Name: Jing Liu Rebecca Course: ADV612 Project: Cholula Project Item: Secondary Research Report

Category Trend (Source: Mintel Report: Condiments and Dressing, US 2014; Mintel Report: Innovation on the menu: flavor trend US, Jun 2014)

Hot sauces’ performance has been steady, presenting opportunity for future growth • The expansion of Hispanic and Asian population, which are both significant users of hot sauces.

Health does not appear as a significant barrier for users. • Nearly one third of condiment users say they don’t consider nutrition (eg fat, calories) in condiments • Only 7% of consumers in general say condiments make food unhealthy • But health positioning ranks high among innovations of interest in the category

Expanding ethnic populations fuel a growing interest in ethnic foods • A quarter of respondents to Mintel’s consumer survey say condiments are a good way to try new flavors • 26% say they are interested in trying flavors from other countries • Among both North and South American cuisines, the top sought-after country remains Mexico, as 51% of Americans mentioned that they’d be interested in more Mexican foods • The most significant growth is predicted to come from Hispanics: a growth of 27%, to make up nearly 19% of the population during the same time period. • Factoring the increase in the Hispanic population in the US, this strong demand equates to the need for more regionally specific Mexican cuisine, which can attract both consumers originally from Mexico, as well as adventurous eaters who are looking for Mexican foods outside of burritos and tacos.

Implications: The growing Hispanic population and interests towards Mexican food can be our opportunity.

Consumer Demographics (Source: MRI+ report: Hot sauce heavy user; Mexican food user, Tabasco user & Frank’s Red Hot user)

Hot Sauce heavy user: • Gender neutral • No major skews over education and income level (HH income over 150k has highest index) • 18-34-year-olds are more likely to use hot sauce heavily • African Americans are most likely to be heavy users of hot sauce.

Mexican food user: • Women are more likely to consume Mexican food. • Age range: 18–24; 35–44 • HH Income: 50-59k • Race: Other (presumably Latinos/Hispanics)

Tabasco users: • Men have higher index; • Age: 55-64; • HH income: 75k+ • Race: Other (presumably Latinos/Hispanics)

Frank’s: • Gender neutral; • Age: 25-44; • HH income: 75k+ • Race: African American

Consumer Behavior/Psychographic (Source: National Perceptual Study – Hot Sauce Study, June 2007, Persuadable Research Corporation)

Use of hot sauce is widespread but not universal. • More than two-thirds of all respondents use hot sauce. • Use of hot sauce varies very little by gender. • Fairly consistent among different age and income groups • Less interest in Midwest, mostly used in the South, and then Northeast and West. • Among the 32% of respondents who do not use hot sauce, the most frequent reasons for not using hot sauce are dislike of the taste or inability to handle spicy foods. • Among respondents who use hot sauce, 75% experiment with hot sauce when cooking or preparing food, and 60% use hot sauce in dips. • Mostly used on burritos, eggs/omelet, boiled chicken breasts and burgers.

52% of respondents have a favorite brand of hot sauce. Flavor is the leading reason for brand preference, not level of hotness. • 71% pay attention to specific types of hot sauce offered in restaurants. • 86% will use the hot sauce available in a restaurant if their favorite brand is not offered. • Just over half of respondents, 52%, have a favorite brand of hot sauce. • 80% of the respondents indicate flavor is the reason for making their brand choice a favorite. • The largest percentage of respondents, 37%, discovered their favorite brand in the home, using it since childhood. • The majority, 71%, would try another brand.

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. • The majority of respondents are not aware of advertising for hot sauce. • 77% of the respondent indicate they are not influenced to try a brand after seeing an ad.

Consumers respond to marketing movements beyond emphasis on flavor. • The increasing need for condiments to provide personalization, customization, and individuality. • Beyond flavor, the personal nature of products in the category is most clear in the social phenomena that surrounds hot sauce, with fans of heat exclaiming their loyalties to Huy Fong’s , Tabasco, Cholula, among others, through social media participation, branded apparel, and even tattoos.

