Consumers may be spoiled for choice, but it is still the former monopoly tipple that sells best.
You might think of a cold beer as the perfect way to cap a long day in the office, but in Taiwan, the drinking culture is centered around social events as colleagues quaff bottles with seafood dinners and at the neighborhood KTV.
According to the Taiwan Tobacco and Liquor Corp. (TTL), Taiwanese drink NT$50 billion (US$1.5 billion) in beer every year, which is around 60 percent of the island's total alcohol consumption. That is more than 50 million liters of beer, or some 83 million regular 0.6-liter bottles or 142 million 0.35-liter cans.
Despite the fact so much of it is drunk, beer has a relatively short history in Taiwan. The Japanese imported the drink during its colonial occupation of Taiwan (1895-1945) and built Taiwan's first brewery. When the Japanese left, the ruling Kuomintang decided to keep the government monopoly on manufacturing and selling alcoholic beverages. Although beer imports were not allowed, beer drinking gained popularity.
Prior to 1987, the choice of brands was limited to Taiwan Beer, but that has changed since Taiwan liberalized its beer market. Consumers can now choose from the many foreign brands on offer in neighborhood convenience stores or supermarkets, with retail prices that are marginally higher than Taiwan Beer.
But if mass-produced beer is too conventional for the connoisseur, drinks from a microbrewery may be the way to go. And now that restrictions on the manufacturing of alcoholic beverages have been removed, microbreweries and their products are slowly gaining ground.
"Microbreweries will have their place in the beer market, but their output is too small to have an impact on the whole," says Liao Nian-yu, president of Sun How Liquor Co., which was founded in 2002. "The real competition is among various foreign brands, and between local and imported products." Liao says in order to start a large-scale brewery, a company must invest at least NT$1 billion (US$30 million), and that is just for starters. With big budgets required to launch a product, it is unlikely that local enterprises will risk competing against TTL and established foreign brands.
Taiwan opened its beer market to European and American brands in 1987, to Japanese brands in 1995, and to the Chinese in 2002, after China and Taiwan's accession to the World Trade Organization (WTO). The market for imported beer has grown from less than 4 percent in 1987 to 25 percent of the total beer market in 2004. According to statistics from the Ministry of Finance, the US and Dutch each took 5.5 percent of Taiwan's beer market in the first three quarters of 2004, while China took 5 percent, and Japan 3.125.
Marketing departments for imported brands knew that Taiwan would be a hard nut to crack. Taiwan had numerous die-hard fans who were simply too familiar with Taiwan Beer to shift to another brand, so foreign breweries decided to target young adults. Heineken produced advertisements featuring young international stars or scenes at young people's parties, and the strategy worked. According to Eastern Integrated Consumer Profile (EICP), an annual survey on Taiwan's consumer behavior, Heineken, which set its Taiwanese branch up in 2002, is Taiwan's most popular import, grabbing 5 percent of Taiwan's beer market.
To handle marketing, retailing, and logistics, Heineken's Taiwan office has increased its staff from a dozen to nearly a hundred. Chu Chun-ho, the general manager of the Taiwan office, says that Heineken expects a 10 to 15 percent annual growth in sales and 10 percent of the market share within four to six years.
One of the most recent players in Taiwan's beer market is Tsingtao Beer from China. Tsingtao was a hit, grabbing 8 percent of the market in 2002, as soon as it landed in Taiwan. Chen Wen-chieh, who runs a small restaurant in Taipei's suburb of Jingmei, believes that Tsingtao's popularity rests on its reputation of being China's first and best beer. "All my guests wanted to give it a try and I couldn't get enough crates from the supplier," he says. "These sales were the result of curiosity." Chen grew up around beer because his father worked for the Taiwan Tobacco & Wine Monopoly Bureau (now TTL), and now his refrigerator is always fully stocked. He says Tsingtao is "good, but Taiwan Beer suits me better."
Whether out of hype or the beer's reputation, Tsingtao's rise did not last long. Rumors circulated that mainland beer contained methanol, which causes catastrophic health problems with continued consumption. Yet, it was not just gossip that put a halt to ever-increasing sales for Tsingtao. Without advertising, few brands can compete in Taiwan. According to the Statute Governing the Relations Between the People of the Taiwan Area and the Mainland Area, mainland companies that do not produce their goods in Taiwan are prohibited from advertising on TV and radio. To deal with the regulation, Tsingtao Beer is working with a Taiwanese beverage manufacturer to set up a brewery in Pingtung County, and production is scheduled to begin in a few months. The projected annual production of the brewery is 50,000 tons, but it will be able to put out 150,000 tons if need be.
