Opportunities for Chilean Food Exports in Taiwan

Transcription

1 Opportunities for Chilean Food Exports in Taiwan Chilean Trade Office November, 2009 Prepared by Asian Pacific Research Ltd.

2 Table of Contents PREFACE: METHODOLOGY AND TERMINOLOGY...4 CHAPTER I. EXECUTIVE SUMMARY A Highly Segmented Food Market Frozen Berries Almonds and Walnuts Olive Oil Condensed Juice Frozen Pork Frozen Chicken Scallop Herbs Selection of Importers/Distributors...13 CHAPTER II. FROZEN BERRIES Imported Frozen Berries Market Trends Importers Importers Selection Criteria Locally Produced Fruit Distribution Channel in Taiwan Retail Sales Food Processing and Food Service Sales Packaging Labeling Sanitation Standards Overall Assessment...30 CHAPTER III. ALMOND AND WALNUT Almond Market Trends Walnut Market Trends Almond Importers Walnut Importers Importers Selection Criteria Distribution Channel in Taiwan Retail Sales Food Processing Sales Packaging Labeling Sanitation Standards

3 3.12 Overall Assessment...47 CHAPTER IV. OLIVE OIL Market Trends Importers Importers Selection Criteria Distribution Channel in Taiwan Retail Sales Food Service Sales Packaging Labeling Sanitation Standards Overall Assessment...62 CHAPTER V. CONDENSED JUICE Market Trends Importers Importers Selection Criteria Locally Produced Condensed Juice Distribution Channel in Taiwan Retail Sales Food Processing Sales Packaging Labeling Sanitation Standards Overall Assessment...82 CHAPTER VI. FROZEN PORK Market Trends Locally Produced Pork Importers Importer s Selection Criteria Distribution Channel in Taiwan Retail Sales Food Processing Sales Packaging Labeling Sanitation Standards Overall Assessment...93 CHAPTER VII. FROZEN POULTRY: CHICKEN AND TURKEY Market Trends

4 7.2 Importers Importer s Selection Criteria Locally Produced Frozen Chicken Distribution Channel in Taiwan Retail Sales Foodservice and Food Processing Sales Packaging Labeling Sanitation Standards Overall Assessment CHAPTER VIII. FROZEN AND PREPARED SCALLOP Market Trends Importers Importer s Selection Criteria Locally Produced Frozen and Prepared Scallops Distribution Channel in Taiwan Retail Sales Packaging Labeling Sanitation Standards Overall Assessment CHAPTER IX. HERB INFUSION Market Trends Importers Importers Selection Criteria Locally Produced Tea Distribution Channel Retail Sales Packaging Labeling Sanitation Standards Overall Assessment CHAPTER X REGULATORY REGIME Tariff Rates and General Import Regulations Labeling Regulations Sanitary and Phytosanitary Regulations

5 PREFACE: METHODOLOGY AND TERMINOLOGY 1. Methodology This Report is based on a combination of desk research, store audits and in-depth trade interviews. Desk research is based mainly on government statistics including trade statistics kept by Taiwan Customs, the Information and Technology Intelligence Services (ITIS), a division of the Ministry of Economic Affairs, and other government institutions as referred to in the text. Taiwan Customs statistics for imports by value include the cost of freight and in some cases insurance and are thus 5% to 6% higher than the f.o.b. values reported at the point of export. The web link for trade statistics is: Store audits were conducted in Taipei in September, The selected stores were: Supermarkets Hypermarkets Wellcome Breeze Center Jason s Market PX Mart Matsusei Sogo Shin Kong Mitsukoshi Costco Carrefour RT- Mart A-Mart Convenience Stores 7/11 Family Mart OK Mart Hi-Life In-depth interviews were held in September and October, 2009 with leading importers in each product line, as referred to in the text. The interviews were conducted on an anonymous basis. 4

6 2. Terminology We have used the following abbreviations. CAGR is Compound Annual Growth Rate. We have used this to show trend growth rates over the five years AAER is Annual Average Exchange Rate (AAER) as published by the Central Bank for each year. We have used U.S. dollars for comparison of landed prices in Taiwan as this is the currency in which most of the importers conduct their foreign trade and is the basis on which they make comparisons of landed prices in Taiwan. 5

7 CHAPTER I. EXECUTIVE SUMMARY 1.1 A Highly Segmented Food Market Taiwan is a highly segmented food market. In this report, we have separately analyzed the trends and opportunities for nine food product lines: Frozen Berries Almonds and Walnuts Olive Oil Condensed Juice Frozen Pork Frozen Poultry Scallops Herb Infusions The conditions for each product line, and even within each product line, are very different in terms of market trends, competing country sources, importers, distribution channels and the final sales through retailers, food service and food processing. In this Executive Summary we have therefore considered each product line separately and have then added some further overall recommendations on the selection of importers and distributors. 1.2 Frozen Berries The main driver of imported frozen berries market is the novelty of tastes and flavors that are not otherwise available in Taiwan. It is primarily a foodservice/food processing market. The market boundaries are somewhat blurred since the demand comes mainly from the spread of western-style chain coffee shops and ice cream parlors that offer cakes, pastries, iced and ice cream dishes. These may be made on-site or prepared in a central kitchen for distribution to the whole chain of food service outlets. Of the frozen berries we have identified, it mainly includes blueberries, cranberries, raspberries and blackberries. The target market is young Taiwanese consumers looking for new tastes and flavors in a coffee shop life-style. The growth in coffee shop and ice cream chains probably still has growth potential after the current recession and the search for new tastes and flavors is a long-term trend in Taiwan. 6