Consumers that sometimes cook at home, but not responsible for all the meals are more likely to use hot sauces. • Positioning products as a helping hand to assist less-skilled home cooks to achieve the end results they desire should find strong appeal among this group.

The Internet and hands-on experiences are important for today’s cook • In 2012, the most popular way Americans learned about new flavors and ingredients were through cookbooks, but things have changed in just two years (39% of adults in 2014, compared to 52% in 2012). Cookbooks have dropped to third, and instead, consumers are learning about new flavors from word-of-mouth and cooking television channels. • In terms of internet mediums, over a third (35%) of consumers turn to cooking websites when finding out about new flavors and ingredients, followed by restaurant websites, cooking blogs, and restaurant blogs. • Outside of cooking television channels, cooking websites, and magazines and cookbooks, consumers are turning to social media; their own personal trips/travel; restaurant websites; cooking blogs; and cooking classes to find new flavors that are to their liking.

Implication: • Hot sauce consumer is rather gender neutral; • There are certain foods people pair with hot sauce regularly; • Our emphasis on enhancing flavor is an advantage; • Consumers are open to trying out new brands; we just need to give them a reason to; • Traditional print advertising doesn’t seem to work very effectively in changing behavior; but maybe effective in the long term in building awareness (need to find out); • Need to integrate marketing efforts on different platform beyond just product advertising;

Target: • Latino and Mexican food enthusiast; • Both male and female, 18–24 & 35–44; • Have an appetite for Mexican food and interest in cooking, but are not experts; • Self-taught home cooks learn from friends or online resources;

About Cholula

Point of Differentiation • Positioning: “The Flavorful Fire” • All about enhancing food flavors without overpowering them • Authentically Mexican (imported from Mexico) – a blend of pequin peppers, árbol peppers, and spices and is promoted as a zesty accompaniment to breakfast favorites, tacos, pizza, soups, Bloody Marys, and more. • Delivers a palatable 1,000-3,600 Scoville units of heat (Reference: Tabasco Original – 2,500-5,000; Franks: 2085; Huy Fong Sriracha: 2200; : 747;). • The Cholula brand offers five varieties, including Original, Chili Lime, Chipotle, Chili Garlic, and Green Pepper (the newest flavor, added to the collection in spring 2014), and grew sales by 15% during the measurement period. • Packaging: an image of a female cook in a rustic cocina, and a carved wooden top (representation of the care and quality tradition of Mexican artisanship) • Distribution: supermarkets and grocery stores

Marketing efforts • In early 2014, Cholula kicked off a “spicy partnership” with Latin chef, author, and TV host Ingrid Hoffmann – Host of Cooking Channel's Simply Delicioso. Hoffmann demonstrated how to use Cholula as an ingredient in cooking; provide recommendations for how to apply each flavor in Cholula’s collection to home recipes or to add it as an enhancement to dishes; and will develop exclusive recipes for the brand, as well as incorporate the hot sauces into a handful of her existing recipes, for a series of webisodes that released on the brand’s website over the course of the year. • “Proudly served” at foodservice locations, such as Qdoba Mexican Grill and On The Border, among others.

SWOT

S W - Authentic Mexican heritage - Relatively low awareness - Flavor enhancer position - Mexican heritage unknown to many - Not the hottest hot sauce in the market

O T - Mexican cuisine ranks high in the - Crowded category flavor trend in US - Well-established brands like Tabasco - Hispanic population expanding or Frank’s have a loyal consumer base - More consumers start to focus on and wide distribution network flavor rather than heat level now - Consumers are open to try new flavors

Direct Competitors (with Mexican claim or elements)

