Original content written in 2012, slightly updated in 2019, translated by Susanne Ganz and edited by TC Lin and Sharon Tseng.

In the summer of 2011, TTL’s newly launched products mango beer and pineapple beer created considerable internet buzz. On Facebook, beer lovers who had managed to get their hands on a bottle of the novel brews proudly posted pictures. Others posted messages asking where the beers were being sold or published blog posts about their beer-tasting experience.

As a result, TTL’s new fruit beers had already become the talk of the town by the time other beverage makers were only about to launch their summer drink marketing campaigns.

One and a half months after hitting the market, more than five million bottles of the fruit beers had been sold, grabbing six percent of the domestic beer market. In the past, a three-percent market share for a new brew was already considered a resounding success.

TTL could have even sold more, but its production was not able to meet the soaring demand. As Huang Jiun-yih, director of the merchandising division at Taiwan’s second largest convenience store chain Family Mart, recalls, the company placed orders for fruit beer virtually every day but often received goods only every second day or as little as 60 percent of the ordered quantity.

The successful market entry of the fruit beers as a fashionable, hip beverage popular among young people owes to TTL veteran Hsu, now 68, who had been promoted to the position of chairman in late November 2010. 

Reinventing Tradition-Steeped 111-year-old TTL

TTL’s headquarters is housed in an elegant red brick building from the Japanese colonial period, the former Monopoly Bureau, on Nanchang Road in Taipei. Inside, terrazzo floors in the corridors reflect the sunlight that filters in through historic wood frame windows.

While the grandiose building, which was completed in 1922, seems to have withstood the ravages of time, TTL today faces challenges that are vastly different from those of the past.

Hsu, who hails from a farming family in Dounan, Yunlin County, joined TTL 33 years ago when it was still a state monopoly known as the Taiwan Tobacco and Wine Monopoly Bureau. Having worked his way up the career ladder from Monopoly Bureau chief secretary and deputy general director to TTL vice general manager, general manager and eventually chairman, Hsu knows the company and the business inside and out.

Therefore, TLL employees admit in private that they somewhat fear their boss, although he is an amiable, harmony-seeking person who rarely confronts people using harsh words.

One employee who is close to Hsu reveals that his boss is well-read and inquisitive, always eager to get to the root of a problem. “It can happen that he knows things in your field that you yourself are not that familiar with,” the employee says jokingly.

For instance, when TTL did a cost estimate for the new fruit beer to set a price, the costs reported by the various branch organizations were rather high. Thinking that this was odd, Hsu analyzed the costs and compared them with the cost estimate for TTL’s Gold Medal Taiwan Beer that had been launched previously. As he found out that the estimates were too high, he asked the respective units to recalculate with an eye to setting a competitive price.

                       

Back then, when Hsu served as deputy general director of the Monopoly Bureau, he oversaw the sales and distribution section, which earned him intimate knowledge of distribution channels and marketing business. But at the same time Hsu also became aware that the time-honored Monopoly Bureau was quite inept at the task of efficiently communicating with consumers. That was particularly true with regard to covering the last mile to the consumer: marketing and distribution channels.

The first thing Hsu did after becoming TTL chairman was revamp distribution to make sure that TTL’s products were available and visible in the market.

In the past, it happened quite often that consumers had heard of a TTL product but had no clue where to buy it.

Twelve years ago, for instance, Anka Biscuits, a cracker made with monascus (red rice mold) from sake production, generated sales of NT$600 million. People had heard of the delicious crackers, but TTL was the only place to sell them. On top of that, consumers had to buy the cookies in wholesale quantities - whole boxes or gift boxes of 12 cartons – as ordinary stores did not stock them.

“Our products were of good quality, but consumers didn’t know that and they also didn’t know where to buy them,” recalls Hsu. The reason for TTL’s restraint is due to the fact that retailers want to make a profit on the goods they put on their shelves. This can be as much as 30 percent to 40 percent. For TTL this was a “too heavy” a burden.

As a state-owned company, TTL has higher production costs than its private sector competitors, which left it with margins too slim to grant profits to distributors.