8 Since the frozen berries are a small, exotic component in a high value end product, such as cakes, pastries and ice cream creations, price is less important than novelty, taste and consistency of supply. We think this is an excellent opportunity for Chile to compete with United States, Canada and France. One segment of currently imported frozen berries is different and that is strawberries, a popular, locally grown fruit for which Taiwan currently imports frozen strawberries from China to make up for local deficits. Some of the low cost frozen strawberries from China may also be used in jams. There are persistent safety concerns over strawberries from China and importers would like to have alternative sources, but we think the main opportunity for Chile will be in categories of frozen berry that are not locally grown in Taiwan. Although there is some demand in the retail stores, as already indicated by frozen blueberries from U.S. and frozen raspberries from Chile, we think the retail store market potential is limited. Much of the attraction of Starbucks, 85C and Haagen Dazs is the life-style for younger people outside the home. The major issue is one of market entry since the sales outlets for frozen berries are highly fragmented. We think there are probably two options. One is to use an existing importer who imports frozen berries from other countries but has the distribution dealerships in Taiwan and is willing to add product from Chile as an additional line. These importers already have the market reach and market access and the question is whether or not they see it is in their interest to have an additional source of supply. The second option would be for Chile to develop its own exclusive import agent not only for frozen berries but also for a basket of other Chilean products that would be big enough to support the marketing and sales effort. For the limited retail market, the best option is probably a direct deal with a large retailer that is interested in foreign foods, such as City Super, Carrefour, Jason s Market and Wellcome. 1.3 Almonds and Walnuts Dried nuts have found multiple market applications in Taiwan using a range of distribution channels: 7

9 A healthy snack food sold in chain convenience stores and supermarkets An ingredient and flavoring in high value end products including pastries, cakes, ice cream and beverages. Almonds are also used in Chinese medicine because of its perceived health benefits. As with frozen berries, growth in dried nuts has been largely driven by the spread of western-style coffee shops and their Taiwanese imitators and by the interest of younger consumers in new snacks, tastes and flavors. The main current source of supply is the USA and the task for Chilean exporters will be to match the quality control and price of the U.S. suppliers, which in 2009 have reduced the average unit price of walnuts by almost half. The largest part of the market is in bulk almonds and walnuts, imported either directly by the larger food processors, mainly bakeries and confectionaries, or through importers and dealers serving the large number of small bakeries and confectionaries. The dried nuts are either re-packaged for sale as snack foods through retail stores or are used as ingredients in high value pastries and cakes. For entry into the bulk market, the options for Chile exporters are to focus on one or two existing importers who have established market access and reach to bakeries and confectionaries or to develop a specialized Chile importer who has a basket of Chilean products sufficient to support promotional and marketing activities. Direct entry into the retail market is probably best achieved through building direct relationships with one of the major retailers who is open to new product sources, such as RT Mart and City Super, although we would not rule out Costco and Carrefour despite their strong links to U.S. and Europe respectively. 1.4 Olive Oil The olive oil from Chile currently on the market includes organic extra virgin olive oil and organic extra virgin olive oil with garlic, basil and lemon as well as extra virgin olive oil. Because of this high proportion of premium olive oil, the average landed price of extra virgin olive oil from Chile is now the most expensive on the market, almost 50% higher than the averaged landed price of Italian extra virgin olive oil. We believe, however, that this concentration on organic and premium olive oil in a market where 8

10 there are so many competing brands is a sound strategy. As indicated in our section on retail sales, there is a wide range of prices for extra virgin olive oil in the retail stores, ranging from NT$200 per liter to over NT$2,000 per liter, depending on the label, the type of packaging and the quality of the olive oil. The term Organic with supporting certification is a powerful discriminator. If not already in place, we would also suggest consideration of distribution through specialty organic shops and Internet sales as additional sales channels. Chile may also want to consider adding additional extra virgin olive oil brands at a lower cost level in the main hypermarkets and supermarkets to enlarge its market share in the non-premium price ranges. We think this can be done without damaging the organic extra virgin olive oil brands. In the context of this study, we have not interviewed Select Chile Import & Export Co. or Presicarre Co, the two importers of Chile olive oil that we have identified. However we noticed that Select Chile Import and Export Co also imports Chilean wine and this would seem to be a good fit, since the markets for wine and extra virgin olive oil have some similarities: foodservice in premium restaurants and hotels and up-market supermarkets and hypermarkets. Presicarre, on the other hand, gives direct access to the Carrefour hypermarkets. Again, if not already in place, we would also suggest consideration of OrganicShop, which is also under the Uni-President Group and provides access to over 500 organic shops. We have not found any examples of Chilean product in the pure olive oil market, in which Standard Foods and Costco are the major players. This segment of the market operates a little differently from the extra virgin olive oil market since it is non-premium and is aiming at both the salad/food dressing market in non-premium foodservice and household use and also the cooking oil market, where it is sometimes mixed with other edible oils. For this market, we would recommend Chile either seeking a tie-up with a hypermarket or supermarket chain, such as Carrefour and RT Mart, or with a Taiwan food processor with strong links in the foodservice segment. 9

11 1.5 Condensed Juice Chile already has a substantial 12% share of the import of condensed grape juice, in competition mainly with Spain and USA. It has also developed relationships with four major importers, including Chia Meei, which is the biggest single OEM beverage processor in Taiwan. Chile has thus established a strong platform for growth and the main focus for Chilean exporters is probably to continue to build up their reputation for consistent and reliable supply, which is the food processors main concern to avoid downtime in the processing factory. One of the great strengths of the major Taiwanese food and beverage processors, such as Uni-President, Wei Chuan and Kuang Chuan Dairy, is their forward integration into their own retail outlets to provide them with a solid consumer base-load. Uni-President operates the 7/11 franchise and has a joint venture with Carrefour; Wei Chuan has a joint venture with the Japanese Matsusei supermarkets and Kuang Chuan has its own Hi-Life convenience chain stores. We think that developing relationships with these key domestic processors and retailers will be a critical step in expanding Chile s market share. There are also some opportunities to export packaged product directly to some of the major retailers, where Costco and Wellcome already have their own overseas sources. Wellcome, which has its own private label, First Choice, may be a potential target. We are not aware of what other condensed juices Chile may be able to offer. Clearly there is strong competition from established U.S. brands in imported orange juice but there are many other opportunities for providing condensed juice to local food processors for packaging and sale under local labels. There is also strong competition from China on apple juice, but there are always concerns about quality control on products from China and food processors would probably be interested in an alternative source. As we have noted before, Taiwan food processors, retailers and consumers are always looking for new tastes and flavors and sources of supply. 10

