Cholula: America's Hottest SauceIn 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 mustardcombined! Multiple factors are driving this evolution. Primarily, the increasing influx of LatinAmerican and Asian immigrants has helped make spicy foods more mainstream. Hot sauce aficionadosexisted in pockets around the country for years, but the product has become prevalent in manyhouseholds and restaurants. Second, Millennials have shown an increasing desire for exploring newand exotic flavors in their food. Research points to the changing palate preferences of thisdemographic, with individuals now valuing having a variety of hot sauce flavors and heat levelsavailable at home and when eating out.Among the numerous brands within the industry, Cholula has worked to establish itself as themost recognized Mexican hot sauce. The product was first introduced to the U.S. market in 1989 inregions 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 theproduct as one that was instead versatile and could be used across different types of foods.Cholula achieved this shift in brand perception through organic social media advertising.Knowing that the Millennial submarket responds well to peer influence and a sense of discovery,Cholula encouraged its fans to share descriptions and photos of their meals using the product increative ways on social media.Relying purely on word-of-mouth advertising has helped Cholula achieve 10 percent marketshare in the U.S. hot sauce category (Tabasco has 18%) and sell an average of 10 million bottles a yearby 2015. The brand's marked success in moving distribution from targeted Latin American markets tothe condiment aisle in mass retailers shows the potential for international brands to meet the needs ofemerging U.S. submarkets.

Questions:

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

2. Using outside resources, offer an assessment of the size of the

David A. Aaker; Christine Moorman. Strategic Market Management, 11th Edition (p. 77). Wiley. Kindle Edition.