1 00:00:01,840 --> 00:00:07,480 Speaker 1: Welcome to brainstuff, a production of iHeartRadio, Hey brain Stuff, 2 00:00:07,520 --> 00:00:13,640 Speaker 1: Lauren vogelbam here. Hot sauce is a fascinating phenomenon. Chili, 3 00:00:13,640 --> 00:00:17,400 Speaker 1: peppers and other naturally spicy fruits evolved the capacity to 4 00:00:17,440 --> 00:00:22,480 Speaker 1: produce those pungent compounds to prevent bacteria, fungi, and mammals 5 00:00:22,480 --> 00:00:26,400 Speaker 1: from eating them and thus from destroying their precious species 6 00:00:26,440 --> 00:00:32,159 Speaker 1: continuing seeds. That's right. Chemical spiciness, as far as scientists 7 00:00:32,200 --> 00:00:36,680 Speaker 1: are aware, is a defense mechanism in mammals. It triggers 8 00:00:36,720 --> 00:00:40,400 Speaker 1: the same nerves that sense actual physical burn level heat 9 00:00:40,800 --> 00:00:45,440 Speaker 1: and thus warns most mammals to stay away. But many 10 00:00:45,520 --> 00:00:48,280 Speaker 1: humans have decided that we enjoy that sense of danger 11 00:00:48,800 --> 00:00:52,080 Speaker 1: a lot. The global market for these sauces is worth 12 00:00:52,159 --> 00:00:56,320 Speaker 1: billions of dollars a year. Within that industry, there are, 13 00:00:56,400 --> 00:00:59,880 Speaker 1: of course, some darlings, particular brands or styles that have 14 00:01:00,160 --> 00:01:06,320 Speaker 1: captured our attention today. Let's talk about siracha. When I 15 00:01:06,360 --> 00:01:09,680 Speaker 1: say siracha in the context of hot sauce, you probably 16 00:01:09,720 --> 00:01:14,080 Speaker 1: think about the thick, bright, red, spicy, savory, tangy sweet 17 00:01:14,120 --> 00:01:16,760 Speaker 1: sauce in a big squeeze bottle with a green cap 18 00:01:16,800 --> 00:01:19,360 Speaker 1: and a rooster on the label that came into popularity 19 00:01:19,520 --> 00:01:22,760 Speaker 1: in the early two thousands. This sauce is a product 20 00:01:22,800 --> 00:01:26,040 Speaker 1: of the American brand Hoifang Foods, which got its start 21 00:01:26,080 --> 00:01:30,240 Speaker 1: in nineteen eighty by a Chinese Vietnamese refugee, one David Tran. 22 00:01:31,520 --> 00:01:34,200 Speaker 1: The name comes from a town in Thailand called Seracha 23 00:01:34,520 --> 00:01:37,880 Speaker 1: on the northeast Gulf coast. There, starting back in the 24 00:01:37,959 --> 00:01:41,120 Speaker 1: nineteen thirties, a local family began bottling the hot sauce 25 00:01:41,120 --> 00:01:44,240 Speaker 1: that would become the brand Saracha Pinat. It was the 26 00:01:44,240 --> 00:01:48,120 Speaker 1: first hot sauce labeled Siracha, and it's still available today. 27 00:01:49,000 --> 00:01:52,440 Speaker 1: It's a bit thinner and more saucy than the aforementioned 28 00:01:52,560 --> 00:01:57,400 Speaker 1: rooster sauce, but it's made up of the same things sugar, salt, vinegar, 29 00:01:57,760 --> 00:02:01,560 Speaker 1: pickled garlic, and ripe bread chilies with the fruity spicy flavor, 30 00:02:02,440 --> 00:02:06,800 Speaker 1: and this seems to have been trans inspiration. A. Tran 31 00:02:06,960 --> 00:02:09,720 Speaker 1: was among the millions of refugees who fled when North 32 00:02:09,720 --> 00:02:12,960 Speaker 1: and South Vietnam unified under a communist government in nineteen 33 00:02:13,000 --> 00:02:16,440 Speaker 1: seventy six. He arrived in America on a Taiwanese freighter 34 00:02:16,520 --> 00:02:20,720 Speaker 1: called the Hifong or Gathering Prosperity and named his company 35 00:02:20,800 --> 00:02:25,040 Speaker 1: Hoifang Foods in honor of the vessel. Just a few 36 00:02:25,040 --> 00:02:29,320 Speaker 1: decades later, his style of saracha was Bonapetite magazine's Ingredient 37 00:02:29,400 --> 00:02:32,840 Speaker 1: of