International business opportunity sriracha in south korea

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, talk about it, wear it and strive to live a spicy life The iconic chili sauce has become a household name across the world Today, we will present to you guys the Chillies King - David Tran and his empire – Huy Fong Foods., who is behind the Sriracha Rush conquering America and several areas around the world ever since the 2000s In this presentation, we will focus on analyzing the Huy Fong Foods' most well known products - Sriracha Hot Sauce’ penetration opportunity in the Korean market 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 was founded by David Tran, a Vietnamese-born Chinese immigrant He incorporated Huy Fong Foods, in February 1980, within a month of arriving in Los Angeles It has grown to become one of the leaders in the Asian hot sauce market, Sriracha sauce popularly 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 is “To make a rich man's sauce, at a poor man's price.” This serves as a promise from the brand to produce hot sauces in high quality but at an affordable pricing so that everyone will be able to enjoy, and Huy Fong foods had excelled the task From sales of only 1,000 USD/month in the days of hand-delivered goods, the company now gains more than 20 million bottles of chili sauce sold each year and revenue of more than 60 million USD with the development 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 give customers the most valuable products Products line The company’s production line includes main products: Sriracha Hot sauce, Sambal oelek and chili garlic sauces; in which Sriracha Hot sauce is currently the company’s best 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 of David Tran to provide Vietnamese immigrants with a hot sauce worthy their Phở soup Exceeding the expectation, Sriracha has now conquered the whole American culinary culture by stepping into sushi ingredients, or restaurant chains as P.F.Chang, which has 204 branches in the US and worldwide, offering Sriracha-flavored dishes - Packaging: The sauce is packaged in unmistakable clear bottles with the rooster logo and green caps, on the bottle there is English, Chinese, Vietnamese, French and Spanish, which makes it recognisable anywhere in the world - Pricing: Sriracha Hot Sauce is available in sizes: oz, 17 oz., 28 oz., and 8.50 lbs, which costs respectively $8.5; $11.45; $19.99 and $34.87, which are slightly lower compared 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 chillies used in production are hand-picked, carefully handled and processed within a day of being picked Additionally, although the ingredients for Sriracha are all public, no one knows the exact recipe of Sriracha The secret recipe and the iconic “rooster” image are some of the factors making Huy Fong’s Sriracha stand out from plenty of competitors in the market - The bigger and bigger Sriracha lover community The company only focuses on the production, without any salesmen or marketing employees Rather, Huy Fong foods has been taking such great efforts to build a growing community of Sriracha lovers Focusing only on its core product, Sriracha assigns partners to exploit more "unique" products such as Sriracha2Go (Sriracha pocket keychain) or SrirachaBox (Sriracha product package including key chains)., snack, shirt ) Knowing that customers are the most loyal partners", Huy Fong Foods also organizes weekly factory tours, enjoying Sriracha's latest products, free clothes and meeting directly with David Tran Gradually the Sriracha factory became a tourist attraction for the whole region.There are also dozens of events each year around the Sriracha theme with thousands of attendees, some of which are also funded directly by Huy 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 dried chilies to make it easier to harvest, process and bottle the product at scale, Sriracha always 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 means depending fully on nature So, in June, 2022, Huy Fong Foods announced that it was halting production of its popular hot sauce due to the weather conditions in one Mexican 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 is bare-boned Patrons of Sriracha tend to know little if anything about the company whose product they consume by the gallon Many still recognise this as an exported Asian product Depending solely on word of mouth may affect the customers’ original experience to the hot source, which is risky enough for the company’s reputation in the current fierce competition on the market - IP problems: One of the reasons the Sriracha name was able to blow up so quickly was the fact that David Tran never trademarked his product, allowing rival companies like Heinz, FritoLay, 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 Fong Foods received complaints from East Coast consumers of a decline in quality, believing the company had changed the ingredients or watered it down Later, they found out 13 tons of Sriracha were replaced with the knockoffs with errors in the