12 1.6 Frozen Pork Much of the assessment for imports of frozen pork depends on global factors. Taiwan consumers, both by preference and through the government s use of CAS and HCAAP quality marks, prefer locally produced pork. The Taiwan authorities, like others around the world, have a strong political commitment to local farmers. Thus, frozen pork imports are tolerated as an inferior product that is used to make up shortfalls in domestic supply. Currently, domestic supply is being curtailed by the high cost of imported grain pig feed. Since many of Taiwan s pig farmers are small holders and often part-time, they cannot afford the upfront additional cost. If imported grain remains expensive, any further recovery in pig farming in Taiwan will probably hinge on achieving FMD-free status and the recovery of exports to Japan. In that scenario, there will probably be a continuing deficit of local pork for domestic consumption. On the other hand, if the price of imported pig feed declines, local pig farmers will move back into the market and the deficits in supply will reduce again. For potential exporters of frozen pork from Chile, the issue is primarily a question of price competition with the U.S. and Canada to meet any supply deficits. Unlike imported beef, imported frozen pork is not regarded as a premium product. Provided that Chile can meet the Taiwan authorities regulatory and phytosanitary requirements, there is a good opportunity to compete with U.S. and Canada on the supply of frozen pork as a trading opportunity. We do not think there remains any overwhelming political attachment to U.S. 1.7 Frozen Chicken As with imports of frozen pork, the import of frozen chicken and turkey is a trading opportunity and the main issue is one of price. Imported frozen chicken and turkey are regarded as inferior to locally produced product and are only used to make up shortfalls in supply for food service and food processing where they are sold without identification. Except for small amounts of turkey at Thanksgiving and Christmas, imported frozen chicken and turkey are rarely sold in the retail stores because of consumers preference reinforced by the government s CAS quality mark, which is only for domestic product. Thus, the opportunity for imported frozen chicken and turkey depends on being below the price 11

13 of locally grown product. Entry into the market depends largely on establishing a consistent and reliable supply relationship with some of the larger slaughterhouses that are responsible for Taiwan s meat supply both to food processors and for food service markets. Although McDonald s is probably tied to K & K Foods for U.S. chicken parts, chicken is a very popular dish in all Taiwanese restaurants and there are many opportunities in food service. 1.8 Scallop The frozen scallop market has been boosted by the availability of low cost scallops from China since they were banned from the EU as an anti-dumping measure. The only alternative source of frozen scallops is Japan, which supplies very expensive scallops. We thus think there is a very good opportunity for Chilean scallops provided they can establish a reputation for consistent and reliable supply at a lower cost than Japan but with better quality control and safety than scallops from China. The best market entry channels are directly to some of the large seafood restaurant chains that import their own seafood of the major international retailers who also import directly from source, rather than working through a small trading company. 1.9 Herbs Taiwan is facing growing shortages of domestic tea production to meet its overall tea consumption, which has grown with the introduction of new ready-to-drink and packaged teas. This includes the small but highly profitable herbal tea segment which we think is the most prospective market for Chile and can be accessed either through international retailers or sold in bulk to local processors for re-packaging and retail sale. Unless Chile exporters can provide strong promotional support for their brands, we suggest that local re-packaging is probably the most effective way to enter the market. The import of herbs for traditional Chinese medicine shops is a difficult market to penetrate because it is mainly carried out by very small traditional companies. An 12

14 alternative approach may be to contact a Taiwanese biotechnology company that is interested in processing new plants and herbs to make health products Selection of Importers/Distributors The global increase in the price of food products has put considerable pressure on the shortening of supply chains. Food manufacturers and exporters have integrated forwards to establish their own import and distribution capabilities up to the point of final sale. Food retailers have integrated backwards to source and import product for their own stores, sometimes using their own private label. Independent importers have to find their own space by adding value, often in the form of breaking bulk and delivering in small quantities to a large and diverse customer base, including retail stores, food service and domestic food processors. In the longer term, Chilean food manufacturers may want to establish their own import and distribution facilities in Taiwan. Since the size of the market may not be sufficient to justify this for individual companies, this can also be done on a co-operative basis among Chilean food manufacturers. There are a number of existing models active in Taiwan to give overseas product manufacturers a direct stake in domestic business development: Establish a wholly-owned importer/distributor in Taiwan Joint venture with an established domestic importer Establish a Chilean product association that can facilitate and develop the import of certain Chilean food products by qualified domestic importers. Appoint a market representative to act on behalf of certain food companies. For Chilean companies preferring an arm s length approach, there are often a number of options. One is to sell directly to larger retailers, including both international retailers and domestic Taiwanese retailers who are developing their own central purchasing and sourcing capabilities. On a case-by-case basis, Chilean food manufacturers may tie up with a domestic retailer looking for a competitive edge or work more broadly with an international chain such as Costco or Carrefour. These tie-ups may involve a private label arrangement or exclusivity and can provide a relatively low cost entry into a major retail chain. 13

15 A second option is to appoint an independent importer/distributor who has an established distribution network throughout Taiwan. This needs evaluation of the importer s market reach and the willingness of the importer to promote Chilean product. Many importers have a range of similar product from differing country sources. This can be an advantage if it means the importer has good market access or a disadvantage if the importer gives preference to other sources. Each case has to be evaluated on its merits but our previous experience suggests that building a relationship based on consistent and reliable supply with a large importer with established market access is a better strategy for long term success than working with a smaller importer with limited access and resources. Country of origin tends to be of little or no importance to Taiwanese buyers unless it is rooted in some specific advantages. These may be established brands, whether from United States, Europe and Japan, systems of quality assurance, such as the USDA quality marks or well known geographical indicators, such as olive oil from Italy. Otherwise, Taiwanese importers are generally open to new sources and willing to put effort into evaluating them. 14

16 CHAPTER II. FROZEN BERRIES According to the Taiwan Customs, frozen berries include raspberries, blackberries, mulberries, loganberries, black, white or red currants and gooseberries, cranberries, blueberries, and peaches. Among them, frozen blueberries, cranberries, and peaches are under the same tariff number and frozen raspberries, blackberries, mulberries, loganberries, black, white or red currants and gooseberries are under the same tariff number. 2.1 Imported Frozen Berries Market Trends Blueberries, Cranberries, and Peaches Blueberries, Cranberries, and Peaches Imports, Increased prices have dampened growth from its peak in MT Million US$ Landed Cost of Imported Blueberries, Cranberries, and Peaches Average landed costs from U.S. are now below those from Canada. China is the lowest cost exporter. Unit cost US$/MT Country % Change USA $2,685 $3,753 39% Canada $2,359 $3,993 69% China $852 $1, % France $3,432 $8, % AAER (NT$-US$) % Source: Taiwan Customs 2009 Source: Taiwan Customs 2009 From our importer interviews, we found that 55% of this category is made up of frozen cranberries from U.S. and Canada. Cranberries are widely believed to help prevent cancer and are less costly than blueberries. Blueberries account for 40% of the total and come mainly from U.S. and Canada, with some smaller quantities from China. Small quantities of frozen sliced peaches are imported from China. 15

