International business opportunity sriracha in south korea

International Business Opportunity: Sriracha in South KoreaWhether you spell it 'Sriracha' or 'Siracha,' whether you pronounce it 'SIR-AH-CHA' or'SEE-RA- CHA,' Sriracha-lovers don't just

International Business Opportunity: Sriracha in South Korea

Whether you spell it 'Sriracha' or 'Siracha,' whether you pronounce it 'SIR-AH-CHA' or'SEE-RA- CHA,' Sriracha-lovers don't just love the spicy sauce We eat it, crave it, talkabout it, wear it and strive to live a spicy life The iconic chili sauce has become ahousehold name across the world Today, we will present to you guys the ChilliesKing - David Tran and his empire – Huy Fong Foods., who is behind the SrirachaRush conquering America and several areas around the world ever since the 2000s Inthis presentation, we will focus on analyzing the Huy Fong Foods' most well knownproducts - Sriracha Hot Sauce’ penetration opportunity in the Korean market

1 Introduction about Huy Fong's food and Sriracha Hot Sauce

1.1 General information

Huy Fong Foods is an American hot sauce company based in California It wasfounded by David Tran, a Vietnamese-born Chinese immigrant He incorporated HuyFong Foods, in February 1980, within a month of arriving in Los Angeles It hasgrown to become one of the leaders in the Asian hot sauce market, Sriracha saucepopularly referred to as rooster sauce due to the image of a rooster on the label

Vision and mission

Huy Fong Foods mission statement from day 1 is “To make a rich man's sauce, at apoor man's price.” This serves as a promise from the brand to produce hot sauces inhigh quality but at an affordable pricing so that everyone will be able to enjoy, andHuy Fong foods had excelled the task From sales of only 1,000 USD/month in thedays of hand-delivered goods, the company now gains more than 20 million bottles ofchili sauce sold each year and revenue of more than 60 million USD with thedevelopment rate of more than 20% in recent years But not only financial success,Sriracha has gradually become an integral part of American culinary culture and many

other parts of the world It all comes from the determination to be "stubborn" to givecustomers the most valuable products

Products line

The company’s production line includes 3 main products: Sriracha Hot sauce, Sambaloelek and chili garlic sauces; in which Sriracha Hot sauce is currently the company’sbest known and best- selling item Let investigate further on their most popular product

- Sriracha Hot Sauce

Sriracha Hot Sauce preview

- Sriracha Hot Sauce is produced from sun ripened chilies pureed into a smooth paste,with a Thai ingredient called Si Racha Sriracha was created with the initial hope ofDavid Tran to provide Vietnamese immigrants with a hot sauce worthy their Phởsoup Exceeding the expectation,

Sriracha has now conquered the whole American culinary culture by stepping into sushiingredients, or restaurant chains as P.F.Chang, which has 204 branches in the US andworldwide, offering Sriracha-flavored dishes.

- Packaging: The sauce is packaged in unmistakable clear bottles with the rooster logoand green caps, on the bottle there is English, Chinese, Vietnamese, French andSpanish, which makes it recognisable anywhere in the world

- Pricing: Sriracha Hot Sauce is available in 4 sizes: 9 oz, 17 oz., 28 oz., and 8.50 lbs,which costs respectively $8.5; $11.45; $19.99 and $34.87, which are slightly lowercompared to other competitors in America or anywhere The product hit $150 million

in annual revenue in 2019, representing 10% of the entire hot sauce market in the US

1.2 Strengths:

- High quality and unique products with iconic packaging

The company is always unwilling to compromise on quality, meaning that the chilliesused in production are hand-picked, carefully handled and processed within a day ofbeing picked Additionally, although the ingredients for Sriracha are all public, no oneknows the exact recipe of Sriracha The secret recipe and the iconic “rooster” imageare some of the factors making Huy Fong’s Sriracha stand out from plenty ofcompetitors in the market

- The bigger and bigger Sriracha lover community

The company only focuses on the production, without any salesmen or marketingemployees Rather, Huy Fong foods has been taking such great efforts to build agrowing community of Sriracha lovers Focusing only on its core product, Srirachaassigns partners to exploit more "unique" products such as Sriracha2Go (Srirachapocket keychain) or SrirachaBox (Sriracha product package including key chains).,snack, shirt ) Knowing that customers are the most loyal partners", Huy Fong Foodsalso organizes weekly factory tours, enjoying Sriracha's latest products, free clothes

and meeting directly with David Tran Gradually the Sriracha factory became a touristattraction for the whole region.There are also dozens of events each year around theSriracha theme with thousands of attendees, some of which are also funded directly byHuy Fong Foods.

