Taiwan Today

For many decades, the pineapple cake has been one of the most commonly found pastries in Taiwan. Not much attention was paid to these little cuboid treats with pineapple jam filling, however, until five years ago, when they suddenly became the hottest cake on the market. According to the Taipei Bakery Association, while one pineapple cake usually sells for between NT$25 and $35 (US$0.80 and $1.15), the market for pineapple cakes grew from NT$2 billion in 2006 (US$61.5 million at the exchange rate then) to NT$25 billion (US$790 million) in 2010.

The market has boomed thanks to the annual Pineapple Cake Festival, which has been organized by the Taipei City Government since 2006 to promote the pineapple cake as a souvenir for visiting tourists. Luo Ji-ying, general manager of Holiday Travel Service, says that the festival made Taiwanese-style pineapple cakes the most popular souvenir not only for domestic tourists, but also for visitors from Asian countries, especially those from mainland China, Hong Kong, Japan and other places where bringing edible souvenirs home to share with relatives and friends has long been part of the travel culture.

Although myriad bakeries sell pineapple cakes, Vigor Kobo is a brand unfamiliar to many locals but by far the most popular among foreign visitors. Its shops are always packed with tourists—many arrive by tour bus and a significant number by their own transportation—and they rarely leave empty handed. Business is so good that the Bank of Taiwan even set up a counter in Vigor Kobo’s flagship shop in Taipei City to provide currency exchange services.

According to general manager Lee Chen-jung, Vigor Kobo’s sales amounted to NT$400 million (US$13 million) last year. True “local consumption” accounted for just 10 percent of that figure, while locals who purchased products for their friends overseas accounted for 20 percent and sales to foreign tourists totaled a whopping 70 percent. “We were the first bakery in Taiwan to focus on the tourist market and we’ve been doing that for 15 years,” Lee says. “For many tourists, no trip to Taiwan is complete without visiting one of our stores.”

A Workable Idea

Vigor Kobo was founded in 1992 by Lee and his college classmate Sun Kuo-hua, who is now president of the company. Although both majored in mechanical engineering, the two shared an interest in opening a bakery. “It seemed to be workable, as we knew the business of several bakery chains was good,” Lee says. “More importantly, a small bakery that didn’t need a lot of capital investment was all we could afford at the time.” So after completing their compulsory military service, Lee and Sun spent two years learning the techniques of baking, then opened a Western style bakery in Taipei County’s Danshui Township (now New Taipei City’s Danshui District).

Students from nearby Tamkang University formed a large part of their customer base. Like most other businesses in the area, however, their revenue was “seasonal” due to the university’s summer and winter vacations. “It was like a ghost town during the vacations and we often just closed the door and went fishing,” Lee recalls. “In a trade with a thin profit margin, it was apparent that we needed a solution for boosting sales.” After nearly four years of struggling in Danshui, Vigor Kobo’s owners decided to move near the Confucius Temple in Taipei City. “There was only one other bakery in the neighborhood and we were confident that our products were better than theirs,” Lee says of the location. “There was also a newly opened supermarket, which we thought would bring some walk-in customers.”

Vigor Kobo managed to drive the other bakery out of business in less than a year. Revenue remained unstable, however, as new bakeries kept popping up nearby. Whenever a new shop opened, Vigor Kobo’s business dropped a little for a while thanks to consumers’ curiosity about the new shop. What made things worse were several indirect competitors that opened in the neighborhood. “The popularity of breakfast chains took a third of our business in the morning,” Sun Kuo-hua says. “And when the 24-hour convenience stores started to run their in-store bakeries, only a third of our original business was left for us.”

While counting every penny and trying to decide how they could continue the business, Sun and Lee began noticing the large number of tourists visiting the Confucius Temple. They began to think about what kinds of pastries the tourists would be interested in buying, and about whether there was a way to make some of the tourists their customers. “When visiting a cultural or historical site, tourists buy souvenirs related to that specific aspect of culture or history,” Sun says. “We tried to find a ‘cultural’ pastry that tourists would love to buy, not only as a pastry or snack, but also as a souvenir they could take home.” After giving it some thought, Sun and Lee made a bold decision to shift their Western-style bakery toward making traditional Taiwanese pineapple cakes. “Most traditional pastries now seen in Taiwan have their origins in mainland China,” Lee says. “Pineapple cakes are one of the few that are truly native to Taiwan.”

Although each bakery does it slightly differently, the recipe for pineapple cakes is widely known—flour, oil and butter for the crust and fresh pineapple and white gourd, or winter melon, for the filling—as the pastry has been common in Taiwan for decades. A large part of creating pineapple cakes with exceptional flavor, therefore, depends on the quality of the raw materials. It was not difficult for Vigor Kobo to bake standout pineapple cakes as Lee says the company always uses high quality ingredients, but it was a different game to market the cakes to tourists instead of students and local residents. Every day, when tour buses arrived at the temple, they took their cakes and jumped on—and occasionally got thrown off—to distribute free samples.

Cultural Characteristics

Meanwhile, Lee and Sun were actively developing new products with unique “cultural characteristics.” One of their most successful offerings has been inkstick pineapple cakes, for which bamboo charcoal is added to the crust to make pineapple cakes in the shape and color of the traditional inksticks used for calligraphy and painting. Another popular product with tourists is the Taichi pineapple cake, which combines the attributes of traditional golden brown pineapple cake and the black bamboo-charcoal pineapple cake to form a yin-yang pattern.