17 Imported Blueberries, Cranberries, and Peaches Market Share by Volume China 20% Others 8% Canada 62% Canada 15% Others 9% USA 49% USA 10% China 27% Imported Blueberries, Cranberries, and Peaches Market Share by Value Others 12% China 8% USA 12% Canada 68% Canada 18% Others 17% China 14% USA 51% Source: Taiwan Customs 2009 The U.S. has taken market share from Canada and become the market leader because its cranberries and blueberries have become less expensive than Canadian ones. China is the main supplier of low cost blueberries, accounting for most of its 27% of the market by volume and 14% by value in The volume of frozen peaches from China is very small. In the first half of 2009, imports of frozen cranberries and blueberries have risen substantially despite the overall economic recession. Importers suggested this was due to greater public awareness of these fruits in pastries and ice cream. Blueberries, Cranberries, and Peaches Imports First Half (Jan-Jun) 2009(Jan-Jun) Y-on-Y Growth Volume (MT) % Value (Million US$) % Source: Taiwan Customs

18 2.1.2 Raspberries, Blackberries, Mulberries, Loganberries, and Gooseberries Raspberries, Blackberries, Mulberries, Loganberries, and Gooseberries Imports, Despite falling prices in 2007, import volumes have remained flat in last 2 years Landed Cost of Imported Raspberries, Blackberries, Mulberries, Loganberries, and Gooseberries France and China have reduced their average landed costs Unit cost US$/MT Country % Change France $9,085 $7,131-22% USA $4,177 $4,779 14% Netherlands $2,688 $3,317 23% China $909 $673-25% AAER (NT$-US$) % MT Million US$ Source: Taiwan Customs 2009 Source: Taiwan Customs 2009 From our importer interviews, we found that raspberries and blackberries each account for about 35% of the total and that raspberries and blackberries are often mixed together in the same package. Imported Raspberries, Blackberries, Mulberries Loganberries, and Gooseberries Market Share by Volume Netherlands 14% China 18% Others 14% USA 15% France 39% China 52% Netherlands 5% Others 9% France 34% 17

19 Imported Raspberries, Blackberries, Mulberries Loganberries, and Gooseberries Market Share by Value Others 8% Netherlands 7% China 3% USA 12% France 70% Others 13% Netherlands 5% China 10% France 72% Source: Taiwan Customs 2009 High quality raspberries and blackberries come from U.S. and France and are used in cakes and pastries while low quality raspberries and blackberries from China are used in making jam. In the first half of 2009, imports of raspberries and blackberries have also grown very rapidly, despite the overall economic recession, although the figures are from a very low base. Although there is consumer interest in new fruit tastes, it is still a relatively small volume. Raspberries, Blackberries, Mulberries Loganberries, and Gooseberries Imports First Half (Jan-Jun) 2009(Jan-Jun) Y-on-Y Growth Volume (MT) % Value (Million US$) % Source: Taiwan Customs

20 2.1.3 Strawberries Strawberries Imports In 2006, surplus output was an issue. Therefore, the import volume was decreased in Landed Cost of Imported Strawberries The average unit cost from China, the biggest source of strawberries, is decreasing Unit cost US$/MT Country % Change China $513 $446-13% USA $2,164 $2, % France $2,805 $3, % AAER (NT$-US$) % Source: Taiwan Customs 2009 MT Million US$ Source: Taiwan Customs 2009 Imported Strawberries Market Share by Volume Others 3% China 97% Others 2% China 98% Imported Strawberries Market Share by Value Others 14% China 86% Others 15% China 85% Source: Taiwan Customs

21 The China import share is 98% by volume. However, the unit cost is lower than that of other countries. Even though China has slightly increased the volume, its market share by value has decreased. Strawberry imports have slumped in the first half of We think this is because of food safety concerns and contamination of strawberries in China with pesticides. Strawberry Imports First Half (Jan-Jun) 2009(Jan-Jun) Y-on-Y Growth Volume (MT) % Value (Million US$) % Source: Taiwan Customs Summary Breakdown of Frozen Berries Imports Products CAGR Blueberries. MT % Cranberries etc US$ million % Raspberries, MT % Blackberries etc US$ million % MT 992 1, ,006 1, % Strawberries US$ million % Total MT % US$ million % Source: Taiwan Customs 2009 Blueberries, cranberries, raspberries and blackberries have all shown strong growth in volume over the period. High quality frozen berries from US, Canada and France have held their price while lower cost product has come from China. Imported strawberries are mainly form China. 20

22 2.2 Importers Frozen Blueberry/Cranberry Importers Market Share by Value 42% 20% 14% Costco President Taiwan B.Winker Enterprise Ywuh-Tsaang Trading 13% 11% SCS Associates Others Source: Taiwan Trade 2009 Four importers hold 58% of the market share for mainly blueberries and cranberries and the volumes imported by each are relatively small. o Costco President Taiwan is the largest single importer of blueberries and cranberries from U.S. for its own wholesale stores. o SCS Associates imports frozen berries for distribution to small bakeries for pastries and cakes and has started its own branded product for raspberry and strawberry jams. o B.Winker Enterprise and Ywuh-Tsang are small domestic trading companies importing small amounts for small bakeries. Neither company was willing to be interviewed. In addition to these, a further 18 importers occasionally import small shipments of frozen blueberries and cranberries. Frozen Blueberry and Cranberry Importers by Import Value US$ million US$ million 10 US$ million US$50,000 and under Source: Taiwan Trade