1.3 Weaknesses:

- Short on supply: only use fresh chillies → fully depends on weather and nature

to produce While most commercially distributed hot sauces are made with driedchilies to make it easier to harvest, process and bottle the product at scale, Srirachaalways has been made with fresh chilies It’s what separates it from the competition.However, the problem is that producing hot sauce by fresh chillies only meansdepending fully on nature So, in June, 2022, Huy Fong Foods announced that it washalting production of its popular hot sauce due to the weather conditions in oneMexican region

- Downside of not spending on marketing:

Not spending on marketing means that the lack of proper information to the public.Huy Fong doesn’t have a Twitter, Facebook or Google Plus account, and its website isbare-boned Patrons

of Sriracha tend to know little if anything about the company whose product theyconsume by the gallon Many still recognise this as an exported Asian product.Depending solely on word of mouth may affect the customers’ original experience tothe hot source, which is risky enough for the company’s reputation in the current fiercecompetition on the market.

- IP problems:

One of the reasons the Sriracha name was able to blow up so quickly was the fact thatDavid Tran never trademarked his product, allowing rival companies like Heinz, Frito-Lay, Subway, … to use the name to flog off their own products Many people also have

to dodge the growing pool of Huy Fong Sriracha copycats In fact, in 2005, Huy FongFoods received complaints from East Coast consumers of a decline in quality,believing the company had changed the ingredients or watered it down Later, theyfound out 13 tons of Sriracha were replaced with the knockoffs with errors in thepackaging and distinctly inferior contents Having no registration of trademarks notonly affects the company’s revenue but also the company’s reputation

1.4 Competitors analysis / Alternatives analysis:

Hot Chili Sauce is an irreplaceable seasoning and sauce in every Korean dining table.According to that particular taste, the hot chili sauce industry has been going strongand diverse in Korea Among which, the 3 original brands of hot sauce that are nowmost trending among the Korean market would be:

Samyang Buldak (불 불불불)

Chung Jung One Sunchang

Gochujang Hot Pepper Paste

Korean Vinegar Chili Sauce, HOT, ChoGochujang

Price $7.9 / 7.05oz $13.99 / 2.2lb $4.99 / 11.02oz

Water, Artificial

Tapioca soup,water, brown rice,red pepper powder,salt, alcohol (topreserve freshness),soybean, garlic,onion

Red chili paste,Sugar,

Chicken Flavor, Corn Brewing vinegar,Ingredients Syrup, Soy Sauce,

Soybean Oil, Onion,

water, citric acid,sesame seeds, garlicGarlic, Decolourised oil, lemon extract,Chili Extract,

Paprika

Japanese apricot

Extract, GreenTea Flavor Oil.

extract, flavorenhancer, lemonflavor

Flavors

- Spicy ChickenFlavor

- Hot Carbonara

- ChiliMayonnaise

TraditionalKorean ChiliSauce

Vinegar Chili Sauce

0mg Sodium:

110mg Totalsugars: 1g;

includes 1gadded sugarsProtein: 0g

Total fat: 0gCholesterol:

0mg Sodium:

150mg Totalsugars: 2g;

includes 1gadded sugarsProtein: 0g

Energy: 935kJ/221 kcalFat: 1,4gSaturated fat:

0,3gCarbohydrates:

49,2g Sugar:

35,7g Protein:

4,4gSalt: 4g

2 Identify and analysis Korea market

2.1 Reasons for Sriracha to enter into Korean market

For a business when deciding to enter into another market, often for reasons such as toexpand sales, acquire, diversify production resources, revive the product life cycle, or

to reduce the dependence on the existing market

Having a large group of new customers who are eager to buy the product is arguablythe biggest benefit of entering a new market This enables Sriracha to meet consumers'growing demands while retaining their current customer base, as Sriracha hasinherently developed into a well- known brand and is widely trusted in its homemarket An expanded consumer base ultimately translates into a higher profit margin,which is great news for any business owner Additionally, entering new markets wouldenable Sriracha to compete with rival companies who have already expanded theirselection of hot sauce-related products.

