Speaker 1: Welcome to brainstuff, a production of iHeartRadio, Hey brain Stuff,
Speaker 1: Lauren vogelbam here. Hot sauce is a fascinating phenomenon. Chili,
Speaker 1: peppers and other naturally spicy fruits evolved the capacity to
Speaker 1: produce those pungent compounds to prevent bacteria, fungi, and mammals
Speaker 1: from eating them and thus from destroying their precious species
Speaker 1: continuing seeds. That's right. Chemical spiciness, as far as scientists
Speaker 1: are aware, is a defense mechanism in mammals. It triggers
Speaker 1: the same nerves that sense actual physical burn level heat
Speaker 1: and thus warns most mammals to stay away. But many
Speaker 1: humans have decided that we enjoy that sense of danger
Speaker 1: a lot. The global market for these sauces is worth
Speaker 1: billions of dollars a year. Within that industry, there are,
Speaker 1: of course, some darlings, particular brands or styles that have
Speaker 1: captured our attention today. Let's talk about siracha. When I
Speaker 1: say siracha in the context of hot sauce, you probably
Speaker 1: think about the thick, bright, red, spicy, savory, tangy sweet
Speaker 1: sauce in a big squeeze bottle with a green cap
Speaker 1: and a rooster on the label that came into popularity
Speaker 1: in the early two thousands. This sauce is a product
Speaker 1: of the American brand Hoifang Foods, which got its start
Speaker 1: in nineteen eighty by a Chinese Vietnamese refugee, one David Tran.
Speaker 1: The name comes from a town in Thailand called Seracha
Speaker 1: on the northeast Gulf coast. There, starting back in the
Speaker 1: nineteen thirties, a local family began bottling the hot sauce
Speaker 1: that would become the brand Saracha Pinat. It was the
Speaker 1: first hot sauce labeled Siracha, and it's still available today.
Speaker 1: It's a bit thinner and more saucy than the aforementioned
Speaker 1: rooster sauce, but it's made up of the same things sugar, salt, vinegar,
Speaker 1: pickled garlic, and ripe bread chilies with the fruity spicy flavor,
Speaker 1: and this seems to have been trans inspiration. A. Tran
Speaker 1: was among the millions of refugees who fled when North
Speaker 1: and South Vietnam unified under a communist government in nineteen
Speaker 1: seventy six. He arrived in America on a Taiwanese freighter
Speaker 1: called the Hifong or Gathering Prosperity and named his company
Speaker 1: Hoifang Foods in honor of the vessel. Just a few
Speaker 1: decades later, his style of saracha was Bonapetite magazine's Ingredient
Speaker 1: of the Year for twenty ten. Fans lawed its flavors
Speaker 1: for improving everything from fu and spring rolls to eggs
Speaker 1: and bacon to tacos and pizza. There was a saracha
Speaker 1: festival in Los Angeles by twenty thirteen. Hoifang alone was
Speaker 1: selling some twenty million bottles a year by twenty sixteen,
Speaker 1: all without ever spending a cent on advertising. But today
Speaker 1: the brand is struggling to continue production, due in part
Speaker 1: to a multimillion dollar falling out with its pepper farmers.
Speaker 1: This is not a simple story about a tasty sauce,
Speaker 1: but a tale of saucy business drama. But let's back
Speaker 1: up a little. The story goes that when David Tran
Speaker 1: arrived in the US, he found the American hot sauce
Speaker 1: scene lacking in Southeast Asian pizaz so he set out
Speaker 1: to create his own a, starting in a five thousand
Speaker 1: square foot building in Boston's Chinatown and delivering his sauces
Speaker 1: to local restaurants out of the back of a Chevy van.