23 Frozen Raspberry and Blackberry Importers Market Share by Value 27% Ele Field 49% Classic Fine Foods 24% Others Source: Taiwan Trade 2009 Ele Field and Classic Fine Foods are the major importers of raspberries and blackberries, accounting for about half of total imports. They are both baking material providers and sell to high-end bakeries for cakes and pastries. Again, there are a further 17 importers who import small amounts on an occasional basis. Among them, we found Far Eastern City Super imports a limited amount of frozen raspberries from Chile. Far Eastern City Super is a premium supermarket in Taiwan. It imports foods from overseas, especially from China and Japan. In 2008, it imported 82kg frozen raspberries with a total value of up to US$50,000 from Chile. Frozen Raspberry and Blackberry Importers by Import Value US$ million US$50,000 and under Source: Taiwan Trade 2009 Frozen Strawberry Importers Market Share by Value 42% 20% 14% DaHu Strawberry Farm Wu Hui Foods Pelitron Enterprise 13% 11% Chao Su Frozen Food Gourmets Partner Source: Taiwan Trade

24 Five importers hold 74% of the frozen strawberries market share. o DaHu Strawberry Farm imports USD$100,000-$200,000 frozen strawberries annually and its focus is on strawberry processing, like concentrates, jams for ice desserts, and juice. Concentrate is 40% of DaHu Strawberry Farms business. o Wu Hui Foods imports strawberries for producing jam. o Chao Su Frozen Food is the importer and distributor of all frozen foods o Gourmets Partner is a specialized importer of premium fine foods especially from Europe and imports their strawberries from France. A further 15 importers import occasional small shipments. Frozen Strawberry Importers by Import Value US$ million US$ million US$50,000 and under Source: Taiwan Trade Importers Selection Criteria Most of the imported frozen berries are used in food processing for cakes, pastries, frozen desserts and ice cream creations. Therefore, the criteria from importers are different from those of imported packaged products. The attractiveness of the package is the last thing for them to consider. The importer will directly ship the frozen berries to their customers, food processors. Importers Selection Criteria for Frozen Berries Importance Source: APR Trade Interviews Attributes Taste and flavor Size and appearance, Shipping Supplier s credibility Country of origin Price 23

25 Taste and flavor is the most important consideration for importers to select frozen berries. Importers consider this as part of the quality. Although there is no scientific methodology to determine the degree of sweetness of frozen berries, Importers expect that the taste should be consistent Sweet or Sour in the same package. On the other hand, importers still import some low quality frozen berries, mainly from China, for jam-making food processor. Size and appearance and shipping quality are the factors next emphasized by the importers. Since most of the frozen berries are used in food processing, the consistency of size is another big concern. Before packing from the suppliers, importers would request for a certain size of frozen berries. Overseas suppliers are responsible for product testing in the country of origin. All of the frozen berries will have to be sifted before packing. Importers still have to do the random test to ensure the size reaches the requirement. In order to ensure the quality after shipping out from the supplier, the frozen berries are kept in 15 degrees for the whole time. Here, the supplier s credibility means stability of supply. The demand in Taiwan for frozen berries is through the whole year. Due to frozen berries is a seasonal agriculture product, it is important for importers to have a steady and secured resource. During the interview, Chao Su Frozen Food indicated that 85% of Taiwan s frozen strawberries are imported form China. This is because China has increased strawberry acreage rapidly. In fact, China is the biggest frozen strawberry supplier among the world. However, the consistency in sweetness and size is questionable. In most cases, importers would prefer to import better quality frozen berries, which are directly provided to high-end confectionaries and restaurants. There are also periodic problems with pesticide contamination. The major usage of frozen berries is to create a high value added end product like pastry and cake. Because these food processors are highly price-sensitive, it is difficult for importers to have a high margin in frozen berries market. All importers are concerned with price and whether or not they can achieve an acceptable mark-up. 24

26 2.4 Locally Produced Fruit Taiwan grows a large variety of fruit for both domestic consumption and for export, particularly to Japan. Imported frozen berries are primarily fruits that are not grown in Taiwan and are mainly used to provide a new taste and flavor and decoration for cakes, pastries and iced desserts. Frozen strawberries are something of an exception since strawberries are grown in Taiwan. However, because they are very popular, largely because of their red color as well as their taste and succulence, additional strawberries are imported from China to make up the deficit in local supply. Total Supply of Strawberries in Taiwan, Locally grown strawberries currently account for about 80% of total strawberry supply. The amount of strawberry imports is affected by the production of locally grown strawberries; imports will normally decline when the local strawberries have a great harvest. 7,500 6,000 4,500 3,000 1,500 0 (MT) 7,001 5,750 6,328 6, , ,006 6,106 1, Local production Imports, frozen Unit: MT Local 7,001 5,750 6,328 6,096 6,106 Production Imports, 992 1, ,006 1,214 frozen Imports, fresh Total 8,300 7,216 7,717 7,645 7,776 Supply Source: AFA, COA 2009 Source: AFA, COA 2009 Taiwan strawberries are grown primarily in Miaoli County in central Taiwan. Its production season is usually from December to March and, as a winter crop in Taiwan, it is affected by the temperature and rainfall. Warm winter will delay strawberries blooming period and too much rain will decrease the production. 25

27 Total Production of Fresh Strawberries Grown in Taiwan Unit: MT County Miaoli County 6,457 5,026 5,474 5,301 5,363 Others Total 7,001 5,750 6,328 6,096 6,106 Sources: AFA, COA has been an exception. Despite a poor season for domestic strawberries, there has been a sharp decline in imports from China because of worries over pesticide contamination. 2.5 Distribution Channel in Taiwan Frozen berries need to be stored in -15 C environment. Therefore, importers of frozen berries need to have access to low temperature storage and delivery systems. Due to most of the imported frozen berries are used to make the final product though the food processor, the distribution channel is quite similar. For those retailers that import frozen berries for their own commercial usage, they store frozen berries in their own warehouse. Imported Frozen Berries Distribution Channels Importer Intermediat Retailer Trading Company 45% Food Processor Hypermarket Supermarket 7% Convenience Store Self-imported 25% Dealer Food Service food processor 20% International Retailer 3% Hypermarket Source: APR Trade Interviews 26