packaging and distinctly inferior contents Having no registration of trademarks not only 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 strong and diverse in Korea Among which, the original brands of hot sauce that are now most trending among the Korean market would be: Samyang Chung Jung One Korean Buldak (불 Sunchang 불불불) Gochujang Pepper Paste Vinegar Chili Sauce, HOT, Hot ChoGochujang Packaging Price $7.9 / 7.05oz $13.99 / 2.2lb Water, Artificial $4.99 / 11.02oz Red Tapioca chili paste, soup, Sugar, Chicken Flavor, Corn water, brown rice, Brewing vinegar, red pepper powder, water, citric acid, salt, alcohol (to Soybean Oil, Onion, sesame seeds, garlic preserve freshness), Garlic, Decolourised oil, lemon extract, soybean, garlic, Chili Extract, onion Japanese apricot Ingredients Syrup, Soy Sauce, Paprika Extract, Green Tea Flavor Oil extract, flavor enhancer, lemon flavor Flavors Spicy Chicken Flavor Traditional - Hot Carbonara Korean - Chili Vinegar Chili Sauce Chili Sauce Mayonnaise Energy: 935 Total Fat: 0g Total fat: 0g kJ/221 kcal Cholesterol: Cholesterol: Fat: 0mg 0mg Saturated Sodium: Sodium: 1,4g fat: 110mg Total 150mg Total Nutrition sugars: 1g; sugars: 2g; s Carbohydrates: includes 1g includes 1g proportio 49,2g Sugar: added sugars added sugars 35,7g Protein: Protein: 0g Protein: 0g 4,4g n 0,3g Salt: 4g 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 to expand 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 arguably the biggest benefit of entering a new market This enables Sriracha to meet consumers' growing demands while retaining their current customer base, as Sriracha has inherently developed into a well- known brand and is widely trusted in its home market An expanded consumer base ultimately translates into a higher profit margin, which is great news for any business owner Additionally, entering new markets would enable Sriracha to compete with rival companies who have already expanded their selection of hot sauce-related products For Sriracha choosing Korea as the market to enter, firstly, Koreans are famous for their spicy food cuisine Secondly, Korea is also one of the markets with a large amount of chili sauce products consumed in the world As a result, the Korean people have developed a distinctive culture known as Mapbusim This refers to the satisfaction of handling one's spice Numerous Koreans who enjoy those foods take pride in their ability to withstand hot, spicy cuisine and often compete with others Therefore, there are some unique menu items or goods that are more geared toward people who genuinely enjoy spicy food In the Korean market, 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, an aged taste, and a blast of garlic Sriracha's entry into the Korean market will provide consumers additional options when 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 is expected 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 grow annually by 4.12% (CAGR 2022-2027) In relation to total population figures, per person revenues of USD 99.69 are generated in 2022 Despite not making up the majority of Korea's GDP, the chili sauce industry is still very significant because it supports 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 The average 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 companies with tremendous request Chili sauce distribution in korea In Korea, you can easily buy and distribute chili sauce For direct shopping, customers can buy at convenience stores such as 7-Eleven or in large commercial centers such as Lotte Department, Coex Mall, For online shopping, Customers can choose Coupang, Gmarket, The convenience and ease of showcase dispersion of chili sauce will encourage businesses to enter market 2.3 PESTLE ANALYSIS IN KOREA Political Factors that Impact Sriracha - Government System: South Korea has a presidential government system in which the President is the head of the state This is one of the countries that has a democratic government that works well The constitution allows for the formation of political parties, but their activities and goals must be democratic - Government resource allocation and time scale: Given the population's wider acceptance of ưthe proposed policies, it is safe to assume that the time scale of these policies will be longer than the mandated term of the current South Korean government - South Korea's government is under increasing global pressure to comply with World Trade Organization regulations governing the food processing industry Economic Factors that Impact Sriracha - Economic Performance of South Korea – South Korea's economic performance is expected 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 Han River," which is still in use today, is how people frequently refer to Korea's economic miracle - Right decisions - South Korean leaders have made quick and accurate decisions in recent history, assisting the country in minimizing loss In the covid-19 pandemic, the government 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 in Asia 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 in