Tips & Tricks

How a Chili Sauce with Zero Promotion Became a Business Empire

By December 4, 2015 November 8th, 2019 No Comments
 

Chili Sauce

Would you believe these fanatic Amazon reviews are for a small jar of chili sauce that retails for about $12 on Amazon and Gilt as a luxury seasoning product?

You might be wondering…what type of magic sauce is this? Who is the genius behind it?

The magic chili spicy sauce, Lao Gan Ma, was created by a 68-year old Chinese woman named Tao Huabi. Her literacy skills go as far as knowing how to write her name. At the age of 42, she was still selling cold noodles on the street and was probably not considered ?successful? to most people.

A little over 20 years later, Tao is now worth over 7 billion RMB (about $1B USD). Overseas Chinese and Westerners call her ?Godmother? (the English translation of Lan Gan Ma) after having created 4100 job opportunities and bringing wealth to 8 million farmers.

Tao?s first factory was built in 1996, and she managed to build a major brand with absolutely no knowledge of how to do so. In fact, she doesn?t use any promotions, advertising, marketing, loans, or funding to build her business. Having seen the success of Tao?s chili sauce, the local government of Guiyang in Southwest China?s GuiZhou Province has many times persuaded Tao to go public, but she has every intention of staying private with her company.

So what is the secret behind her anti-promotion strategy?

Say NO to Fakes

As the popularity of Lao Gan Ma grows, many brands have attempted to duplicate the product. There is a chili sauce brand from the same origin called Lao Gan Die (Godfather in English) with the exact same packaging being displayed side by side with Lao Gan Ma on the shelves at supermarkets.  The strategy behind this is to create a ?family relationship? between the two brands, driving consumers to believe that Lao Gan Die is under the Lao Gan Ma brand.

However, when the supervisor of the Lao Gan Die brand was asked how they compare themselves to the Lao Gan Ma brand, he replied, ?We count our money by hands and Lao Gan Ma weighs their money on weighing scale.? Tao has been fighting over 50 fakes for years to protect Lao Gan Ma?s brand reputation which makes Lao Gan Ma brand even more reputable and successful!

Genuine Product

The taste is the key! Coca Cola?s mysterious formula is invaluable because of its unique taste. It?s quite common in China for wannabe brands to copy well-known brands, and everyone wants their chili sauce to taste as good as Lao Gan Ma. But her recipe is inimitable. Tao uses special authentic chili peppers from Zunyi and  puts herself in charge of the quality control process to make sure all the chili pepper roots are cut off one by one to remove impurities. Additionally, she strictly controls the balance of taste and spice.

In March 2015, LA Times invited two famous chefs and a food critic for a blind taste-test with 10 different brands of chili sauces (including the well-known Sriracha). The winner, of course, was Lao Gan Ma Chili Crisp Sauce!

Stable Prices

The price for Lao Gan Ma in China is around 10 RMB ($1.50) and has stayed relatively the same for the past several years, while other competitors either try to charge twice or half the price of Lao Gan Ma. But despite the competition, Lao Gan Ma manages to maintain its competitive advantage and remains the number one chili sauce brand in China. Tao said, ?I am Chinese and I don?t want to take advantage of Chinese consumers.?  Meanwhile, low price does not mean low quality for Lao Gan Ma. Even a low-priced product can provide extreme customer satisfaction!

Consumer Psychology

Tao started her street restaurant near schools selling cold noodles topped with her special chili sauce to students… and she always gave free noodles to the poor students who had no money. That?s how she got the name ?Godmother.? For Chinese people no longer living in China, Lao Gan Ma?s taste reminds them of home.

Lao Gan Ma comes in a rustic jar with an old-fashioned label. The industry questioned this method, and thought a more modern design would be ideal. They thought wrong! Tao’s classic and simple take on packaging adds to the brand’s image of comfort, home, and timelessness.

Debt-Free

Tao’s philosophy around money has created a culture of consistently positive cash flow for Lao Gan Ma.

Tao requires that all the distributors pay in full before releasing the goods and she always pays in full before getting the raw material from her suppliers.

At one point, the local government offered her funding  to which she declined and said, ?I would be sleep-less if I owed anyone money.? Her character is the foundation leading the brand?s solid reputation.

Treat Employees Like Family

Along with customers, Tao’s employees also refer to her as Godmother. Her company’s benefits and the way she treats her employees shows she truly cares about them. She knows most of her employees by name, pays visits to their homes regularly, and makes them a special home-cooked meal on their birthdays. She treats her employees like family.

Tao knows she lacks management experience, so she treats her employees well to ensure their loyalty and commitment to Lao Gan Ma. Because of that, employees at Lao Gan Ma are committed to making the company successful, and it shows.

What can you learn from Tao Huabi and Lao Gan Ma?

Lao Gan Ma?s success did not come easily. It came out of Tao?s dedication to product quality, commitment to brand image, employee appreciation, and an overall solid reputation.

As an entrepreneur, you should always be thinking of ways to set yourself apart from the rest–whether it be your product, your brand, or yourself as the representative. And maybe you will become the next empire.

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