Since TTL is bound by the Public Procurement Act, every procurement above a certain amount must be published for several weeks or even more than a month. Once procurement has been decided, a time-consuming administrative procedure has to be followed. As a result, TTL cannot keep up with rapidly fluctuating raw material prices.

But Hsu wanted his staff to find a method to break through the barrier of low profits.

“The chairman wanted us to learn from them (distributors) and negotiate conditions,” says Tsai Chiu-kuei, manager with TTL’s Department of Sale.

For instance, in late 2011 the new product Rice Wine Chicken Noodles successfully made in into the Family Mart convenience chain and became a bestseller.

Family Mart alone sold 130,000 bowls of the instant noodles in a month, outselling even Uni President Enterprise’s Man Han Feast beef-flavored noodles, the longtime market leader in the big bowl segment.

Huang Chi-fang, assistant manager in TTL’s Division of Biotechnology, who was in charge of the product, notes that instant noodles sell best through wholesale and convenience stores. Therefore, the noodles had to be highly visible in both places so that consumers could find them, or else all of the advertising would be useless.

When TTL approached Family Mart, it proposed its own marketing campaign, planning to launch TV commercials when the instant noodles went on sale. Family Mart, for its part, also designed a special promotion for the noodles and gave them a good display position. Both sides compromised on the profit side and proposed marketing campaigns.

Although Family Mart’s profit margin was four percent lower for the TTL instant noodles than for other listed products, their better-than-average inventory turnover rate compensated for the lower profits.

“They are very willing to make changes,” says merchandising director Huang,  observing that TTL has recently been very eager to take up the suggestions from its distributors.

Tobacco and Liquor Corporation (TTL) Chairman Hsu An-hsuan (Photo by Chung Shih-Wei/CW)

Focusing Marketing Firepower

The second change Hsu pursued was more efficient, more precise marketing.

He demanded a stronger focus on TTL’s products to improve brand recognition, arguing that only if consumers have a lasting impression of a product can marketing campaigns generate demand.

TTL’s kaoliang liquor, for instance, just couldn’t compare with the popularity and brand recognition of KKL kaoliang from the Kinmen Distillery on the offshore island of Kinmen.

“The fact that our products were better than competing products but we were selling less than them meant that our product marketing definitely needed to improve. Our communication with the customer was impaired,” says Hsu. He demanded that TTL’s kaoliang products be differentiated into two distinct product lines – a lower-priced Yushan Taiwan Kaoliang Liquor series for the mass market and the pricier, aged Yushan Original Cellar series for connoisseurs. The product names and product portfolio were overhauled. Then several signature products were chosen, such as kaoliang with an alcohol content of 52 percent from the Original Cellar series, which is where marketing resources were pooled.

Subsequently, different distribution channels were chosen for different product lines so that marketing campaigns could be tailored toward specific target groups.

“He demanded that management based on retail formats and product categories,” recalls Tsai. “He didn’t want us to stock up inefficient sales points because it would be a waste of human resources.” 

Red wine is a case in point. In the past, TTL’s Yushan Taiwan Cabernet Sauvignon, Merlot was sold through more than 20,000 traditional retailers. Following an analysis of sales figures and inventory turnover, Tsai adjusted the distribution strategy, reducing distribution via the hospitality sector to 50 percent and via traditional grocery stores to 30 percent of the overall mix. At the same time, the number of retailers stocking the wine was reduced to 15,000 to boost efficiency.

To further boost marketing efficiency, Hsu demanded that the time-honored company become more agile and responsive, which meant that better coordination among the various divisions was imperative. As Tsai explains, it happened quite often in the past that commercials for new products went on air several months after the products had hit the shelves, by which time the novelty factor had already worn off. Against this backdrop, the ad campaigns were not very effective.

As different divisions failed to coordinate their efforts, the opposite could also happen, meaning commercials were pushing a product that had not even been rolled out. When consumers, inspired by the commercials, went to buy the product, they would go home empty handed.

“If you want to sell well, this just can’t be,” says Hsu. They learned their lesson.

