James Dennin, Kapitall: Hot sauce is a fast growing industry. We decided to take a closer look at some seemingly hot stocks.
Whether or not you like your eggs with a kick – it might surprise you to hear that hot sauce was one of the fastest growing industries last year. In fact, it was only slightly edged out by social networking in its market expansion through 2012, according to IBIS World, an Australian marketing and research firm.
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It seems that a confluence of factors – from immigration to demographic changes – has changed the American palate. Over the years, Americans have craved more flavor in their foods, and spice is a much healthier flavor enhancer than salt, preservatives, or fat.And there are strong numbers to support this. Over the last decade, the hot sauce industry has grown over 9% each year, with little to no signs of slowing down. There have been major plays in the market as well, supporting the idea that sauces and condiments are earning more attention from investors. Last year, Warren Buffett's Berkshire Hathaway (BRK/A) acquired the legendary condiment maker Heinz. And then there's the incredibly trendy, yet strange and mercurial company behind the hot sauce Sriracha – whose steady rise despite not spending a dime on advertising (or really anything, besides chili peppers) is a powerful testament to hot sauce's resilience and popularity. The company, Huy Fong Foods, is possibly one of the worst run businesses you've never heard of. Since opening its doors in 1980 (with the expressed goal of bringing traditional Vietnamese hot sauce to the country's diaspora – nothing more), the company has not once raised the cost of its product. You heard me. Through four presidencies and a three-fold increase in food prices, Sriracha's price has held constant. And yet the company's profits have risen steadily each year.