Why Taiwan Is Lapping Up
Taiwan's climbing commodity prices have left the frozen snacks market in doldrums across the board. Yet DuRoyal has bucked the trend, recording 20 percent sales growth. What is its secret formula?
Why Taiwan Is Lapping UpBy Jau-Yi Wu
From CommonWealth Magazine (vol. 377 )
Sporting a head of perky short hair, high heels, and a knee-length olive green sundress, Ms. Elly Chou, general manager of the Lucky DuRoyal Company, a subsidiary of the Namchour Group, practically bounds into the room for our interview. With commodity prices climbing and incomes remaining static, she is probably one of the few chiefs of a consumer goods brand who is in the mood for smiling.
Statistics can tell us a great deal. Over the first half of this year, against a backdrop of a 10 percent decline in Taiwan’s frozen desserts market, the DuRoyal brand under the Lucky DuRoyal Company overhauled its product structure and re-positioned itself as a mid- to premium-level brand. On the strength of these moves, it bucked the trend to attain 20 percent sales growth, boosting profits by 30 percent to record the best sales in the company’s 18-year history.
But it gets even better.
DuRoyal’s best-selling Crunch Pie series of ice cream bars was priced at NT$30 each. Last summer the company successfully introduced the NT$45 Super Crunch Pie.
This year, going after an even more premium frozen snack segment, DuRoyal introduced the Kabisuo imprint. Stressing production from the same chocolate ingredients as Godiva, it retails for NT$75 per bar – just about the price of a boxed lunch of pork chops and rice. Nevertheless, consumers have opened up their wallets and made it another bestseller.
What is DuRoyal’s secret for becoming pricier and more popular at the same time?
The key is tapping into the needs deep down in the hearts of consumers.
Elly Chou relates that a decade of experience as the licensed local distributor for a premium international frozen snacks brand convinced them of the demand and the capacity among Taiwanese consumers. However, they noted that consumers often complained of the tendency of foreign brands to be overly sweet.
DuRoyal began laying the groundwork seven or eight years ago, aggressively developing its technical know-how with its sights on one day breaking into the high-end frozen desserts market with its own brand.
A Taste of Indulgence
Namchour Group director Chen Fei-long agreed to allow Elly Chou to take research staff with her to visit high-end ice cream plants around the world. “Knowing only what consumers need isn’t enough; the know-how must be in place at the same time for the brand to take off,” says Chou, an MBA from National Chengchi University, the term “strategy” never far from her mind or lips.
In 2006, DuRoyal finally stepped out as a premium frozen dessert brand.
Even though the financial crisis caused by excessive credit- and cash-card debt last year led to consumer belt-tightening and a general drop in domestic demand, keen observer Chou spotted the perfect opportunity to introduce DuRoyal as a premium brand. She knew that in less prosperous times people are unable to spend big money to pamper themselves, but the human need for a little indulgence is always there.
“People’s pursuit of a little pleasure, a little extravagance – that’s my niche right there,” exclaims Chou. Expanding on that theme, she explains that as time goes by, she feels less like she’s selling “desserts” and more like she is selling “a feeling.”
In addition to reducing the sweetness of their products to better satisfy Taiwanese tastes, before introducing the Super Crunch Pie last summer DuRoyal teamed up with companies in the 3C and video game industries popular with youths, holding prize drawings to raise awareness.
The strategy worked splendidly, as evidenced by sales of over 100,000 Super Crunch Pies at 7-Eleven outlets around the island on the very first day. This year, for the introduction of the Kabisuo ice cream bars, the company used a promotion where customers could get a series of Russian dolls designed by Taiwanese artist Push for an additional NT$75. That promotion also succeeded in generating a lot of buzz.
Elly Chou, who gave up teaching to pursue a business career 18 years ago, agrees that we live in a consumer society of extremes. Nevertheless, she reminds us that corporations must know what constitutes the “middle ground” and not merely dismiss it as lost territory.
Just as Super Crunch Pie is a “mid-priced” frozen dessert on the Taiwanese market, it is a fancier product than the original Crunch Pie, entering the mid-priced area of the high-end sector.
Pricing Determines Success
Despite the rise of the price for a kilo of milk powder from NT$85 to $92 and a 30 to 50 percent jump in food oil over the first half of the year, Elly Chou remains upbeat in the face of the continued climb in material costs.
Over the next two months DuRoyal will introduce another ten flavors aimed at restaurant channels in order to boost sales and bring in a wider range of customers.
“I don’t care about the cost,” says Chou, emphatically. “It’s not a question of having to raise prices when the cost of raw materials goes up. It’s a question of whether you create value for customers, whether you help customers solve problems.”
And that’s the lesson the Namchour Group has taken away since its founding 55 years ago: aggressively setting prices to “create value” rather than calculating price from the cost side, in order to achieve lasting resistance to inflation.
“When you create value for customers, there is always room for upward price adjustment,” Elly Chou states confidently.
Translated from the Chinese by David Toman
Chinese Version: 杜老爺，愈貴愈暢銷的祕密