One of the most successful market penetrations by a U.S. product has taken place in the past year. American cigarettes have already captured a significant portion of the smoking populace in Taiwan, and better yet for tobacco companies, have convinced a huge number of people to drop their non-smoking habits.
The marketing of American cigarettes in Taiwan offers a useful case study for other U.S. firms seeking a productive sales record on the island.
In January 1987 the ROC opened its doors to foreign cigarettes. Succumbing to U.S. trade pressures, the government lifted prohibitive tariffs and eased advertising restrictions on imported tobacco products. As a result of the market opening measures, sales of foreign cigarettes have jumped dramatically. According to the U.S. Department of Agriculture, American tobacco exports have increased 2,300 per cent in recent years. In 1986 cigarette export sales accounted for only US$209.3 million. By 1987 that figure had dramatically increased to US$5.1 billion.
Taiwan has provided a particularly lucrative part of the overseas market for U.S. cigarette companies, and it opened just in time to help save American producers from some bad times. American tobacco companies have desperately sought new markets as increasing numbers of Americans kick the smoking habit due to warnings from the U.S. Surgeon General, social pressures at work and in public areas such as restaurants, and simply better public information about the results of smoking for personal health. Statistics indicate the magnitude of the problem facing U.S. cigarette companies: in 1965, 40 percent of the American public were smokers; by 1987 that figure had dropped to 29 percent.
But sales are now considerably easier in Taipei or Kaohsiung than they are in New York or Chicago. While the ROC has banned cigarette commercials from television, this is the only major local restriction. In fact, American manufacturers have been unusually effective in cultivating the local market. Extensive printed media exposure, fashionable packaging, sales gimmicks, and contests have all produced superb results in convincing smokers to shift brands, and especially in changing the habits of non-smokers.
Teenagers now form one of the largest groups of local consumers. Smoking teenagers, a relative rarity only a few years ago, are now as common as motorcycles on the streets. The Marlboro Man, for example, with horse at side and cigarette in mouth, is seen all over Taipei on billboards and on smaller posters in shops, on walls, and even glued to motorscooters as decoration. Philip Morris Asia has successfully made the vigorous and rugged Marlboro Man a symbol attractive to local youths. With its Marlboro and Parliament brands, it currently holds the first and second position in foreign cigarette sales on the island.
Currently, Marlboro sales represent 36 percent of the foreign cigarette market. In a poll taken by the John Tung Foundation, a local organization dedicated to promoting public health, 80 percent of the adolescent smokers said they prefer foreign cigarettes. Like student Huang Wen-jay, most "only smoke Marlboro. "
But the Marlboro Man is just one advertising approach used by foreign cigarette companies. According to Dr. David Yen of the John Tung Foundation, some of the most effective and innovative promotions used by U.S. tobacco firms are "pretty girls offering cigarettes to teenagers in discotheques" (who sometimes are short-term foreign residents hired for the purpose) and "free admission to live pop-music shows in exchange for five empty cigarette packs."
Yeehotung International Trading Co., which distributes Kent cigarettes on Taiwan, has also employed innovative tactics to sell local people on the high quality of American cigarettes. Recently the company sponsored a fashionable lottery in a local hotel to increase sales. The prizes included free trips and a Mercedes-Benz luxury sedan.
Local smoking habits have changed drastically since Taiwan's trade barriers were lifted in 1987. Thanks in part to years of highly-sophisticated advertising experience in the U.S., American brands have suddenly and decisively overwhelmed the local brands with their powerful media campaigns. Parents have been influenced as much as their children. According to the John Tung Foundation, smoking has increased 45 to 50 percent among the "father population," and increased 5 to 10 percent among the "mother population." More significantly, since 1987 the number of adolescent users has jumped 44 percent.
Kurt Chang, an international trade executive in Taipei, says he first started smoking at work. "At meetings cigarettes are always offered, and even non smokers have to take one." He adds that taking a cigarette demonstrates courtesy to the host, and for a Chinese not to take one would represent a "loss of face" and poor business practice.
Creative packaging has helped sell the goods as well. Imported cigarettes are frequently used as gifts for customers. One student, James Kuo, says he received his first pack of Marlboros from his father, who received two cartons from a client. Now Kuo smokes up to a pack a day. Like many other smokers on Taiwan, Kuo started smoking two years ago when the ROC first opened its market to foreign cigarettes. He attributes his first cigarette to "curiosity" and to Chinese courtesy: "When a friend offers me a cigarette I must accept."
Since 80 percent of teenage smokers, like Kuo, prefer foreign cigarettes, they represent a healthy chunk of the import tobacco market. Another youth, Chou Jien-ting, says that he has always enjoyed imported cigarettes: "I like the taste. They're very light."
His comments are not just the result of advertising. Long Life cigarettes, one of Taiwan's own major brands, are still cheaper than the imports. But they are not as popular. Chou said he has tried the Long Life brand, but found "they're too strong and the taste is harsh." Comparative studies of local and imported cigarette brands bear out this conclusion. But of course the final choice is still a matter of personal taste; some people like a cigarette with extra punch.
The ROC has in recent years enjoyed rapid modernization and internationalization. With the concomitant liberalization of the local economy and the rising levels of income have come striking changes in society, including alterations in traditional values. As Western and Japanese fast-food outlets, discos, and video movie houses (MTV) modify the landscape, schools and parents have also moved away from previously strict controls over their children. Just as the military style haircuts in Taiwan's schools have altered, so have after-school dress codes and patterns of social activity changed. Both schools and parents are allowing youths new freedoms.
Although smoking is still technically illegal for teenagers in Taiwan, decreased levels of supervision have allowed students almost limitless opportunities to smoke. After school, instead of a traditional dinner with family, it is just as common for a teenager to join friends for a Big Mac and a Marlboro. At largely unsupervised discotheques, which often offer complimentary cigarettes, smoking is the natural thing to do. Smoking has to some extent become a symbol of liberation and modernity.
Not everyone agrees. "The people of the ROC want to buy American, except for your cigarettes," reads one advertisement by the Tung Foundation. The foundation, which has one department focusing exclusively on anti smoking programs, is leading a campaign against the importation of foreign cigarettes. Lin Ching-li, a spokeswoman for the Tung Foundation, criticizes American cigarette companies for "selling out the health of the Taiwan public" Ted T.L. Chen, a professor of public health at MIT who frequently visits Taiwan, agrees with the sentiment. He calls on anti-smoking advocates in Taiwan "to unite with their counterparts in Japan, South Korea, Thailand, the Philippines, and mainland China to organize an Asian-Pacific anti-smoking alliance."
Thus far the effects of the anti-smoking campaigns have been negligible. Taiwan's consumers have embraced this product with enthusiasm, and American cigarette firms are winning new customers daily. In one of the best trading moves in recent years, the U.S. has saved one of its own declining markets through effective penetration of the foreign marketplace. Other American companies have much to learn about packaging, advertising, target group selection, and marketing from the case of cigarette sales in Taiwan. Market penetration can be done, and done well. Some people only hope other products will be somewhat less hazardous.