Speaker 1: Seven years later, as sales and profits boomed, Tran moved
Speaker 1: the production to a sixty eight thousand square foot facility
Speaker 1: outside of Los Angeles, California, and started developing his own
Speaker 1: equipment for producing the bottles and the sauce. He also
Speaker 1: partnered up with Underwood Ranches, a California family owned farm
Speaker 1: run by fourth generation farmer Craig Underwood. Tran needed perfectly
Speaker 1: ripe Plopenia peppers, and Underwood was glad to provide as
Speaker 1: many of them as possible. For a long time, the
Speaker 1: two companies prospered together. Hoifong moved down the street to
Speaker 1: a former Whammo toy factory with double the space in
Speaker 1: nineteen ninety six, and then again to a spot a
Speaker 1: bit further out in Erwindale in twenty ten with almost
Speaker 1: ten times the space. That facility can produce three thousand
Speaker 1: bottles of seracha in an hour. All of this required
Speaker 1: a lot of peppers, according to court paperwork, When Tran
Speaker 1: was getting ready to move to Erwindale, he approached Underwood
Speaker 1: with the deal, saying, essentially, I need more peppers and
Speaker 1: I'd like to buy them from you, So if you
Speaker 1: expand your acreage, I'll pay you by the acre grown
Speaker 1: instead of buy the weight produced. So don't worry about
Speaker 1: putting all your peppers in one basket. Even if you
Speaker 1: have a lousy crop one year, I'll pay you the
Speaker 1: same for it. Underwood took the deal, and over the
Speaker 1: next decade they went from making about a quarter of
Speaker 1: their revenue selling peppers to Hoifong to making about eighty
Speaker 1: percent of their revenue there. With trans encouragement, they bought
Speaker 1: and leased a bunch more Land pepper growing and developed
Speaker 1: a new mechanical harvester to help pick them more efficiently.
Speaker 1: Tran refused to raise the sauce's wholesale price and refused
Speaker 1: several lucrative offers to buy the company, intending to keep
Speaker 1: it in the family. The businesses even survived a bit
Speaker 1: of a sarahapanic in twenty thirteen, when residents of Irwindale
Speaker 1: complained about tear gas esque fumes and a court ordered
Speaker 1: production to shut down. Ten other cities offered to host
Speaker 1: the factory, but all of Hoifong's employees and peppers and
Speaker 1: Heart were local, so they worked out a way to
Speaker 1: stay by upgrading the filtration in their ventilation system, minor
Speaker 1: bumps aside. It seemed like a veritable hot sauce heaven.
Speaker 1: But in twenty sixteen, it all fell apart. Up through
Speaker 1: the first week of November that year, everything seemed normal.
Speaker 1: Underwood and Tran met to talk about their plan for
Speaker 1: the twenty seventeen season. Underwood outlined his preparations already underway,
Speaker 1: and Tran agreed to pay him millions of dollars in
Speaker 1: advance for a planned seventeen hundred acres of peppers. A
Speaker 1: week later, the floor fell out. According to those court documents,
Speaker 1: Tran suddenly insisted that Underwood sell him peppers by the
Speaker 1: ton instead of by the acre, and at five hundred
Speaker 1: bucks a ton, which I understand is a low ball. Further,
Speaker 1: Tran said that Underwood needed to sell to this new
Speaker 1: company had started specifically for sourcing peppers called Chili Coo,
Speaker 1: and that Chiliico didn't have the liquidity to send any
Speaker 1: advance payments, so Underwood was going to have to figure
Speaker 1: out funding on his own. Meanwhile, in the middle of
Speaker 1: all of this, Tran was secretly trying to hire Underwood
Speaker 1: Ranch's Coo out from under them. The manning question Jim
Speaker 1: Roberts has hands on experience running large scale harvesting operations,
Speaker 1: and Tran wanted him to come work for Chili Coo.
Speaker 1: No matter who they bought their peppers from. Roberts turned
Speaker 1: to down and Underwood turned down the proposed changes to
Speaker 1: their contract, thus bringing the partnership to a screeching halt.
Speaker 1: It was a financial disaster for Underwood. They had empty
Speaker 1: farmland they couldn't get out of their leases. This contract
Speaker 1: ending cut again eighty percent of their revenue. They had
Speaker 1: to lay off some forty employees, about half of their staff.