28 Importers of frozen berries can be separated into 3 different types. Professional importers import around 70% of the total market share by volume and put their major effort on food processors. Food processors use the frozen berries in several different ways, for example, jam, pastry, cake and syrup. Chao Su Frozen Food dehydrates the frozen berries after shipment to their factory. The dehydrated berry is used to mix with grain powder to add flavor for food processors. These various combinations are sold through supermarkets, hypermarkets and convenience stores. Many of the small food service outlets are served by their dealers, unless the food service has a large demand in frozen berries or special requirements that they need to collaborate with the importers. SCS Associates mentioned that small food service entities might have several demands other than frozen berries. Dealer can provide all in one service for those small entities. Therefore, the relationship between dealers and importers is not very strong. For those self-imported food processors, they mainly use frozen berries as material to make products under their own brand name. These end products are directly sold to the restaurants and bakery shop for further usage. There are limited resources for end consumers to purchase frozen berries in the market. An Importer like Costco sells frozen blueberries and mixed berries directly through Costco s retail stores and enjoy a bigger mark-up than other players in the market. 2.6 Retail Sales There are not many frozen berries available in the retail stores. Only one brand has been observed and is shown below. Brand: Rader Farms Importer: Costco Frozen Blueberries Country of Origin: U.S. Price: NT$355/1.36kg Source: APR Store Audit, September

29 We have not found any examples of imported frozen berries being re-packaged and sold by local companies. 2.7 Food Processing and Food Service Sales. It is difficult to separate these two in respect of frozen berries. Some frozen berries are sold to relatively large food processors such as I Mei and Uni-President that use them in cakes and pastries. However, most of the frozen berries are distributed by the importers through dealers to many local bakeries that use the berries for making cakes and pastries that are then sold in the shop front. Frozen berries are also used in ice cream parlors such as Haagen Dazs to add to ice cream creations. 2.8 Packaging Frozen berries are mostly imported in bulk for shipment to the food processors. Most packaging is in 10kg plastic bags. As indicated above the importers not very much concerned about the bulk packaging appearance since it is being delivered directly to food processors. The importers deliver to the food processors in their own cartons. The only branded packaged frozen berries we have found for retail sale are frozen blueberries from the U.S. as indicated above. These are sold in plastic bags of 1.36kg. 2.9 Labeling For frozen fruits, special labeling requirements include: Besides the items stipulated in the Law Governing Food Sanitation, the following items shall also be labeled: 1. Food category. 2. Preserving methods and conditions. 3. Cooking methods if the product needs cooking before serving Source: Sanitation Standard for Frozen Foods. Website link is given in 2.10 below. Labeling for selling to food processors has to comply with the Council of Agriculture Regulations for Food Labeling and the Department of Health Food Sanitation Act, Articles 17-19, which are set out in detail in Chapter The importers provide the required labeling in Chinese on their own trade cartons used for delivering the bulk 28

30 frozen berries to the food processors. Packaged frozen berries for sale in retail stores, as in the Costco example, must also comply with the Department of Health Regulation on Nutrition Labeling for Packaged Food, which is also detailed in Chapter In the case of these packaged frozen berries, all the labeling is achieved by means of a paper sticker attached to the original packaging. The labeling has to be provided in Chinese and it is primarily the responsibility of the importer to comply with the regulations. In the case of packaged product, this is usually by means of a paper sticker that is prepared by the importer and sent to the exporter for attachment to the original packaging. The manufacturer can include the information in the original packaging, but it is usually too expensive for the volume of product exported to Taiwan Sanitation Standards The major sanitation standards set out by the Department of Health under the Food Sanitation Act which effect imports of frozen berries and the containers they are packaged in are set out in the table below. The main requirements for frozen fruits as set out in the Sanitation Standard for Frozen Foods, referenced in the table below, are: Total aerobic count per gram: Not more than 100,000 MPN of E.Coli per gram: Not more than 10 No putridity, discoloration, off odor or flavor, contamination, foreign matter or parasite shall be found. Sanitation Standards Applicable to Frozen Berries. Standard Sanitation Standards for Pesticide Residue Limits in Foods Sanitation Standard for Ice Products Link nguagetype=2&secondmenuid=5&thirdmenuid= anguagetype=2&secondmenuid=5&thirdmenuid =195 29

31 Sanitation Standard for Food Utensils, Containers and Packages Sanitation Standard for Frozen Foods Sanitation Standard for General Foods Sanitation Standard for Foods to be Eaten Raw Sanitation Standard for Foods Treated with Ionising Radiation Sanitation Standard for Edible Natural Colorants Sanitation Standard for Lecithin Sanitation Standard for Nitrous Oxide to be Used in Food anguagetype=2&secondmenuid=5&thirdmenuid =197 anguagetype=2&secondmenuid=5&thirdmenuid =198 anguagetype=2&secondmenuid=5&thirdmenuid =199 anguagetype=2&secondmenuid=5&thirdmenuid =200 anguagetype=2&secondmenuid=5&thirdmenuid =206 anguagetype=2&secondmenuid=5&thirdmenuid =214 anguagetype=2&secondmenuid=5&thirdmenuid =217 anguagetype=2&secondmenuid=5&thirdmenuid = Overall Assessment The demand for frozen berries is primarily driven by the spread of western-style coffee shops and ice cream parlors and Taiwanese imitators that offer cakes, pastries and iced desserts for young Taiwanese consumers looking for new tastes and flavors in a coffee shop life-style. Of the frozen berries we have identified, it mainly includes blueberries, cranberries, raspberries and blackberries. The growth in coffee shop and ice cream chains probably still has growth potential after the current recession and the search for new tastes and flavors is a long-term trend in Taiwan. 30

32 Strawberries are different in that they are locally grown and frozen imports from China are used to make up the demand deficit for a popular fruit. Some of the low cost frozen berries from China may also be used in jams. However, there are persistent safety concerns over strawberries from China and importers would like to have alternative sources. Thus the opportunity for Chile will be in these categories and other categories of frozen berry that are not locally grown in Taiwan. Although there may be some demand in the retail stores, as already indicated by frozen blueberries from U.S. and frozen raspberries from Chile, the main market is as an exotic component in high value cakes, pastries and iced desserts. Provided that Chile can compete on quality and price with U.S. Canada and France, it has the opportunity to enter this market. The major issue is one of market entry into the bakeries segment, which is highly fragmented. We think there are probably two options. One is to use an existing importer who imports frozen berries from other countries but has the distribution dealerships in Taiwan and is willing to add product from Chile as an additional line. These importers already have the market reach and market access, the question is whether or not they see it is in their interest to have an additional source of supply. The second option would be for Chile to develop its own exclusive import agent not only for frozen berries but also a basket of other Chilean products that would be big enough to support the marketing and sales effort. For the retail market, the best option is probably a direct deal with a large retailer that is interested in foreign foods, such as Costco, City Super, Carrefour, Jason s Market and Wellcome. 31