the Year for twenty ten. Fans lawed its flavors 38 00:02:32,840 --> 00:02:36,359 Speaker 1: for improving everything from fu and spring rolls to eggs 39 00:02:36,360 --> 00:02:40,040 Speaker 1: and bacon to tacos and pizza. There was a saracha 40 00:02:40,160 --> 00:02:44,400 Speaker 1: festival in Los Angeles by twenty thirteen. Hoifang alone was 41 00:02:44,440 --> 00:02:47,600 Speaker 1: selling some twenty million bottles a year by twenty sixteen, 42 00:02:48,040 --> 00:02:52,440 Speaker 1: all without ever spending a cent on advertising. But today 43 00:02:52,600 --> 00:02:56,120 Speaker 1: the brand is struggling to continue production, due in part 44 00:02:56,160 --> 00:02:59,560 Speaker 1: to a multimillion dollar falling out with its pepper farmers. 45 00:03:00,440 --> 00:03:03,280 Speaker 1: This is not a simple story about a tasty sauce, 46 00:03:03,680 --> 00:03:08,799 Speaker 1: but a tale of saucy business drama. But let's back 47 00:03:08,880 --> 00:03:11,800 Speaker 1: up a little. The story goes that when David Tran 48 00:03:11,919 --> 00:03:14,480 Speaker 1: arrived in the US, he found the American hot sauce 49 00:03:14,480 --> 00:03:18,240 Speaker 1: scene lacking in Southeast Asian pizaz so he set out 50 00:03:18,240 --> 00:03:20,640 Speaker 1: to create his own a, starting in a five thousand 51 00:03:20,720 --> 00:03:24,160 Speaker 1: square foot building in Boston's Chinatown and delivering his sauces 52 00:03:24,200 --> 00:03:26,399 Speaker 1: to local restaurants out of the back of a Chevy van. 53 00:03:27,720 --> 00:03:31,520 Speaker 1: Seven years later, as sales and profits boomed, Tran moved 54 00:03:31,560 --> 00:03:34,519 Speaker 1: the production to a sixty eight thousand square foot facility 55 00:03:34,600 --> 00:03:37,880 Speaker 1: outside of Los Angeles, California, and started developing his own 56 00:03:37,880 --> 00:03:42,120 Speaker 1: equipment for producing the bottles and the sauce. He also 57 00:03:42,200 --> 00:03:45,920 Speaker 1: partnered up with Underwood Ranches, a California family owned farm 58 00:03:46,120 --> 00:03:51,080 Speaker 1: run by fourth generation farmer Craig Underwood. Tran needed perfectly 59 00:03:51,160 --> 00:03:54,680 Speaker 1: ripe Plopenia peppers, and Underwood was glad to provide as 60 00:03:54,720 --> 00:03:57,840 Speaker 1: many of them as possible. For a long time, the 61 00:03:57,840 --> 00:04:01,880 Speaker 1: two companies prospered together. Hoifong moved down the street to 62 00:04:01,960 --> 00:04:04,600 Speaker 1: a former Whammo toy factory with double the space in 63 00:04:04,680 --> 00:04:07,320 Speaker 1: nineteen ninety six, and then again to a spot a 64 00:04:07,320 --> 00:04:10,080 Speaker 1: bit further out in Erwindale in twenty ten with almost 65 00:04:10,080 --> 00:04:14,240 Speaker 1: ten times the space. That facility can produce three thousand 66 00:04:14,240 --> 00:04:18,039 Speaker 1: bottles of seracha in an hour. All of this required 67 00:04:18,200 --> 00:04:22,680 Speaker 1: a lot of peppers, according to court paperwork, When Tran 68 00:04:22,800 --> 00:04:25,880 Speaker 1: was getting ready to move to Erwindale, he approached Underwood 69 00:04:25,880 --> 00:04:29,480 Speaker 1: with the deal, saying, essentially, I need more peppers and 70 00:04:29,520 --> 00:04:31,719 Speaker 1: I'd like to buy them from you, So if you 71 00:04:31,760 --> 00:04:34,599 Speaker 1: expand your acreage, I'll pay you by the acre grown 72 00:04:34,839 --> 00:04:38,559 Speaker 1: instead of buy the weight produced. So don't worry about 73 00:04:38,600 --> 00:04:41,120 Speaker 1: putting all your peppers in one basket. Even if you 74 00:04:41,160 --> 00:04:43,359 Speaker 1: have a lousy crop one year, I'll pay you the 75 00:04:43,360 --> 00:04:48,040 Speaker 1: same for it. Underwood took the deal, and over the 76 00:04:48,120 --> 00:04:50,560 Speaker 1: next decade they went from making about a quarter of 77 00:04:50,600 --> 00:04:53,880 Speaker 1: their revenue selling peppers to Hoifong to making about eighty 78 00:04:53,920 --> 00:04:58,400 Speaker 1: percent of their revenue there. With trans encouragement, they bought 79 00:04:58,440 --> 00:05:01,640 Speaker 1: and leased a bunch more Land pepper growing and developed 80 00:05:01,640 --> 00:05:04,520 Speaker 1: a new mechanical harvester to help pick them more efficiently. 81 00:05:05,480 --> 00:05:09,240 Speaker 1: Tran refused to raise the sauce's wholesale price and refused 82 00:05:09,279 --> 00:05:12,520 Speaker 1: several lucrative offers to buy the company, intending to keep 83 00:05:12,520 --> 00:05:16,960 Speaker 1: it in the family. The businesses even survived a bit 84 00:05:17,000 --> 00:05:20,600 Speaker 1: of a sarahapanic in twenty thirteen, when residents of Irwindale 85 00:05:20,680 --> 00:05:24,120 Speaker 1: complained about tear gas esque fumes and a court ordered 86 00:05:24,120 --> 00:05:28,160 Speaker 1: production to shut down. Ten other cities offered to host 87 00:05:28,200 --> 00:05:32,200 Speaker 1: the factory, but all of Hoifong's employees and peppers and 88 00:05:32,520 --> 00:05:35,120 Speaker 1: Heart were local, so they worked out a way to 89 00:05:35,160 --> 00:05:39,760 Speaker 1: stay by upgrading the filtration in their ventilation system, minor 90 00:05:39,839 --> 00:05:43,200 Speaker 1: bumps aside. It seemed like a veritable hot sauce heaven. 91 00:05:44,120 --> 00:05:48,720 Speaker 1: But in twenty sixteen, it all fell apart. Up through 92 00:05:48,880 --> 00:05:52,160 Speaker 1: the first week of November that year, everything seemed normal. 93 00:05:52,839 --> 00:05:55,159 Speaker 1: Underwood and Tran met to talk about their plan for 94 00:05:55,240 --> 00:06:00,160 Speaker 1: the twenty seventeen season. Underwood outlined his preparations already underway, 95 00:06:00,480 --> 00:06:02,719 Speaker 1: and Tran agreed to pay him millions of dollars in 96 00:06:02,760 --> 00:06:07,560 Speaker 1: advance for a planned seventeen hundred acres of peppers. A 97 00:06:07,600 --> 00:06:12,240 Speaker 1: week later, the floor fell out. According to those court documents, 98 00:06:12,400 --> 00:06:15,599 Speaker 1: Tran suddenly insisted that Underwood sell him peppers by the 99 00:06:15,680 --> 00:06:18,880 Speaker 1: ton instead of by the acre, and at five hundred 100 00:06:18,880 --> 00:06:22,479 Speaker 1: bucks a ton, which I understand is a low ball. Further, 101 00:06:22,920 --> 00:06:25,640 Speaker 1: Tran said that Underwood needed to sell to this new 102 00:06:25,680 --> 00:06:30,000 Speaker 1: company had started specifically for sourcing peppers called Chili Coo, 103 00:06:30,480 --> 00:06:33,760 Speaker 1: and that Chiliico didn't have the liquidity to send any 104 00:06:33,800 --> 00:06:36,520 Speaker 1: advance payments, so Underwood was going to have to figure 105 00:06:36,560 --> 00:06:40,160 Speaker 1: out funding on his own. Meanwhile, in the middle of 106 00:06:40,240 --> 00:06:43,520 Speaker 1: all of this, Tran was secretly trying to hire Underwood 107 00:06:43,600 --> 00:06:47,880 Speaker 1: Ranch's Coo out from under them. The manning question Jim 108 00:06:47,960 --> 00:06:52,280 Speaker 1: Roberts has hands on experience running large scale harvesting operations, 109 00:06:52,520 --> 00:06:55,159 Speaker 1: and Tran wanted him to come work for Chili Coo. 110 00:06:55,920 --> 00:06:59,839 Speaker 1: No matter who they bought their peppers from. Roberts turned 111 00:06:59,839 --> 00:07:03,080 Speaker 1: to down and Underwood turned down the proposed changes to 112 00:07:03,120 --> 00:07:06,760 Speaker 1: their contract, thus bringing the partnership to a screeching halt. 113 00:07:07,960 --> 00:07:11,720 Speaker 1: It was a financial disaster for Underwood. They had empty 114 00:07:11,760 --> 00:07:15,160 Speaker 1: farmland they couldn't get out of their leases. This contract 115 00:07:15,240 --> 00:07:18,680 Speaker 1: ending cut again eighty percent of their revenue. They had 116 00:07:18,720 --> 00:07:21,560 Speaker 1: to lay off some forty employees, about half of their staff. 