflix will really need to figure out this “CDN” and “caching” and “transcoding” stuff because it just announced that Beyonce will be doing the half-time show for the NFL Christmas Day game between the Houston Texans and Baltimore Ravens.

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Jersey Mike’s Subs Sells For $8B: I did not realize how many of you readers were into Chick-fil-A (CFA). Probably the most comments I received about a single company after I wrote about the chicken sandwich vendor last week.

So, let me give you all some more franchising juice: private equity (PE) giant Blackstone acquired Jersey Mike’s sub chain for $8B last week. The company’s 67-year old CEO Peter Cancro has a wild story as told in a Forbes profile:

• In 1971, a 14-year old Cancro starts working at Mike’s Sub in New Jersey.

• In 1975, Cancro was in senior year high school and Mike’s Sub was put up for sale.

• Cancro borrowed $125k from his high school football coach at 10% interest to buy the sub shop from his former boss (his football coach was a VP at a local bank).

• Instead of going to the University of North Carolina to play football, Cancro becomes a sub shop owner.

• Within a few years, Cancro paid back the loan and Mike’s Sub was doing $1m a year.

• In 1987, Cancro had opened a few new stores and saw people buying subs and taking them back to California, so he decided to franchise the business.

• He re-named it to “Jersey Mike’s” and added 100 stores over the next decade (the franchise fee is an upfront $18,500 with an additional 6% royalty on sales).

• The chain has grown to 3,000 locations (99% are franchisees) and now does $4B in systemwide sales. This is up from $1B in 2018, which is +20% YoY growth over the past 5 years (that growth trails only 4 other comparably-sized fast food chains including Cava and Raising Cane’s).

A major catalyst for Jersey Mike’s recent growth is that Cancro invested a lot in the business during the pandemic while other chains tightened their belts (Cancro says, “I’m kind of a go-the-other-way person”). He did so by raising $500m and spending $150m to re-model 1,700 stores per Forbes. Re-modelling costs are usually born by the franchisees but Cancro foot this bill (Jersey Mike’s HQ also paid for each store to give away 1,000 subs to people in need and first responders during COVID).

After the chain’s sale to Blackstone for $8B, Cancro — who was drawing fat annual dividends from Jersey Mike’s — is now worth $6.6B.

I posted details of this deal online and there were two common chirps I read.

First was “oh, it’d be nice to get a $125k loan from my high school coach, too”. I guarantee his high school coach knew how to underwrite loans as a community banker. And one of the biggest variables a community bank loan officer will consider is a person’s character and reputation. This guy was coaching Cancro — whose parents he probably knew well — towards a D1 College Football career. Clearly, this is not an egregious case of underwriting.

Second was “will private equity ruin the chain?”. Based on the absolute piece of shit Subway sandwich I had about 7 weeks ago, this is a very valid concern. In fact, three of Jersey Mike’s main competitors — Subway, Jimmy John’s, Firehouse Subs — were all acquired by PE in the past 5 years. A seeming degradation in service seems to be a running theme.

To be sure, not all PE fast food deals have been bad. Cancro’s mentor used to own Domino’s and sold the pizza chain to Bain Capital in 1998 for $1B. The pizza chain still crushes it and has outperformed Google as a stock over the past two decades. A positive sign for Jersey Mike’s is that Cancro will keep a minority stake and remain CEO with plans to expand to 10,000 locations, including 300 in Canada. As with Chick-fil-A, Jersey Mike’s is quite discerning with its partners. Only ~1% of operator applicants are chosen to be franchisees (former Jersey Mike’s workers get preference and Cancro loans the startup cost to these ex-employees).

I’ve only eaten at Jersey Mike's a few times but will report back when it makes it’s way to somewhere near me. PS. Did I mention that Subway — which regularly charges $20 a sub (and may or may not serve real bread or tuna) — sucks now?

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Jaguar's ludicrously bad rebrand: British luxury carmaker Jaguar has been going through some tough times. In 2008, Indian conglomerate Tata acquired Jaguar and its sister brand Land Rover for $2.3B.

Since then, the Land Rover brand has been juking. I see these MFers everywhere and they are definitely in my "if this random animal cartoon-themed NFT I bought in 2021 goes 10,000x in the next few months, I'll buy a new SUV" bucket along with Mercedes' G-Wagon. 

Comparatively, Jaguar sales have been flaccid so the manufacturer decided to pause its existing production and re-launch as an EV-only carmaker. Our first taste of the re-brand came last week in the form of a new logo and maybe the most-confusing launch video ad ever. 

First, here's the logo:

Good lord, they got rid of the actual jaguar. How will I know what animal this car represents? Also, the new logo looks like someone just opened a Google Slide, picked the 16th font down from the menu and jiggled the mouse until it hit some random % on the pink background gradient. 

They then paired this galaxy brain move with one of the most confusing launch ads ever (there are no cars involved and it looks like a woke fashion show) and taglines that sound smart at 2am after you eat an edible but when you wake up the next morning, look ridiculous ("copy nothing", "delete ordinary"). 