33 CHAPTER III. ALMOND AND WALNUT 3.1 Almond Market Trends Almond Imports, Imports have remained within a range of about 3,000-3,500 MT 4,000 3, ,474 3,169 3,171 2, , Landed Cost of Imported Almond Landed costs from the U.S. have slightly reduced Unit cost US$/MT Country % Change United States $4,876 $4, % China $1,338 $1, % Japan $8,988 $13, % AAER (NT$-US$) Source: Taiwan Customs % MT Million USD Source: Taiwan Customs Breakdown of Almond Imports Products CAGR Sweet, shelled, MT 2, , , , , % fresh or dried US$ million % Bitter, shelled, MT % fresh or dried US$ million % Sweet, in shell, MT % fresh or dried US$ million % Bitter, in shell, MT % fresh or dried US$ million % MT 3, , , , , % TOTAL US$ million % Source: Taiwan Customs 2009 About 77% of imported almonds are sweet and shelled. A further 16% are bitter and shelled. CAGR (compound annual growth rate) for total almonds has been a modest 2.3%. 32

34 The U.S. remains the main source of imported almonds, with about one fifth of the market met by low cost almonds from China. Imported Almond Market Share by Volume Others <1% China 18% USA 82% Others 1% China 21% USA 78% Imported Almond Market Share by Value Others <1% China 6% USA 82% Others <1% China 7% USA 93% Source: Taiwan Customs 2009 The U.S. import share rises to about 93% by value because of the higher value of landed U.S. almonds. In the first half of 2009, imported almonds have shown a year-on-year increase of 32% by volume and 25% by value, despite the overall recession in the Taiwan economy. Importers were unable to attribute this to any particular reason other than the growing popularity of almonds as a healthy food for use in both cakes, pastries, beverage flavoring and snack foods. Almonds Imports First Half (Jan-Jun) 2009(Jan-Jun) Y-on-Y Growth Volume (MT) % Value (Million USD) % Source: Taiwan Customs

35 3.2 Walnut Market Trends Taiwan Walnut Imports, Walnut imports declined in 2008 to a five year low. Landed Cost of Imported Walnut Landed costs have increased substantially over the period 2,000 1, ,599 1,555 1,516 1, , MT Million USD Unit cost US$/MT Country % Change USA $4,20 4 $6, % China $2,38 9 $3, % India $3,28 6 $6, % AAER (NT$-US$) % Source: Taiwan Customs 2009 Source: Taiwan Customs Breakdown of Walnut Imports CAGR Products Shelled, fresh MT 1, , , , , % or dried US$ million % In shell, fresh MT % or dried US$ million % MT 1, , , , , % TOTAL US$ million % Source: Taiwan Customs % of imported walnuts are shelled. The U.S. has increased its market share by both volume and value over the period 2004 to

36 Imported Walnut Market Share by Volume Others 15% Others 4% China 25% USA 61% China 25% USA 71% Imported Walnut Market Share by Value Others 13% China 16% USA 71% Others 4% China 14% USA 82% Source: Taiwan Customs 2009 In the first half of 2009, the imports of walnuts have also shown extremely rapid growth, by 79% by volume and by 39% by value. Almost all of this growth comes from the USA, which has reduced its average unit price to US$3,960 per MT compared with $6,519 per MT in Walnut Imports First Half (Jan-Jun) 2009(Jan-Jun) Y-on-Y Growth Volume (MT) 614 1,099 79% Value (Million USD) % Source: Taiwan Customs

37 3.3 Almond Importers Seven importers cover two thirds of the almond market share. Almond Market Share by Value 34% 5% 5% 6% 15% 13% 13% 9% Lian Hwa Foods Corp Sheng Hsiang Trading Co., Ltd Sun Growth Trading Co., Ltd Fu Mei Co., Ltd Junior Young Ent. Co., Ltd Long Chi Zen Industrial Corp. Copower Co., Ltd Others Source: Taiwan Trade 2009 All of the top 7 players are importing significant amounts of fresh or dried, sweet and shelled almonds from USA. Lian Hwa Foods, Sheng Hsiang Trading and Sun Growth Trading are the three major players in the almond market with an annual importing value from US$1.5 million to US$2.5 Million. o Lian Hwa Foods is one of Taiwan s biggest food manufacturing companies. o Sheng Hsiang concentrates on importing baking materials o Sun Growth is the agent in Taiwan of Blue Diamond Growers, one of the largest almond processor located in California, U.S. o Fu Mei imports for its parent company, I Mei, which is also one of Taiwan s largest food manufacturers. There is again a large tail of importers importing almonds on an occasional or opportunistic basis. Almond Importers by Import Value US$ million US$ million US$ million US$ million 0 US$ 0.1 and under Source: Taiwan Trade

38 3.4 Walnut Importers Walnut Market Share by Value Sheng Hsiang Trading Co., Ltd 33% 16% 12% Rigiwang Trade Co., Ltd Sun Growth Trading Co., Ltd Fu Mei Co., Ltd Long Chi Zen Industrial Corp. 3% 6% 6% 6% 10% 8% Tong Hsing Ent.Co., Ltd Sansoon Products Co., Ltd Jin Da Food Co., Ltd Others Source: Taiwan Trade 2009 Among 8 biggest importers in Taiwan, 6 of them are importing from USA. Only one of them, Sansoon Products, imports from China. The baking material provider, Sheng Hsiang, is the biggest importer in the walnut market. More than 40 other companies import small amounts of walnuts. Walnut Importers by Import Value US$ million US$ million US$ million US$ million US$50,000 and under Source: Taiwan Trade 2009 We have so far been unable to identify any importers of either almonds or walnuts from Chile. 3.5 Importers Selection Criteria Most of the imported almond and walnuts are sold to food processors and for confectionary. 37

