In recent years the U.S. condiments and sauces market has been upended by one product: hot sauce. Since 2000, the category has grown 150%—more than BBQ sauce, ketchup, mayonnaise and mustard combined! Multiple factors are driving this evolution. Primarily, the increasing influx of Latin American and Asian immigrants has helped make spicy foods more mainstream. Hot sauce aficionados existed in pockets around the country for years, but the product has become prevalent in many households and restaurants. Second, Millennials have shown an increasing desire for exploring new and exotic flavors in their food. Research points to the changing palate preferences of this demographic, with individuals now valuing having a variety of hot sauce flavors and heat levels available at home and when eating out. 

Among the numerous brands within the industry, Cholula has worked to establish itself as the most recognized Mexican hot sauce. The product was first introduced to the U.S. market in 1989 in regions like Texas and Southern California that had larger Hispanic influences. Gradually though, distribution expanded nationally and Cholula appeared widely in both restaurants and grocery stores. Initially, the product was positioned alongside other Mexican food staples like taco mix and tortillas. While this placement strategy was crucial to kick-starting sales, management was cautious to avoid “pigeon-holing” the brand. In other words, the Cholula team wanted consumers to perceive the product as one that was instead versatile and could be used across different types of foods......

Questions: 

1. Based on the information in the case and any outside resources, perform a profitability analysis of the hot sauce industry. What is Cholula’s biggest challenge? 

2. Using outside resources, offer an assessment of the size of the hot sauce market in the U.S. Be prepared to defend your method for market sizing.