Obviously, Jaguar got cooked on socials. I will tip my hat to the company's social media intern, though. Handled the dozens of questions asking "where is the car" with seemingly self-aware corpo-speak ("The story is unfolding. Stay Tuned.", "Think of this as a declaration of intent"). 

The best analysis on Jaguar's miss was from Lulu Cheng Meservy: 

[Jaguar's] subsequent decline was caused by two main things: 

1) LAGGING INNOVATION AND ENGINEERING: Jaguar went five (!) years without releasing a new production model, and their technology felt outdated.

2) UNCLEAR POSITIONING: Jaguar got stuck between lanes. They used to be associated with classic sophistication and luxury, competing effectively with Bentley and Aston Martin in a rarefied space. [...]

This campaign is about “collaborating with a collective of original creators across the arts,” according to Jaguar’s website, which has been taken over by the rebrand.

That message is roughly the opposite of what Jaguar should be saying, which is some version of “our cars are engineered to the gills and go very very fast.”

Art school grads simply aren’t associated with elite engineering ability, I’m sorry. It’s possible a marketing exec read too many think pieces about how millennials shop based on values and forgot that people want cars that are really well built.

Jaguar's team has acknowledged that their pivot to super high-end luxury EVs will mean that it'll lose 80%+ of its existing buyer base. Is the remaining base — mostly male — going to want this brand association? Seems suspect. I guess we'll find out when the car is officially launched at Miami Art Week (????) in early December. 

I was briefly coming around to the idea that “any PR is good PR”. The thinking was maybe Jaguar was pulling that Coca-Cola move from the mid-1980s. Launch the “New Coke” recipe. Get 10,000 of customer calls complaining that they want the original recipe. Bring back “Original” Coke and watch sales boom.

But then I read that the first Jaguar EV model will be $125,000 (Tata is spending $18B to make Jaguar full EV). To charge that price, you either need insane tech or play the luxury brand card. A major part of luxury is history as I wrote about earlier this year when discussing the secret sauce for French luxury brand Hermes. Jaguar is over 100 years old and its “cool” factor is closely tied to the James Bonds British-ness of the 60s and 70s. A new car company literally can't re-create decades of brand. That's Jaguar's edge. But the re-brand has none of that.

Thankfully, other car brands were watching this meltdown and offered us a lesson in how to do proper car ads. Porsche showed how to take an old luxury brand and make it appeal to a new generation. Meanwhile, Volvo dropped a ~4 minute masterpiece directed by Hoyte van Hoytema (Christopher Nolan’s cinematographer on Interstellar, Dunkirk and Oppenheimer).

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Some other baller links:

• Technology and Grieving…Ranjan Roy writes about losing his 6-year old daughter to a rare febrile epilepsy condition. It’s one of the most moving pieces I’ve read in a long time. I have definitely thought about fatherhood differently since.

• The business of film explained by Good Will Hunting guys…Matt Damon explains how streaming broke DVD, and Ben Affleck breaks down why AI won’t replace actors anytime soon.

• Roger Federer wrote an incredible tribute…to Rafa Nadal — who is retiring from the sport of tennis — including this bit, “And you know what, Rafa, you made me enjoy the game even more. OK, maybe not at first. After the 2004 Australian Open, I achieved the #1 ranking for the first time. I thought I was on top of the world. And I was—until two months later, when you walked on the court in Miami in your red sleeveless shirt, showing off those biceps, and you beat me convincingly. All that buzz I’d been hearing about you—about this amazing young player from Mallorca, a generational talent, probably going to win a major someday—it wasn’t just hype.” 

• The US Government wants Google to spin off Chrome Browser...as a remedy from its anti-trust case against the company's search and digital ad monopoly. M.G. Siegler has a great breakdown on why the spin-off is unlikely and why the future of browsers are so important (especially for the AI wars). 

• AI art Turing Test...Scott Alexander tested his readers on whether they could identify AI-generated art vs. human-created art. The average participant scored 60% and he has interesting takeaways. 

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…and them fire posts (including this one of Mike Tyson getting ready for the Jake Paul fight):

Finally, we try to minimize the politics around here. But we also want to look at funny memes. It’s a balance. With that in mind, President-elect Donald Trump flew from Florida to NY to watch UFC at Madison Square Garden last weekend. He rolled up with a bunch of people from his transition team and recent cabinet appointees. One of the most viral photos from the event was Trump on Trump Force One with Elon, Don Jr., Republican Speaker of the House Mike Johnson and RFK Jr. (recently named Secretary for Health and Human Services; HHS).

RFK Jr. has been particularly outspoken against junk food and is pushing MAHA (Make American Healthy Again). On the plane, everyone was eating McDonald’s and RFK Jr. had to partake. It looks like RFK Jr. rolled with a Big Mac, Large Fries and 10 McNuggets. His face says it all and they had to joke “MAHA starts on Monday”. RFK’s meal happens to be my exact post-bar 3am order (although I will throw in a Cheeseburger or Junior McChicken ever now and then). Anyway, that’s the set-up for three very funny posts: