In front of the three-sided courtyard of a hillside building on Nantou County Road No. 139, which leads to central Taiwan’s Baguashan Scenic Area, there is always a long line of people. Once visitors make it inside and take a seat, each is greeted with a complimentary cup of tea and a piece of pineapple cake. None of the service people try to sell anything, but few visitors—after enjoying their snack—leave without purchasing a few boxes of pineapple cakes. The structure, which was originally a residence, is now the headquarters and production center of SunnyHills, one of Taiwan’s most popular pineapple cake brands.
Once viewed as little more than just another small cuboid pastry, in recent years the pineapple cake has become Taiwan’s most popular baked treat among local and international visitors. Some believe its rise in popularity is the result of the 2008 opening of Taiwan to mainland Chinese tourists, who love to take home edible souvenirs. Others say the cakes have become a hit thanks to Taipei’s annual Pineapple Cake Festival, which has been organized by the Taipei City Government since 2006 to promote the confection to tourists. Regardless of the cause, combined revenue for Taiwan’s pineapple cake companies increased from NT$3 billion (US$92.2 million) in 2006 to NT$40 billion (US$1.3 billion) in 2013, Taipei City Mayor Hau Lung-bin (郝龍斌) said at the festival in June that year.
With an eye toward capturing a slice of such a lucrative market, established pastry shops have converted their production lines to turn out pineapple cakes and new shops have jumped into the market. SunnyHills, however, has a different goal. “Rather than a bakery, SunnyHills has positioned itself as an agri-business that seeks to help local farmers,” says company president and co-founder Michael Sheu (許銘仁). “We use Taiwanese farm products and our aim is to increase the value of the country’s agriculture sector.”
SunnyHills, a popular pineapple cake brand, has focused on expanding overseas since opening this shop in Taipei in 2011. (Photo by Chang Su-ching)
Sheu and his younger brother, who had been growing tea in Nantou, and one of their cousins started planning to enter the pineapple cake market in 2008. They soon realized doing so would not be easy, however, as there were already many competitors and the three had no relevant experience.
They turned to their uncle Lan Sha-zhung (藍沙鐘), who had retired from the pastry industry, for help. Lan informed them that most bakers add winter melon to pineapple cake filling to compensate for the tart taste and rough texture of pineapples, while some go as far as completely replacing pineapple with winter melon. In either case, however, the pastry is still called pineapple cake. After some discussion, the SunnyHills team decided to distinguish their product by using only a pineapple cultivar known as Cayenne No. 2 for the filling and avoiding the use of winter melon altogether. “It was a bold decision,” says Andre Hsieh (謝禎舜), the company’s brand consultant. “As a new brand, SunnyHills needed to have something to distinguish it from existing products.”
Sheu explains that Cayenne No. 2 was the most widely grown pineapple cultivar during the 1950s and 1960s, when Taiwan was one of the world’s largest exporters of the canned fruit. In the 1980s, however, Taiwan’s fruit exporters began losing ground to countries with lower production costs. At the same time, new varieties that are sweeter and juicier were gaining popularity in the domestic fresh fruit market. Those trends continued, and by 2008, farmers in Nantou County were receiving between NT$1.5 and $2 (US$0.05 and $0.06) for each 600 grams of pineapple they grew, while their cost to raise that much fruit was between NT$4.5 and $5 (US$0.14 and $0.16). “The more pineapples farmers grew, the more money they lost,” Sheu says. “Still, farmers kept growing them because they had grown them for decades and didn’t know what else to do.”
SunnyHills has opened a Tokyo shop designed by Japanese architect Kengo Kuma in December 2013. (Photo courtesy of SunnyHills)
To secure an adequate supply of fruit, Sheu decided to contract local farmers to plant 30 hectares of Cayenne No. 2 and guaranteed them a purchase price of NT$6 (US$0.19) per 600 grams. “No one had ever offered such a contract, so it sounded too good to be true, and at first, the farmers certainly believed it was,” he recalls. “I had to deposit the money in a trust account before they’d sign anything.” He slowly managed to earn the trust of farmers and demand for Cayenne No. 2 has increased to the point that SunnyHills now contracts growers to raise the cultivar on 300 hectares of land at a guaranteed purchase price of NT$10 (US$0.30) per 600 grams.
While Sheu was busy securing the raw ingredient for the filling, Lan started working on a different recipe for pineapple cakes. Eventually, he decided to use maltose as the sole sweetener and forgo other additives bakers sometimes employ to adjust acidity. Those decisions meant that rather than having a uniform taste, the flavor of the company’s pineapple cakes would vary with the season, as pineapples harvested in the summer are sweeter than those gathered at other times. Lan’s sample batches, each with a slightly different recipe, were tasted by friends and relatives, whose responses and suggestions were worked into the next batch.
The dimensions of the pineapple cakes SunnyHills came up with are also different from others on the market. Unlike most 4-centimeter-long cakes, Sheu says that those baked by his company have a 6 × 3 × 2.5-centimeter “golden ratio.”
SunnyHills opened its Shanghai shop in October 2013. All its stores greet guests with complimentary tea and pineapple cakes. (Photo courtesy of SunnyHills)
With development of the pastry underway, it was time to decide upon a brand name. “Each cake uses pineapples grown on this sunny hill, and they’re also baked here,” Hsieh says. “The company chose SunnyHills because the name communicates both a feeling and an image.” The company’s logo—a cyclist on the move—also has a local origin, as the county road running in front of the company’s headquarters is popular with cyclists. “More importantly, the bike is a reminder to ourselves that we have to keep pedaling to move forward,” he says.