117 00:07:22,640 --> 00:07:26,040 Speaker 1: Hoifong was fine for the moment. They contracted with other 118 00:07:26,080 --> 00:07:30,000 Speaker 1: farms and showed them confidential video from Underwood of how 119 00:07:30,040 --> 00:07:34,200 Speaker 1: their new mechanical harvester worked. This might have been the 120 00:07:34,320 --> 00:07:37,720 Speaker 1: end of the drama, but it seems Hoifong was dissatisfied 121 00:07:37,720 --> 00:07:41,200 Speaker 1: with the outcome of everything. They sued Underwood for one 122 00:07:41,240 --> 00:07:44,200 Speaker 1: point five million dollars, an amount they claimed they had 123 00:07:44,200 --> 00:07:49,600 Speaker 1: overpaid for twenty sixteen's pepper crop. Underwood countersued for breach 124 00:07:49,640 --> 00:07:54,320 Speaker 1: of contract and intentional contract fraud. A couple years later, 125 00:07:54,600 --> 00:07:59,120 Speaker 1: jury acknowledged both the overpayment and the damages. They said 126 00:07:59,200 --> 00:08:03,120 Speaker 1: Hoifong owed Underwood thirteen million in actual damages and an 127 00:08:03,160 --> 00:08:06,800 Speaker 1: extra ten million in punitive damages, but that Underwood had 128 00:08:06,800 --> 00:08:10,920 Speaker 1: to refund them that one point five million. But the 129 00:08:11,040 --> 00:08:14,880 Speaker 1: mess did not end there, because Hoifong appealed the decision. 130 00:08:16,120 --> 00:08:19,920 Speaker 1: By then, this was twenty nineteen, Underwood had already spent 131 00:08:19,920 --> 00:08:21,920 Speaker 1: a couple of years in the red, and they were 132 00:08:21,960 --> 00:08:24,320 Speaker 1: looking at another couple of years in the appeals process 133 00:08:24,400 --> 00:08:29,040 Speaker 1: before potentially seeing any settlement money. They wound up accepting 134 00:08:29,040 --> 00:08:32,679 Speaker 1: what's called a litigation finance deal from an investment firm. 135 00:08:33,120 --> 00:08:37,080 Speaker 1: A litigation finance or funding is basically an investment firm 136 00:08:37,160 --> 00:08:41,160 Speaker 1: betting on the outcome of a court case. In this case, 137 00:08:41,360 --> 00:08:44,360 Speaker 1: a firm floated Underwood four million bucks that they wouldn't 138 00:08:44,400 --> 00:08:46,679 Speaker 1: have to pay back if they eventually lost the case, 139 00:08:47,080 --> 00:08:49,640 Speaker 1: but that they'd have to pay back double if they won. 140 00:08:50,880 --> 00:08:54,720 Speaker 1: The courts eventually decided to uphold the original decision and 141 00:08:54,800 --> 00:08:57,720 Speaker 1: Hoifong had to pay Underwood out. In summer of twenty 142 00:08:57,760 --> 00:09:02,559 Speaker 1: twenty one, this all came to be public knowledge basically 143 00:09:02,600 --> 00:09:05,480 Speaker 1: because Leslie stalled that a segment on Sixty Minutes about 144 00:09:05,480 --> 00:09:08,440 Speaker 1: it in twenty twenty two. A focusing on the litigation 145 00:09:08,559 --> 00:09:13,319 Speaker 1: funding aspect. In a nutshell, litigation funding can be cool 146 00:09:13,360 --> 00:09:15,640 Speaker 1: because it can help small businesses that can't afford to 147 00:09:15,640 --> 00:09:18,960 Speaker 1: go through with court cases, but it's also a multi 148 00:09:18,960 --> 00:09:22,080 