South 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 create global opportunities with its skilled workforce - Attitude towards health and safety: With increased liberalization, attitudes toward health and safety are becoming more negligent Sriracha must avoid these attitudes because the cost of failure is too high in South Korea - Leisure interests: Customers in South Korea prefer experiential products over traditional value propositions Sriracha can capitalize by developing products that improve the customer experience Technological Factors that Impact Sriracha - Lowering cost of production: The latest technology is rapidly lowering production and servicing costs in the Consumer/Non-Cyclical sector Sriracha must improve its supply chain to increase flexibility to meet customer needs and cost structures - 5G and its potential: Sriracha must pay attention to the development and enhancement of user experience as speed and access increase This has the potential to completely transform the customer experience in the Food Processing industry - Maturity of technology: The technology in the Food Processing sector has not yet matured, and most players are competing for new innovations that will allow them to gain a larger market share in South Korea Environmental Factors that Impact Sriracha - Extreme weather is increasing Sriracha's operating costs as it invests in making its supply chain more adaptable - Recycling is quickly becoming the norm rather than the exception in South Korea's economy Sriracha must plan to comply with regulations and expectations in the Consumer/Non-Cyclical sector - Regular scrutiny by environmental agencies adds to Sriracha's operating costs - Environmental standards are also influencing product innovation priorities Rather than catering to traditional value propositions, many products are designed to meet environmental standards and expectations - Waste management, particularly for units near urban areas, has become increasingly important for players such as Sriracha The South Korean government has established stringent guidelines for waste management in urban areas Legal Factors that Impact Sriracha - Regulatory incentives: Among the incentives offered, financial incentives include reductions/exemptions of corporation, local, and income taxes, as well as cash grants for investment in high-tech industries that have a broad economic impact In addition to offering major financial incentives, the Free Economic Zones (FEZs) like Incheon, Gwangyang, and Busan/Jinhae are committed to creating an international business and living environment These incentives are attractive to investors looking to enter the country - The Korean government wants to ensure fair market competition Businesses that are suspected of abusing their power may face restrictions under the Monopoly Regulation and Fair Trade Act So, when Sriracha products are introduced into the Korean market, the prices of these products can be more expensive than in other countries International Business opportunity of Sriracha in South Korea 3.1 International Business opportunity in South Korea Opportunities - There are a lot of trade fairs regarding cuisine held over a year in South Korea such as the International Exhibition Seoul Food by KOTRA (cơ quan xúc tiến thương mại đầu tư Hàn Quốc) So, Sriracha can launch an impressive booth as forming the first acknowledgement for the citizens of South Korea about the product Also, by launching the marketing and promoting strategy such as reducing price can help Huy Fong penetrate on the given market as well as take insights from potential customers - Sriracha includes each of the distinct flavors that Koreans adore: a pepper kick, an aged taste, and a blast of garlic, which can be the one of the USP in Korean market with the characteristics of more flavourful than other competitors as the love for certain ingredients is so crucial in making decision while purchasing - Culture: Koreans are famous for enjoying spicy food + The color of red: For a long time, the color redhas been believed to have shamanistic power for warding off evil spirits or bad luck, pursuits of happiness + Mapbusim: This means the pride of being able to handle one’s spice Many Koreans who love those foods feel proud of themselves for being able to handle hot spicy dishes and even compete with others So, there are some special menu items or products that cater more to those who really love spicy dishes Koreans think they should eat spicy food when they are stressed - Policies regarding international trade: Korea has participated in WTO Besides, as a member of KORUS FTA (Obama), USTKA (Trump), America gov can ensure the smooth route for domestic firms to expand in the host country - Economic performances of SK are expected to be stable in the next 10-year-period, which can ensure the potential circumstance to undertake the Trade Agreements signed and pave the way for Srirancha to come into the South Korean market - Lower cost production, Free Economics Zones like Incheon, Busan can become a promising factor for Huy Fong