For Sriracha choosing Korea as the market to enter, firstly, Koreans are famous fortheir spicy food cuisine Secondly, Korea is also one of the markets with a largeamount of chili sauce products consumed in the world

As a result, the Korean people have developed a distinctive culture known asMapbusim This refers to the satisfaction of handling one's spice Numerous Koreanswho enjoy those foods take pride in their ability to withstand hot, spicy cuisine andoften compete with others Therefore, there are some unique menu items or goods thatare more geared toward people who genuinely enjoy spicy food In the Koreanmarket, Gochujang chili pastes are the most widely used sauce in the

Korean market Gochujang does not include vinegar, unlike Sriracha, which does.Gochujang, made from fermented soybean and rice, is more of a paste than a sauce.Sriracha includes each of the distinct flavors that Koreans adore: a pepper kick, anaged taste, and a blast of garlic.

Sriracha's entry into the Korean market will provide consumers additional optionswhen it comes to adding chili sauce to their daily dishes

2.2 Identify Korean market size

Scale related to chili sauce market share

In Korea, there are currently 93 companies that process chili sauce, and this number isexpected to rise in the coming years

Statistics show that in 2022, revenue in the “Sauces & Condiments segment”(including Chili sauce) amounts to USD 5.12 billions The market is expected to growannually by 4.12% (CAGR 2022-2027) In relation to total population figures, perperson revenues of USD 99.69 are generated in 2022 Despite not making up themajority of Korea's GDP, the chili sauce industry is still very significant because itsupports the country's food processing sector and traditional cuisine

In addition, volume is expected to amount to 1,741.0mkg by 2027 The Sauces &Condiments segment is predicted to show a volume growth of 2.4% in 2023 Theaverage volume of sauces and condiments sold per person is expected to be 30.7 kg in

2022 This result appears that Korea is an ideal showcase for chili sauce companieswith tremendous request

Chili sauce distribution in korea

In Korea, you can easily buy and distribute chili sauce For direct shopping, customerscan buy at convenience stores such as 7-Eleven or in large commercial centers such asLotte Department, Coex Mall, For online shopping, Customers can choose Coupang,Gmarket, The convenience and ease of showcase dispersion of chili sauce willencourage businesses to enter market

Political Factors that Impact Sriracha

- Government System: South Korea has a presidential government system in which thePresident is the head of the state This is one of the countries that has a democraticgovernment that works well The constitution allows for the formation of politicalparties, but their activities and goals must be democratic

- Government resource allocation and time scale: Given the population's wideracceptance of ưthe proposed policies, it is safe to assume that the time scale of thesepolicies will be longer than the mandated term of the current South Koreangovernment

- South Korea's government is under increasing global pressure to comply with WorldTrade Organization regulations governing the food processing industry.

Economic Factors that Impact Sriracha

- Economic Performance of South Korea – South Korea's economic performance isexpected to remain stable in the next 5-10 years, owing to government spending,stable demand due to

disposable income, and increased investment in new industries The "Legend of the HanRiver," which is still in use today, is how people frequently refer to Korea's economicmiracle.

- Right decisions - South Korean leaders have made quick and accurate decisions inrecent history, assisting the country in minimizing loss In the covid-19 pandemic, thegovernment provided 12.2 billion dollars in assistance to businesses and individuals.Such prompt and timely decisions reduced GDP by only 1.4%

Social Factors that Impact Sriracha

- Demography: South Korea is one of the most prosperous and developed countries inAsia and the world The country has a population of more than 51 million people.Some of the major cities are Seoul, Daegu, and Busan

- Education level: South Korea, particularly Seoul, has a high level of education.Sriracha can be used to increase its presence in South Korea

- Skill level of workforce in South Korean market: Human resource skill levels inSouth Korea range from moderate to high in the Consumer/Non-Cyclical sector.Sriracha can use it to not only improve services in South Korea, but also to createglobal opportunities with its skilled workforce

- Attitude towards health and safety: With increased liberalization, attitudes towardhealth and safety are becoming more negligent Sriracha must avoid these attitudesbecause the cost of failure is too high in South Korea

- Leisure interests: Customers in South Korea prefer experiential products overtraditional value propositions Sriracha can capitalize by developing products thatimprove the customer experience.

Technological Factors that Impact Sriracha

- Lowering cost of production: The latest technology is rapidly lowering productionand servicing costs in the Consumer/Non-Cyclical sector Sriracha must improve itssupply chain to increase flexibility to meet customer needs and cost structures

- 5G and its potential: Sriracha must pay attention to the development andenhancement of user experience as speed and access increase This has the potential tocompletely transform the customer experience in the Food Processing industry

- Maturity of technology: The technology in the Food Processing sector has not yetmatured, and most players are competing for new innovations that will allow them togain a larger market share in South Korea

Environmental Factors that Impact Sriracha