Business from tourists at the Confucius Temple gave Sun and Lee confidence that there was a much bigger market waiting to be tapped, so they started promoting their products by attending travel fairs. Their first appearance at a Hong Kong fair some 15 years ago, however, was not very rewarding. Lee recalls that like others in the Taiwan section, they brought a lot of brochures to introduce their pineapple cakes. And like others in the section, they had almost as many copies of the brochures left toward the end of the fair as they did in the beginning. “Taiwan had just started to promote tourism at the time, so we weren’t very experienced at it,” Lee says. “And frankly, it’s hard to sell a food or snack with brochures only.”

Learning from experience, when Vigor Kobo staffers attended the same fair the following year, they brought as many pineapple cakes as they could. “We packaged a piece of pineapple cake with a stack of brochures from all the Taiwanese companies,” Lee says. “That time, the Taiwan section was the only place that had a long line of people waiting to get in.” By taking the same approach, Vigor Kobo also became a name known in Macau, Malaysia, Japan and other Asian countries. Lee is now confident that Vigor Kobo literally “is” pineapple cakes in those countries, and that 90 percent of tourists visiting Taiwan from them pay a visit to his shop.

The business has seen even greater growth since 2008, when Taiwan was opened to tour groups from mainland China. “With the growing economy, mainland Chinese tourists have demonstrated shocking buying power,” says Luo Ji-ying of Holiday Travel Service. “Whether it’s Louis Vuitton or small souvenirs, they make a sweep of every shop they visit.” According to the Tourism Bureau, 1.6 million mainland Chinese, including 1.2 million who listed tourism as their primary purpose for their trip, visited Taiwan last year. Of that number, an astounding 700,000 visited Vigor Kobo shops. It is common for a bus of mainland Chinese tourists to spend between NT$200,000 and $250,000 (US$6,667 and $8,333) in a single visit, Sun Kuo-hua says.

Such high demand enables the company to reach a scale of economy and thus lower production costs. By signing contracts to purchase 3 million to 4 million paper boxes for its products a year, for example, Vigor Kobo can get them at 40 percent of the amount others are paying.

Focus on Tourists

Reduced costs allow the company to maintain very competitive prices, but Lee believes that there are other factors behind Vigor Kobo’s booming business. “We always think we’re in the tourism industry rather than the food industry,” he says. “The more we make things convenient for tourists, the more they will come again.”

Lee cites the packing and delivery services the company offers free of charge as an example of how to “make things convenient for tourists.” Rather than making visitors carry their purchases around with them for the rest of their trip, Vigor Kobo has set up a system that lets them collect their items at a different place and time. In other words, tourists can make their purchases when they arrive in Taipei and collect their goods a week later at their hotel in Kaohsiung, from whence they depart from the island. What is even better is that Vigor Kobo offers its packing services not only for its own products, but also for all the other items tourists have purchased during their trip in Taiwan.

Currently, Vigor Kobo has 11 shops, including eight in Taipei City and New Taipei City, one in Kaohsiung City and two at Taiwan Taoyuan International Airport. Every day, bakery products that are 90 percent completed at the company’s facility in Wugu, New Taipei City are sent to these shops for final baking. Among Vigor Kobo’s offerings, the traditional Taiwanese-style pineapple cakes are the all-time best seller, while pineapple cakes developed for special occasions also find seasonal popularity. The Whispering Flowers gift box, for example, was a popular souvenir during the Taipei International Flora Exposition, which began in November 2010 and ended in late April this year. The gift box contained 12 pineapple cakes flavored with roselle, a type of hibiscus, to represent Taipei’s 12 administrative districts. The 12 cakes were individually packaged in small boxes with tops designed in the shape of an azalea, Taipei City’s official flower, and each of them also bore images of the official flower of a particular district.

Another popular Vigor Kobo product celebrates the Republic of China’s centennial. For it, the company bakes a large Taiwan-shaped pineapple cake, then packages the cake in a box that features a map of Taiwan on the cover. The map is an unusual blend of old and new, as it is drawn in an antique style but is rendered in 3-D and doubles as a mouse pad.

While products for special occasions generate only a small part of Vigor Kobo’s revenue, the company considers them a worthwhile investment. “As part of the tourism industry, we’ve always focused on promoting Taiwan rather than promoting our brand,” Lee says. “For tourists, biting the ‘Taipei,’ ‘Kenting’ or ‘Hualien’ of the Taiwan-shaped cake will surely bring back some of the good memories of the trips they made to those places.” To promote tourism further, Vigor Kobo is in the process of modifying its Wugu factory to handle groups of visitors, with the revamped facility scheduled to open to tourists later this year.

Countless bakeries in Taiwan sell pineapple cakes, and bakeries in Taipei, Taichung in central Taiwan and Keelung in the north all claim to have developed the pastry first. Few, however, have made the cake such an iconic part of their business as Vigor Kobo. By doing so, the company has managed to find a lucrative niche in the market, as well as give tourists mouth-watering memories of Taiwan.

Write to Jim Hwang at jim@mail.gio.gov.tw