Although the imported beer market has grown by leaps and bounds since foreign breweries were first allowed to sell their products, it is not likely that any individual brand, or even all of them together, can take down Taiwan Beer. Decades as a monopoly since the Japanese built Taiwan's first brewery in 1920 guarantees the product's brand recognition. Just because Taiwan Beer does not have local competition does not mean that it cannot compete in foreign markets. Soon after TTL began exporting Taiwan Beer, the brew started winning awards such as the Monde Selection, an award granted by an independent international organization that has been judging products since 1961, or the Brewing Industry International Awards competition, which has a reputation as the Oscars of the brewing industry. TTL Chairman Morgan Hwang says, in part, Taiwan Beer's popularity rests on the use of homegrown penglai rice, the chewier, stickier Indica variety, which is added during the brewing process to slightly sweeten the flavor.
There are other reasons for Taiwan Beer's popularity at home. The EICP survey shows that when buying beer, taste is the first consideration and freshness the second, while brand and price matter little. "Many think freshness is an important quality of a good beer," says restaurant owner Chen Wen-chieh. "The first thing the pros do is check the manufacturing date. Anything bottled more than 48 hours ago is unacceptable." While TTL has taken a page from imported brands' advertising campaigns by featuring rock star Wu Bai as the public face of the beer, their ads also emphasize the freshness of Taiwan Beer, something few imported brands can lay claim to.
No doubt, freshness and the big push of an erstwhile monopoly have helped Taiwan Beer hold on to most of its market, but its advantages do not end there. Liao Nian-yu points out that while Heineken and Kirin sell well in pubs and bars, Taiwan Beer is still the most popular brand among neighborhood restaurants and convenience stores. "You sip in a pub, drink at home, and pour here," says Chen Wen-chieh. "It's common that three, four guys walk in, order some dishes, and there are a dozen empty bottles before the first dish is served."
Although Taiwan Beer still dominates the local market, TTL is well aware of the competition. Liao says beer is a "low-involvement" product, which means that most consumers, especially the younger generations, are not overly loyal to any single brand, thus advertising can often convince people to try a new brand. Heineken's TV advertising, for example, is clearly targeted at young consumers and has made it Taiwan's most popular foreign beer. To defend its market, TTL has also been investing in advertising as well as developing new products and improving marketing strategies.
Gold Medal Taiwan Beer, for example, was launched in the Spring of 2003 to compete with foreign brands for young drinkers in the pub and club markets. Foreign beer companies have long promoted their products by employing beer girls- -attractive young women who stop by pubs and encourage the clientele to try their product--and TTL, not willing to be left behind, has adopted this strategy and hired 144 Taiwan Beer girls to promote Taiwan Beer. In addition to securing the domestic market, TTL has also been cultivating foreign markets. But although Taiwan Beer has been exported to and gained popularity in various countries, China still refuses to allow TTL to market its product there.
Taiwan's government has approved trademark applications for China's Tsingtao Beer and Yanjing Beer (Yanjing is the old name of Beijing, where the manufacturer is based), but TTL's several applications--before and after Taiwan and China's accession to the WTO--were all rejected. Beijing authorities cite Chinese trademark law, which stipulates that no product can feature a name that is identical to a geographical area at or above the county level, nor can the product use a foreign geographical name known to the public as a trademark. Taiwan countered by saying that Tsingtao (Qingdao) is the name of the city where the Tsingtao Beer is located, and that many other Chinese-owned companies have registered products with geographical names. Beijing authorities say that those brand names were registered before the law passed in 1982, but they have offered to accept Taiwan Beer if its trademark is "TTL Beer." TTL, however, has decided not to market its beer under that name and is still negotiating with Beijing.
In fact, Taiwan Beer is not the first Taiwanese liquor to attempt to enter the Chinese market. Kinmen Kaoliang, which is made by distilling red sorghum, is manufactured in Kinmen, and Beijing has approved the use of the name Kinmen (Quemoy) as a trademark. Morgan Hwang says the hold up is due to politics, since Beijing consistently claims that Taiwan is a renegade province and refuses to consider the island as an independent sovereign state. However, business is business and Taiwan Beer is more than ready to enter the Chinese market.
So at your next celebration, no matter which beer you choose, empty the glass, or as an old Taiwanese song goes, "Bottoms up! This glass is not for raising gold fish."