Tabasco, is preferred by 29% of respondents. • A strong heritage in the US • Known by 84% of respondents, is by far the most well-known brand. • Recognized as the spiciest hot sauce by the most percentage of respondents (Original SU 2500-5000, the hottest flavor goes up to 7000) • What’s special: The fresh peppers are mashed, mixed and placed in oak barrels. The pepper mash is allowed to age for up to three years in the McIlhenny warehouse. This process creates the subtle flavor notes that are unique to Tabasco. • Launched its very own Sriracha product in 2014 • Product extension: 6 flavor varieties; Tobasco chocolate • Commercial: Mosquito (1998 super bowl); • Slogans: “One drop works wonders”; “Tabasco brings out the unexpected in food”; • It has appeared in many movies and cartoons, as well as on television. (Our Gang short Birthday Blues in 1932; Charlie Chaplin's Modern Times in 1936; Back to the Future: Part III, the saloon bartender uses Tabasco as an ingredient for an instant hangover cure he calls "wake-up juice". • Speaking to the role hot sauce plays in the lives of consumers beyond the kitchen, during the 2014 holiday season, Tabasco is promoting gift-worthy offerings in its Country Sore, including the hot sauce varieties themselves, Tabasco-branded toys, shoes, jewelry, cookware, spicy candy, among others.

Tapatio • California based, founders come from Guadalajara. • The ingredients, as listed on the product label, are: water, red peppers, salt, spices, garlic, acetic acid, xanthan gum and sodium benzoate as a preservative. • Product slogan: "Es una ... Muy salsa" ("It's a very saucy sauce!") • Brand image: a Mexican men wearing a sombrero • Product extension: in 2011, Frito Lay released a line of Tapatío flavored Doritos, Ruffles, and Fritos in the United States • Collaborated with streetwear brand The Hundreds to celebrate Cinco de Mayo with a T- shirt and special edition hot sauce bottle labeling, which features Hundreds founders Bobby and Ben (fans of the brand) alongside the iconic character that’s been featured on the Tapatio label since the 1970’s. According to the clothing brand, its website crashed when the products went live, and the products sold out within 15 minutes.

Indirect Competitors (category leaders)

Frank’s Red Hot • Made with a premium blend of aged cayenne peppers, originally from Ohio • Best known for its original sauce, and its pairing with chicken wings “FRANK'S® REDHOT® Cayenne Pepper Sauce was used as the secret ingredient for the first ever Buffalo Wings in Buffalo, New York” (https://www.franksredhot.com/wings/history-of- franks-redhot/ ) • Ethel, the next door granny as “brand ambassador”, on TV commercial, taglines “I put that XXXX on everything” (https://www.franksredhot.com/videos/ ) • Achieved the most sales among all hot sauce brands in 2014

Texas Pete • Louisiana-style hot sauce, originated from North Carolina, borrowed the Texas name for its reputation for spicy cuisine. • Slogan: "Embrace your "Cha!ddiction"" , meaning "indulging in this sweet and spicy paste" • Mildly spicy

Huy Fong Sriracha • Saw the strongest growth among brands in the “other condiment” segment • Complaints from neighbors of the company’s factory in Irwindale, Calif., who claimed the plant caused bad odors, coughing, headaches, and heat that irritated eyes, resulted in temporary closure in 2014. • The multimillion hot sauce company “built entirely on word of mouth” turned to social media and enhanced transparency to reach its “Sriracha Friends.” • The company now encourages visitors who take the factory tour to share photos via social media using the hashtag #34spicyyears. Huy Fong also recently asked followers to share photos of their Sriracha tattoos. • Extended product lines: during a weekend event marking the beginning of its pepper- grinding season in late summer 2014, every visitor to the factory got a red hairnet and a ticket entitling the bearer to a T-shirt and 9-ounce bottle of Sriracha hot sauce. Tours ended with tastings of Sriracha caramels, popcorn, and ice cream, and included a visit to the new company store. Such a personal touch that provides a face to a company may work for other brands in this highly competitive market.