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Top 2000 Survey : Service Industry

Green Energy, Green Economy Avert Decline

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Green Energy, Green Economy Avert Decline

Source:Ming-Tang Huang

Cultural creative, environment-related industries are finding growth while retail and hospitality sectors are expanding markets. The service industry is developing profitable streams even as profits have declined overall.

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Green Energy, Green Economy Avert Decline

By Lucy Chao
From CommonWealth Magazine (vol. 622 )

The list of names that made the cut in the Service Industry category of the 2017 CommonWealth Magazine Top 2000 Survey is out. Taiwan’s service industry netted NT$9.3 trillion in 2016, for a growth rate of 5.8 percent. However, slowed by the sluggish economic recovery, average profits climbed just 3.7 percent, a slight dip from the 4.8 percent figure recorded in 2015.

Looking over the service industry rankings, World Peace Industrial Co., Ltd., a semiconductor parts and components distributor held by WPG Holdings Limited, achieved 5th place on its first participation in the survey, propelled by the momentum of NT$260.82 billion in revenue, shaking up the rankings. Among the sub-categories, the Information/Communications/IC Distribution sector not only occupied two places in the top 10, but led all categories with a total revenue of NT$1.58 trillion.

Diving further into the service industry rankings, a distinct green shade emerges, as green sustainability, energy, and products feature prominently. Holding firmly in tenth place is EVA Airways. Waving the banner of sustainability, the airline made its way to the top of the air transport industry despite the unfavorable economic climate.

Green energy: Environment and Renewables Profits Near 20 percent

Looking at the overall industry performance rankings, the Green Energy sector once again flexed its muscles. With the rise of environmental consciousness in recent years, the environmental health service industry achieved the third-largest growth focused on waste treatment, recycling, and renewable energy, notching average revenue growth of 19.4 percent and average profits of 23.3 percent.

This showing echoed the words of Cleanaway Company, Ltd. CEO Yang Ching-hsiang, who told CommonWealth, “There is no such thing as a good or bad economy for our company. In fact, the more resolute the government’s attitude has become towards the environment, the busier we have gotten.”

Specializing in waste treatment, Cleanaway’s capabilities include making toxic materials inert, and revitalizing polluted rivers and soil. Last year, the company achieved revenue of NT$3.12 billion, for 13.56 percent growth and 46.14 percent profitability. Like mining night soil for gold, the future is bright for turning rubbish into green energy.

Recording revenue growth of 60 percent, the Other Cultural Creative Industries category turned heads as a dark horse, earning the distinction as the fastest-growing sector.

Part of this performance can be attributed to Eslite, which took in NT$18.98 billion in revenue for a whopping 134-percent growth rate, propelling the bookseller to fourth place as the fastest-growing member of the Service sector, thanks largely to over NT$10 billion in profits from real estate investments across the strait in Suzhou. Rocketing into seventh position in this category with annual revenue growth of 55.3 percent, HIM International Music also turned heads and opened eyes. Lee Shou-hsien, vice president of HIM International Music, relates that two areas in particular powered the company’s growth last year, namely music and cultural creative copyrights at 26.4 percent, and performance management at 70.8 percent. Singers on the company’s roster made extensive appearances on competitive singing shows across the strait, along with 28 live performances, 17 more than in the previous year. This combined to drive profitability growth of 17.2 percent.

Green Money: Retail and Growers Profit Together

Another area worth looking at is retail. In the intensely competitive retail sector, the biggest challenge is responding to customers needs. Benson H. Cheng, partner of consulting services at Deloitte and Touche Taiwan, relates that last year the emphasis remained on online and offline integration as well as retail via all channels. Cheng notes that more and more companies are making changes to align with customer perspectives and consumer experience.

According to statistics from the Ministry of Economic Affairs, the retail sector recorded record sales last year, with convenience stores and supermarkets showing growth of 4.7 and 9.3 percent, respectively. A similar trend can also be seen among the top four names in the Department store/Wholesale/Retail sector of the service industry.

Last year, Taiwan’s two dominant convenience store chains once again turned in exceptional performances, with Uni-President achieving new records for both consolidated revenue and profitability as the number of outlets nationwide topped 5,000, propelling the company to seventh in the Top 2,000. Meanwhile, the FamilyMart chain of convenience stores raked in over NT$60 billion to jump two places in the rankings.

Looking closer, one of the key forces taking the two convenience store chain giants to new heights is organic produce.

Uni-President convenience stores partnered with the Taichung branch of the Taiwan Agricultural Research Institute to market steamed sweet potatoes made to order as well as with Formosa Vegetable to sell organic produce, combining to record 70 percent category growth in 2016 as consumers made nearly one million purchases of produce at its convenience stores.

For its part, FamilyMart sold organic produce and frozen vegetables under partnerships with Tanhou Food, local agricultural cooperatives, and Taiwan Sugar, responding keenly to consumers’ concerns for food safety and the demand for healthy fruits and vegetables.

Cross-competition for customers between convenience stores and supermarkets has helped stimulate mutual growth. Convenience stores have incorporated supermarket-like functions, while supermarkets have crossed over into convenience store territory, and mega box stores are venturing into local communities.

For instance, French retail giant Carrefour scaled down to move into local communities while incorporating various high-tech features like 3D virtual reality goggles for trying out clothing and cosmetics. Meanwhile, last year’s revenue leader among supermarkets, PX Mart, turning its attention to younger consumers, increased the proportion of produce offered and put its weight behind promoting freshly baked bread available in-store.

Food and Beverages Venture Overseas

Overall revenues grew 4.6 percent last year in the Tourism/Food and beverages category in spite of intense competition and reduced visitor traffic from Chinese tourists. Meanwhile, overseas ventures injected much-needed energy into the category, as companies like Gourmet Master (parent company of the 85o C. cafe chain), which opened its first store in the United States in 2013, opened another eight cafes, raising the total to 25 outside Taiwan. La Kaffa International Co., Ltd. is another local enterprise that continues to expand overseas operations, and even the Oriental Food Chain Restaurant Group has entered a new stage, pursuing development of multiple brands and international operations as it prepares to enter the United States, its third global market.

Whether sinking roots or branching overseas, Taiwanese businesses invariably find ways for hope to blossom, even under difficult circumstances.

Translated from the Chinese by David Toman


Taiwan’s Top 50 Service Companies – Net Profit After Tax

Taiwan’s Top 50 Service Companies – Profit Margin

Taiwan’s Top 50 Service Companies – Revenue Growth

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