Creating a Market
After eight months of working on the recipe, packaging and other details, SunnyHills began selling pineapple cakes in April 2009. The “honest pineapple cakes,” as Hsieh calls them, quickly gained recognition among domestic consumers. “For us, that meant we’d created a market for the Cayenne No. 2 pineapple and would be able to continue providing an opportunity for local pineapple farmers,” Sheu says. “We also thought we could improve the economic prospects of our hometown by offering jobs in the bakery.” SunnyHills makes most of its cakes by hand and turns to automated production equipment only during holiday seasons such as the Moon Festival, when demand peaks. “Manual production requires more workers and creates more jobs for our townspeople,” Sheu says. “For us, that’s more important than productivity.” SunnyHills currently employs 280 local workers between the ages of 20 and 80.
In the beginning, however, things did not go quite as planned. SunnyHills’ original intention was to accept orders via the Internet and telephone, but eager would-be buyers who did not want to wait for delivery started showing up at the Nantou production center, even though the company did not list its address on its website. Instead of turning the visitors away, SunnyHills demonstrated its hospitality by treating each to a cup of tea and a piece of pineapple cake. “We didn’t expect any ‘customers’ at the factory, so we treated them as guests. Where I come from, we always consider it a pleasure to offer guests some tea and snacks,” Sheu says. News of the company’s hospitality and delicious cakes spread via word of mouth and media coverage, and SunnyHills’ Nantou facility turned into a must-visit tourist destination. Visitors to the factory consumed about 300,000 pineapple cakes in SunnyHills’ first year of operation.
(Photo courtesy of SunnyHills)
Business soon took off and the company opened its first retail store in Taipei in July 2010. In characteristic fashion, guests at the shop were greeted with a free pastry and a cup of tea. Meanwhile, growing consumer recognition of the company’s new pineapple cake recipe led many other bakeries to create imitations. Soon enough, cakes made with a Cayenne filling and bearing packaging and brand names similar to SunnyHills’ flooded the market. Sheu estimates that the amount of Cayenne pineapple production in Taiwan has increased more than 30 times since SunnyHills began selling its cakes. “That’s actually a good thing, because it means more people are using local agricultural products, and that’s helping to drive the growth of the agricultural sector,” he says.
SunnyHills’ early start and established consumer recognition could have enabled the company to enjoy continued growth in the domestic market. Instead of seeking a larger market share at the expense of local businesses, however, SunnyHills made the decision to go international. In August 2011, the company opened its first overseas shop at Singapore’s iconic Raffles Hotel. “The centuries-old hotel is an expensive location and we had to meet certain branding and hospitality criteria to get in,” Hsieh says. “In return, we have the endorsement of the Raffles Hotel, which gives our products a classy image and upmarket feel.” According to Sheu, business at the Raffles store has been quite good, with around 5,000 cakes sold per day. The clientele has comprised an equal mix of locals and a population of Taiwanese and Japanese expats, while corporate clients frequently purchase the cakes for special occasions.
With sales of pineapple cakes booming, SunnyHills began selling pineapple juice in summer 2012 to recycle the produce waste piling up at its factory. (Photo courtesy of SunnyHills)
Tokyo Challenge
After finding success in Singapore, SunnyHills opened a shop in Shanghai in October 2013 and another in Tokyo in December that year. Doing business in Tokyo has proven particularly challenging, as desserts are popular and competition in the sector is intense in Japan, especially in Tokyo. SunnyHills did not enter the market unprepared, however, as the company invested three years of planning and considerable financial resources to open the Tokyo shop. In light of a market survey showing that consumer acceptance of tarter pastries is relatively low in Japan, the filling of the cakes SunnyHills sells there is made only from pineapples that are harvested in June and July and have lower acidity. The company also decided to set the price of its pineapple cakes at ¥300 (US$3) apiece, as the survey showed that is the going price for quality baked goods. “We’re not trying to sell Taiwanese pastry there per se,” Hsieh says. “Our goal is to establish a recognized Taiwanese brand at the high end of the market.”
The tricky thing was that while a SunnyHills pineapple cake retails for NT$35 (US$1.17) in Taiwan and NT$60 (US$2) in Singapore and Shanghai, the company had to find a way to justify selling them at the higher price point in Japan. The solution was to follow the same basic recipe while substituting premium ingredients and upgrading the production process. Cakes sold in the Japanese market use the most premium of butters—Echire butter from France—and are baked in precision molds that turn out perfectly shaped pastries.
SunnyHills also commissioned renowned Japanese designer Kengo Kuma to work on the exterior and interior appearance of the Tokyo shop. “There are many centuries-old pastry operations there,” Hsieh says. “As a new brand in the market, we not only needed to provide a high quality product, but also have an out-of-the-ordinary, eye-catching shop to grab people’s attention.” Kuma’s efforts resulted in an NT$100 million (US$3.3 million) structure with a wooden lattice exoskeleton designed to lure passersby inside. The interior echoes the exterior, and true to SunnyHills tradition, a staff member at the front greets visitors with a cup of tea and a piece of cake. According to Hsieh, Japanese consumers have been pleasantly surprised, and the company’s pineapple products seem to be finding ready acceptance in the market. The company’s ambitions do not end in Tokyo, however, as SunnyHills is already planning to expand to other major cities in Asia such as Beijing and Hong Kong.
Although SunnyHills started out as a small local bakery, it has grown dramatically over the past five years. The company’s critical decision to use Cayenne No. 2 in its unorthodox recipe is undoubtedly one of the reasons for that development, while following a business approach that is unusual for the pastry industry seems to have played an important role in helping SunnyHills compete at the highest international level. “We’re not running a local bakery,” Hsieh says. “We’re building a brand of Taiwanese agricultural products.”
Write to Jim Hwang at cyhuang03@mofa.gov.tw