to directly produce Sriracha in SK and implement the FDI strategy Besides, the initial 5G breakthrough, which encourages citizens to use the Internet and be online more can be helpful for an effective marketing plan Threats - A host of huge competitors with large market share, culture-oriented marketing, familiarity, international reputation such as Gochujang - Exchange rate has witnessed an upward trend in the past years, therefore, the quantity of imports will be reduced, which can be detrimental for Sriracha to be sold in South Korea - The government focuses on fair market competition, so it may lead to the prices of Sriracha products being higher than in other nations, which can discourage the buying behavior of customers - The difference between time perception, power distance of the two cultures may lead to misunderstanding while launching the products and promoting consumption - Current implemented marketing strategy may be unsuitable for the expectation of Koreans about experiential products over traditional value proposition - Unfamiliar weather may result in the increase in operating costs regarding making the supply chain more adaptable Also, the cost may be added by impact of regular scrutiny from environmental agencies Potential customer - Age: 15-80 - Occupation: officier, student, housewife - Eating habit: Spicy food lovers, seekers of a pepper kick, an aged taste, and a blast of garlic included in dishes, familiar with processed food, fast food - Open-minded, easily adapt to new foreign products, new flavor - Tend to express variety-seeking purchasing behavior, spend time trying samples of new-launched products - Using social media and Internet 2-3 hrs per day - Belief: the implication of red color and the power of stress relief while eating spicy food 3.2 Adjustment We should focus on Marketing solution by developing marketing strategies with the aim of accessing as many customers as possible => apply the marketing strategy 4Ps Reason 1: Not many customers in the Korean domestic market know about Sriracha chili sauce Vinegar-based sauces have been already promulgated in the mind of the average Korean consumer as “the foreign hot sauce”, whereas sriracha is still a very new thing to the populace and mostly only familiar to folks in big cities who have had a chance to try it in the first place In other words, most Koreans simply have not had a chance to try it Solution: Adjusting in price (What is the cost of a Sriracha chili sauce bottle in the market ?) Penetration pricing method can increase sales and large increases in profits but only of the market grows Low prices attract new buyers or the competitions’ customers to the product + Sriracha $5 average price for 17oz and Tabasco $4.6 average price for 12oz + Tapatio 10oz of 12 bottles $20 and Sriracha 17oz of 12 bottles $23 Another benefit for this approach is that it discourages or blocks competitors from entering the market By having successful sales and profits, the cost of production goes down The firm can use the profit gains to expand production or implement technologies that will bring efficiency and lower cost of production Moreovers, the scarcity of Sriracha sauce was caused by a chili pepper shortage that has lasted for nearly two years now The shortage of chili peppers is the result of weather conditions affecting the quality of chili peppers The company gets its peppers from Mexico, which is currently experiencing a drought => Sriracha increasing sales has led them to expand to a warehouse that stores its peppers => Solve the problem of pepper shortage => We can make the price of Sriracha competitive with other brand in the Korean domestic market by applying strategy involving penetration pricing Adjusting in place (Where can we buy Sriracha chili sauce?) Retail stores Retail stores are the most significant places where Sriracha chili sauce products are sold because these venues are strategically located and easily accessible in various markets around Korea These retailers include small local, convenience stores and regional stores, as well as large firms like Walmart, Emart, Lotte Mart, Homeplus Mart, COSTCO, convenience stores Sriracha Online Store Customers can purchase Sriracha chili sauce through the company’s online store, Sriracha company’s website or some sale platforms such as Alibaba, Amazon, Adjusting in promotion (Advertisement and PR) In fact, Sriracha is marketed via Word of Mouth Extremely catchy bottling and labeling, Stands out from the rest In a 2007 Natural Perception Study on hot sauces: + ⅔ of correspondents use hot sauce + 52% of respondents have a favorite brand of hot sauce This is a high percentage, but suggests a great many respondents are willing to use more than one brand Flavor is the leading reason for brand preference, not level of hotness + Willingness to try other hot sauce brands is tied directly to availability Free samples are particularly effective at promoting sampling + Awareness of hot sauce is currently built through retail print advertising However, the majority of respondents indicate