Speaker 1: billion dollar business that has very little oversight, and some 149 00:09:22,240 --> 00:09:25,400 Speaker 1: experts worry that it's predatory or even changing the way 150 00:09:25,400 --> 00:09:29,600 Speaker 1: that the law works. Anyway, that segment brought what was 151 00:09:29,800 --> 00:09:34,000 Speaker 1: otherwise a niche local agrobusiness story to light, and here 152 00:09:34,040 --> 00:09:37,640 Speaker 1: we are. It seems like what happened is that Tran 153 00:09:37,880 --> 00:09:40,440 Speaker 1: and or his family and their companies were kind of 154 00:09:40,480 --> 00:09:43,000 Speaker 1: banking on being able to source cheaper peppers on the 155 00:09:43,040 --> 00:09:47,200 Speaker 1: open market instead of contracting with one farm, and it 156 00:09:47,280 --> 00:09:50,600 Speaker 1: might have worked except for a couple of factors. First, 157 00:09:50,960 --> 00:09:54,880 Speaker 1: the weather has not been cooperating. Farming is an uncertain 158 00:09:55,000 --> 00:09:58,960 Speaker 1: venture that depends partially on weather conditions, and conditions in 159 00:09:59,040 --> 00:10:02,760 Speaker 1: southwest North Amyria have been weird these past few years 160 00:10:02,880 --> 00:10:07,000 Speaker 1: due to climate change. Think of the droughts, fires, and 161 00:10:07,040 --> 00:10:10,880 Speaker 1: flooding that you've seen on the news. Climatologists are calling 162 00:10:10,920 --> 00:10:14,040 Speaker 1: this a mega drought, the driest twenty years in the 163 00:10:14,080 --> 00:10:18,000 Speaker 1: last thousand years or more. Because of this, demand for 164 00:10:18,040 --> 00:10:22,800 Speaker 1: peppers in general is outpacing supply, and so without dedicated 165 00:10:22,880 --> 00:10:25,680 Speaker 1: growers working with him, Tran hasn't been able to source 166 00:10:25,800 --> 00:10:28,560 Speaker 1: enough peppers to produce enough sauce to keep up with 167 00:10:28,600 --> 00:10:32,120 Speaker 1: the demand for it. That's why there have been Hoifunk's 168 00:10:32,120 --> 00:10:36,320 Speaker 1: Saratcha shortages on and off since twenty twenty. That and 169 00:10:36,559 --> 00:10:39,720 Speaker 1: this is just conjecture, but maybe other local farmers are 170 00:10:39,720 --> 00:10:43,560 Speaker 1: a little wary of contracting with them. The climate factor 171 00:10:43,559 --> 00:10:47,200 Speaker 1: here is troubling and good reason among many others to 172 00:10:47,280 --> 00:10:50,240 Speaker 1: pay attention to what environmental scientists are telling us about 173 00:10:50,280 --> 00:10:54,120 Speaker 1: what we need to do to mitigate climate harm. But 174 00:10:54,600 --> 00:10:58,400 Speaker 1: for now, for anyone looking for a more dependable saracha fix, 175 00:10:58,800 --> 00:11:01,800 Speaker 1: there are, of course lots of other brands and hot 176 00:11:01,840 --> 00:11:06,439 Speaker 1: sauce styles out there, including some now made by Underwood Ranches, 177 00:11:06,600 --> 00:11:09,840 Speaker 1: which are available on their website with the tagline the 178 00:11:09,880 --> 00:11:17,400 Speaker 1: peppers make the Sauce. Today's episode is based on the 179 00:11:17,480 --> 00:11:20,840 Speaker 1: article why Sarracha is Everybody's Favorite hot Sauce on HowStuffWorks 180 00:11:20,840 --> 00:11:24,000 Speaker 1: dot Com, written by Mark Mancini. Brain Stuff is production 181 00:11:24,040 --> 00:11:26,680 Speaker 1: of iHeartRadio in partnership with how stuffworks dot Com, and 182 00:11:26,679 --> 00:11:29,520 Speaker 1: its produced by Tyler Klang. For more podcasts, from my 183 00:11:29,600 --> 00:11:33,120 Speaker 1: heart Radio, visit the iHeartRadio app, Apple podcasts, or wherever 184 00:11:33,160 --> 00:11:34,600 Speaker 1: you listen to your favorite shows.