For the new fruit beer, clear targets were already being set during the product development phase. Commercials would go on air when the product had been delivered to 60 percent of all sales points. In the first month after hitting the shelves, that rate would have to go up to 70 percent. 

Hsu also cancelled all promotions aimed at distributors to make them stock the products to use these marketing resources more effectively.

In the past, the cut-throat price competition among distributors had led to razor-thin margins. A distributor jokingly notes, “You could sell a truckload of Taiwan beer and make not even enough profit to buy a bottle of wine.”

The rebates granted to online vendors only made them stock up excessively and postpone new orders, but they failed to generate more sales on the consumer end. Therefore, Hsu abolished the online promotions from last year, supplying online vendors based on market demand, thus stabilizing vendor prices and securing profits from online sales. Yet TTL still rewards online vendors, once they have generated good sales, with overseas trips or cash.

“Online vendors are now very happy if they can sell our products. Our things sell well and are lucrative,” says Hsu with a broad smile. Hsu’s final demand was that TTL staff frequently get out of their offices to observe the market. While the national brewer may be the industry bellwether, it needed to learn how to read and anticipate market trends in an increasingly competitive environment.  

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In 2010, Hsu founded a market research unit within TTL by pooling all marketing talent from across the company’s divisions. On top of that, regional market research centers with a combined staff of more than 100 employees were set up in northern, central and southern Taiwan.

These analysts went out and did field work, visiting retailers, checking product displays and store shelves; they also engaged in online services and brought back business intelligence from the frontline.

Hsu personally toured distributors across the island, observing the market first-hand. Tsai recalls that when Hsu pushed the idea of fruit beer, not only distributors but even the company’s eight sales offices were highly skeptical that fruit beer would sell, arguing that beer must have a certain “bitterness.”

Undeterred, Hsu stood his ground against the naysayers. He even demanded an internal review on the grounds that the dissenters had not studied the market research and reports thoroughly enough.

“He often says, you need to get out once in a while; don’t stay in the office,” says Tsai. Even after landing a hit product with the fruit beers, Hsu still wants TTL to reinvent itself.

                       

The Secret Behind Fruit Beer’s Success

Jane Shing-tang, director of the Planning Office at the Food Industry Research and Development Institute, notes that previously fruit beers sold in the Taiwanese market were expensive because they were imported or produced by small craft beer makers.

Thanks to its size, TTL has a large production capacity that enables it to bring down production costs, so that its fruit beers sell at half the price of an imported product.

“Getting the price right is very important,” says Margaret Ho, public relations manager at Carrefour Taiwan, who organizes the hypermarket chain’s annual beer festival. But taste is even more crucial.

Last year, TTL launched Sweet Touch, a canned beer beverage made with imported lychee and grape juice concentrates. Yet fruit beer is made from fresh juice, which is far more challenging since, depending on the source of the fruit, fresh juice varies in sweetness, flavor and acidity. Fresh fruit is also four times as expensive as juice from imported concentrate.

Yet Irwin mangoes and Golden Diamond pineapples, which are used for the fruit beers, are locally grown and highly popular with Taiwanese consumers. On top of that, the fruit beers have an alcohol content of just 2.8 percent compared to the 4-5 percent of the typical average beer, which makes it easier to market them to consumers outside the traditional beer drinker community who are open to trying a new beverage. Using local ingredients and positioning the beers as distinctly Taiwanese has also reinforced the advertising effect.

The fruit beer commercial shows young people in Taiwan drinking fruit beer in a mango orchard during a leisure trip. McCann Worldgroup Taiwan CEO Gary Chi, who created the ad, said he wanted consumers to feel an emotional connection.

Jack Hsieh, vice president of marketing at online shopping platform PayEasy, believes that TTL also successfully exploited the high popularity and acceptance of Taiwan Beer in the local market by filling its fruit beers in familiar green glass bottles.

It would seem that TTL has learned its lesson, and then some, from its fruit beer experiences.

Translated by Susanne Ganz
Edited by TC Lin, Sharon Tseng