that print advertising has little influence on their brand preference Doing so opens up your potential audience well beyond the reach of traditional marketing, while also allowing your existing customers to interact with you at any time => Here are some tips of advertising and PR - Photos sell: Showcase Your Hot Sauce Brand in Use: Instagram is the perfect platform for foodies and restaurants to make us all jealous As a condiment, many of these could feature your product Creating videos, some with mouth-watering, commercial-style looping, and others with longer- form instructional meal prep content, sharing recipes that include your product in a place that gets that extra click - Promote User-Generated Content of Your Hot Sauce: Inspire your customers to create content and post about their experiences User-Generated Content is an effective way to harness word of mouth in the digital age, providing you with visual content with none of the preparation - Create Social Media Ads for Your Hot Sauce Brand: By adding a few dollars to boost this content, you can target hot sauce lovers to: + Take advantage of online deals + Know when you’ve become available in nearby stores + Let them know of events you’re part of Be sure to thoroughly explore your ad targeting options for Facebook, Instagram, Google, and other social channels And don’t forget to retarget Shoppers that visit your website can be served ads later on, with messages that are specific to their previous experiences - Social Media Influencers Can Help Promote Your Sauce: Another online partnership to consider is with social media influencers These are people who regularly connect with engaged audiences, large and small, through social media or blogs They’ve gained the trust of their fans, and they can pass that trust on to your brand - Promote Free Samples Online and Offline: A wide-reaching free sample campaign can be the fastest way to have customers taste your product Public places with busy streets are filled with people willing to try delicious foods Reason 2: Sriracha sauce is perfect for use in Korea, perfect as an all-in-one condiment But not in Korean food This is where there is a fine line to be emphasized: sriracha has all the individual components that Koreans love: pepper kick, aged bite, and a garlic blast…But it’s not a reasonable substitute for anything specific in Korean cuisine, which is why it is completely inappropriate for traditional preparation of Korean dishes In other words, you simply cannot just squirt sriracha sauce all over the place when cooking Korean food, sriracha sauce would be a horrible match for traditional flavor Reason 3: The level of recognition of Korean chili sauce is too large and the quality and taste of chili sauce in Korea and Sriracha are similar Gochujang is a red-colored paste made from Korean chili peppers, fermented soybeans, and salt It is the lifeblood of Korean food and dishes => Solution: Sriracha can use a concentric diversification strategy to make it easier to enter the Korean market Concentric diversification is a strategy employed by companies to expand their businesses by adding new products or services that are related to their existing ones The goal of concentric diversification is to leverage the company’s existing competencies and resources to enter new markets and grow its business Moreover, Sriracha can: - Use of Existing Infrastructure - Reduce risk About the flavor, since sriracha sauce delightful components (pepper, savoriness, garlic, aged character, sweetness, and vinegar) are used in Korean cuisine both separately and in various combinations for specific use, but usually not all at once About the big consumption of gochugaru (Korean red chili flakes), it can be seen that the market of chili powder is still potential: - Featured at every meal, kimchi is consumed daily by 95 percent of Koreans—2 million tons annually - Total consumption in Korea has risen in recent years because of a rising population; the kimchi market in Korea reached almost 1.45 trillion South Korean won as of 2020 In which, most Koreans use chili powder to make kimchi - The gochu (Korean red pepper) that goes into Korean traditional fermented foods such as kimchi (fermented cabbage) and gochujang (spicy red pepper paste) This shows the potential level of chili powder product development From there, Sriracha was able to develop a new line of chili powder products, which can compete directly with the familiar Gochugaru in Korea  ... South Korea 3.1 International Business opportunity in South Korea Opportunities - There are a lot of trade fairs regarding cuisine held over a year in South Korea such as the International Exhibition... when Sriracha products are introduced into the Korean market, the prices of these products can be more expensive than in other countries International Business opportunity of Sriracha in South Korea. .. share in South Korea Environmental Factors that Impact Sriracha - Extreme weather is increasing Sriracha' s operating costs as it invests in making its supply chain more adaptable - Recycling is