Speaker 1: Hoifong was fine for the moment. They contracted with other
Speaker 1: farms and showed them confidential video from Underwood of how
Speaker 1: their new mechanical harvester worked. This might have been the
Speaker 1: end of the drama, but it seems Hoifong was dissatisfied
Speaker 1: with the outcome of everything. They sued Underwood for one
Speaker 1: point five million dollars, an amount they claimed they had
Speaker 1: overpaid for twenty sixteen's pepper crop. Underwood countersued for breach
Speaker 1: of contract and intentional contract fraud. A couple years later,
Speaker 1: jury acknowledged both the overpayment and the damages. They said
Speaker 1: Hoifong owed Underwood thirteen million in actual damages and an
Speaker 1: extra ten million in punitive damages, but that Underwood had
Speaker 1: to refund them that one point five million. But the
Speaker 1: mess did not end there, because Hoifong appealed the decision.
Speaker 1: By then, this was twenty nineteen, Underwood had already spent
Speaker 1: a couple of years in the red, and they were
Speaker 1: looking at another couple of years in the appeals process
Speaker 1: before potentially seeing any settlement money. They wound up accepting
Speaker 1: what's called a litigation finance deal from an investment firm.
Speaker 1: A litigation finance or funding is basically an investment firm
Speaker 1: betting on the outcome of a court case. In this case,
Speaker 1: a firm floated Underwood four million bucks that they wouldn't
Speaker 1: have to pay back if they eventually lost the case,
Speaker 1: but that they'd have to pay back double if they won.
Speaker 1: The courts eventually decided to uphold the original decision and
Speaker 1: Hoifong had to pay Underwood out. In summer of twenty
Speaker 1: twenty one, this all came to be public knowledge basically
Speaker 1: because Leslie stalled that a segment on Sixty Minutes about
Speaker 1: it in twenty twenty two. A focusing on the litigation
Speaker 1: funding aspect. In a nutshell, litigation funding can be cool
Speaker 1: because it can help small businesses that can't afford to
Speaker 1: go through with court cases, but it's also a multi
Speaker 1: billion dollar business that has very little oversight, and some
Speaker 1: experts worry that it's predatory or even changing the way
Speaker 1: that the law works. Anyway, that segment brought what was
Speaker 1: otherwise a niche local agrobusiness story to light, and here
Speaker 1: we are. It seems like what happened is that Tran
Speaker 1: and or his family and their companies were kind of
Speaker 1: banking on being able to source cheaper peppers on the
Speaker 1: open market instead of contracting with one farm, and it
Speaker 1: might have worked except for a couple of factors. First,
Speaker 1: the weather has not been cooperating. Farming is an uncertain
Speaker 1: venture that depends partially on weather conditions, and conditions in
Speaker 1: southwest North Amyria have been weird these past few years
Speaker 1: due to climate change. Think of the droughts, fires, and
Speaker 1: flooding that you've seen on the news. Climatologists are calling
Speaker 1: this a mega drought, the driest twenty years in the
Speaker 1: last thousand years or more. Because of this, demand for
Speaker 1: peppers in general is outpacing supply, and so without dedicated
Speaker 1: growers working with him, Tran hasn't been able to source
Speaker 1: enough peppers to produce enough sauce to keep up with
Speaker 1: the demand for it. That's why there have been Hoifunk's
Speaker 1: Saratcha shortages on and off since twenty twenty. That and
Speaker 1: this is just conjecture, but maybe other local farmers are
Speaker 1: a little wary of contracting with them. The climate factor
Speaker 1: here is troubling and good reason among many others to
Speaker 1: pay attention to what environmental scientists are telling us about
Speaker 1: what we need to do to mitigate climate harm. But
Speaker 1: for now, for anyone looking for a more dependable saracha fix,
Speaker 1: there are, of course lots of other brands and hot
Speaker 1: sauce styles out there, including some now made by Underwood Ranches,
Speaker 1: which are available on their website with the tagline the
Speaker 1: peppers make the Sauce. Today's episode is based on the
Speaker 1: article why Sarracha is Everybody's Favorite hot Sauce on HowStuffWorks
Speaker 1: dot Com, written by Mark Mancini. Brain Stuff is production
Speaker 1: of iHeartRadio in partnership with how stuffworks dot Com, and
Speaker 1: its produced by Tyler Klang. For more podcasts, from my
Speaker 1: heart Radio, visit the iHeartRadio app, Apple podcasts, or wherever
Speaker 1: you listen to your favorite shows.