Talk with Mr. Tabasco
Hellishly hot or no, Paul C.P. McIlhenny, the 68-year-old Chairman & CEO of McIlhenny Company, has a lot to be proud of given that his family's pepper sauces dominate their segment in the US.
Just because Tabasco goes down like a house on fire with Cajun food in local Louisiana, doesn't necessarily mean though that it will do so in Japan or Estonia. Apparently, however, it does.
Proud family company
McIlhenny Company (pronounced 'Mackle-Henny') also sells Tabasco brand products, including red, green garlic, habanero and chipotle pepper sauces, with great success in more than 110 countries and territories around the world.
Based on Avery Island in the coastal marshland of southern Louisiana, where you are far more likely to meet an alligator than a car when crossing the road, the 144-year-old family company is proudly independent. In fact, Paul McIlhenny is a member of the fourth generation of McIlhennys to produce Tabasco sauce.
The man talks quietly, but is delightfully humorous. Regrettably, a lot of his wry wit had to be excised from these serious pages. Thus, readers will be deprived for ever of various conversational gems. These include a description of the British predilection for marmite, the salt and savoury food spread, as 'gastronomic blasphemy'.
"We get offers all the time"
It is evident that you are not a big consumer of raw oysters or Bloody Marys. You are clearly male, but, unfortunately, if you are not 18 to 34, you may not be our typical demographic either.
So what type of person are you trying to attract?
Most people make their main brand decisions when they are around 18, so we are talking post high school and college days. Therefore, our principal aim is to get the next generation to splash Tabasco on their noodles or slices of pizza.
I think that we are a fun condiment with an exciting personality and full of sensual attraction. A psychographic profile of its personality would probably reveal a cool young male somewhat akin to the youthful Tom Cruise.
Tabasco isn't consumed directly, but is used with specific foods. We think these have been broadening out from raw oysters to Bloody Marys, chilli con carne à la Mexico, and pizza. Try it and excite your life!
So you haven't given up on marketing your brand to older consumers altogether?
There are so many ways to enjoy our brand, and this represents one of the challenges for our PR & advertising people.
For instance, Tabasco wakes up other foods in a sandwich. It also kicks up bland camp food a notch, which is why we are part of the MREs (meals ready to eat) in UK and US troop rations.
Our product is easily embraced by outdoor sportsmen, campers, or hikers. Even the Sherpas in Nepal love Tabasco on their Himalayan climbs because it peps them up at high altitudes, which is why they call it "Sherpa oxygen".
Tabasco is also heavily used by astronauts because they lose their sense of taste in outer space.
In what way does your being a traditional family company from the Pelican State also help to support the marketing of the Tabasco brand?
This is particularly the case as it’s becoming increasingly rare to be a family-owned company in the fourth generation whether in the US or anywhere else.
Have you ever thought about opening your company to outside shareholders in order to grow more quickly?
We're lucky to have had a number of years of high compound annual growth and thereby dividend growth, which keeps our family not only proud but happy! So we have not been obliged to share our good fortune with outside parties.
Also, there are clear benefits in being able to run your own company without the immediate bureaucratic oversight of bodies such as the SEC.
Presumably your private structure also protects you from unwanted takeover bids?
We get offers all the time! However, we’ve been able to resist them by offering profitable growth to our shareholders.
Is the family following in your footsteps as managers within the business?
No, although all of our nine-member board are extended family members, my two daughters and four grandsons do not work in the business.
Where do you see the most international growth, and how do you achieve this?
We expect and regularly record double-digit growth overseas. Our success is based on a combination of strong markets, good strong marketers, and exclusive distributors for each country, such as Develey Senf & Feinkost in Germany.
The most growth comes from those countries which are strongest economically and financially. This applies not only to BRIC countries, but also to mature markets like Germany, which has recorded compound growth for four to five years and exceeded plan.
You're lucky because food cultures vary tremendously around the globe. How has Tabasco conquered so many different local taste buds?
Luckily for us overseas, some of the more westernised foods such as pizza, spaghetti, hamburgers or Tex-Mex products such as nachos and salsas have conquered large parts of the world. So we greatly benefit from the global village.
In Japan and Germany, which are our two largest export markets, you can’t find a pizza parlour, spaghetti house or hamburger joint without a bottle of Tabasco on every table. The Japanese don’t necessarily use it in their native dishes, but they do put it on pizza and spaghetti.
Tabasco is, however, also being increasingly used in traditional dishes in a number of countries, simply because people love to experiment with our tremendously versatile products.
In Germany you now hear of Tabasco with currywurst and Turkish-style doner kebabs etc. In the UK some love it in 'toad-in-the-hole' (sausages in Yorkshire pudding).
Bartenders also like to practise alchemy with our brand. In Poland they have a drink called 'Mad Dog' which mixes raspberry syrup, vodka and Tabasco. In Estonia there is Milli Mallikas, which means jellyfish, and which combines sambuca, tequila and Tabasco.
There is no way on God’s green earth that we could have thought of all this, but, obviously, we are delighted to profit from such local creativity.
Commodity prices have generally rocketed over the past few years. What is the situation regarding your main ingredient, chilli peppers?
We have been squeezed to an extent because many farmers have been swayed into growing corn to produce ethanol, which has put pressure on all commodities.
However, we have probably been hit less than some competitors because we have many thousand small growers in Central & South America who are less willing to run the risk of switching to another crop.
Also, we are lucky in that our variety of chilli pepper is harder to grow and pick than the bigger cayenne or jalapeno variety. Tabasco is a unique variety and has to be handpicked so it makes our growers more money.
Fortunately, we have pricing power in the States.Tabasco is much more expensive in the US than other hot sauces due to its higher quality, iconic status and greater brand recognition. Thus, when we go up in price, all of our competitors follow us.
Even market leaders, however, are not impervious to natural disasters. To what extent were Tabasco's chilli-growing marshlands in Louisiana affected by the 2010 Deepwater Horizon catastrophe in the Gulf of Mexico?
However, I suspect that the spill had a considerably greater impact on the huge seafood industry in south Louisiana. As Tabasco is used in cocktail sauce with shrimps and raw oysters, this would have affected us at least indirectly.
Fortunately, though, seafood seems to have come back remarkably quickly due, presumably, to the self-cleaning aspects of the marsh and ocean.
To what extent do you believe that you can continue to extend your brand portfolio?
We now have seven flavours, three of which are used for export. We also have co-brands, for example, with Heinz A1 Steak Sauce' in the US.
Obviously, if you overdo diversification, you risk dilution, but we have successfully increased our audience without damaging the brand. With a core product which has been called 'hotter than the hinges of Hades', it was surely right, for instance, to also offer consumers a milder variety using green jalapeno pepper.
Also, we have certainly grown our brand by having a bigger billboard in the condiments section of supermarkets. However, our core original red product still accounts for around 70 per cent of our business.
My philosophy is good old American trial & error: Throw 'em up on the wall, if they stick and work, keep 'em, and if they don't, try something else. Let the consumer be your judge.