39 Importers Selection Criteria for Almond and Walnut Importance Attributes Shape and appearance, Taste Quality-freshness, Supplier s reputation Shipping, packaging Price, Country of origin Source: APR Trade Interviews Importers in Taiwan have a set mind for the shape of bulk almonds and bulk walnuts. For bulk almonds, they require shapes like whole, strip, slice, and powder. For bulk walnut, the required shapes are 1/2, 1/8 and 1/16. The reason why most of the importers like to import from USA is because USA provides excellent quality control. The freshness of walnuts and almonds can affect the taste of final product. Therefore, the supplier must have a strict quality control standard that these importers can rely on. In most of the cases, importers do not normally open the bulk almonds and walnuts upon arrival. For bulk almond and walnut, suppliers reputations are equated with quality. Almonds and walnuts are directly shipped to their customers, like food processors and bakeries. The stability from the suppliers is another important issue for importer. Importers in Taiwan prefer to work with reputable suppliers rather than look for a low price. Due to the concern of the freshness, shipping is controlled at 5 the whole time. If Chile is considering importing almonds and walnuts to Taiwan, the shipping might be an important issue for Chile since processed almonds have to be handled extra carefully. Sun Growth Trading imports bulk processed almonds sealed in a plastic bag every 25LB and then put into a carton box. Bulk whole almonds are directly put in to cartons, which weigh 50LB each. Sun Growth Trading also imports bulk walnuts from U.S. and China. Walnuts from U.S. are packed in 25LB per plastic bag and the equivalent, 12.5 kg per plastic bag, for walnuts from China. Importers are usually responsible for the shipping cost. Therefore, one of the possible barriers for importer s not to import from Chile is because the shipping cost is relatively higher than imports from other county like China. When shipped to Taiwan, the cartons are normally stored in the importer s own warehouse until they are delivered to the customer. 38

40 Because of the competition and the low margin, all importers are concerned with price and whether or not they can achieve an acceptable mark-up. In many case, due to very less supplier from USA, the price is tag along with supply. The contact with suppliers is made monthly One thing to notice about is that most of the suppliers of almonds and walnut are from U.S. and China. However, the freshness is one of the concerns for importers. Since the production time of walnuts and almonds in the Northern Hemisphere is August, there is an opportunity for Chile, if Chile can provide same quality of almond and walnuts during the off-season in the Northern Hemisphere. 3.6 Distribution Channel in Taiwan The distribution channel can be separated into three types. Imported Almond and Walnut Distribution Channels Importer Intermediat Retailer Trading Company 20% Dealer Chinese Herbal Bakery Self-imported food processor International Retailer 60% Food Processor 6% 9% 2% 3% Hypermarket Supermarket Convenience Store Own Retail Store Hypermarket Source: APR Trade Interviews In Taiwan, 95% of almonds and walnut is imported in bulk. Only 5% is foreign branded products. Importers of bulk almonds and walnut sell mainly to confectionaries and bakeries. Some big food processors import almonds and walnut for their own usage. They 39

41 mainly break bulk and re-package the dried almonds and walnut for sale as a snack food or for household use under their own brand name. Lian-Hwa and Fu-Mei are two biggest self-imported food processors in Taiwan. Lian Hwa s own branded, VIVA, is a well-known almond and walnut brand in Taiwan. Fu-Mei is the subsidiary of I Mei, one of the biggest food processors in Taiwan, concentrating on manufacturing cakes, cookies, pastry, and packed deserts. Apart from a few major bakeries and confectionaries, however, many of the bakeries and confectionaries are small enterprises and the distribution from independent importers to small confectionaries and bakeries is very fragmented and uneconomic. In some cases, the importers work with dealers to extend their service to small business. There is a seasonal demand for confectionaries especially in Moon Festival and Chinese New Year. Most of the confectionaries purchase almond and walnut through importers or their dealers. They use almond and walnut for cakes and pastries. Because the use of almonds and walnut is different, there are plenty of shapes for confectionaries to choose. Chinese herbal medicine shop is the other important channel for almonds and walnut importers to distribute their products. There is a belief that walnuts provide prevention and treatment for cardiovascular disease. Therefore, some end consumers will purchase walnuts combined with other Chinese Medicine for treatment. A few importers and international retailers import small volumes of branded imported almonds and walnuts. RT Mart and Costco, for example, import almonds themselves and sells through their hypermarkets. Other than that, most of the branded almonds and walnuts are imported by independent importers and sold through supermarkets and hypermarket. 3.7 Retail Sales Packaged and branded almonds and walnuts are mainly sold as snack foods through supermarkets and hypermarkets, although some are also sold through convenience chain stores such as 7/11. They include both foreign imported brands and also locally re-packaged domestic brands. Retail stores care about the brand image, especially high-end supermarkets like Jason s and City Super. Therefore, packaging and size are important attributes for 40

42 them to attract their customers. Since these are also often bought as gifts for friends and for celebrating festivals, brand image and packaging is again very important. Therefore, retailers selling processed almonds and walnuts. We have again prepared a qualitative assessment of the retailers selection criteria. Retailers Packaged Dried Almond and Walnut Selection Criteria Importance Attributes Brand image, Packaging Size and appearance Taste and flavor, Price Country of origin Product certificate Source: APR Trade Interviews For hypermarkets and supermarkets, brand imaging is their biggest concern. When considering almonds and walnuts, the purchasing group will look at - Product image, they only provide well-known brand in the retail store. They do sell some local brands of re-packaged almonds and walnuts, but only if they are well-known as well. - Packaging style - Country of origin: almonds and walnuts from U.S. are well-known among consumers in Taiwan. Therefore, product from U.S. is really popular in Taiwan. The most often seen imported brands in the retail stores are shown below. Most Popular Imported Almond Brands in Retail Stores Brand Product Image Importers Comments Kirkland Signature Costco Dry Roasted Almonds Country of Origin: U.S. Price: NT$359/1.13kg 41

43 Marcona Almonds Costco Country of Origin: Spain Price: NT$329/454g Natural Dried Walnut O natural Super Elephant Co., Ltd. Country of Origin: U.S. Price: NT$ /150g Fisher SP Lendid Co., Ltd. Orange Ginger Almond Country of Origin: U.S. Price: NT$ 359/283g Nut Walker LR Ritz Ent. Barbecue Almonds Country of origin: Thailand Price: NT$169/150g Natural Dried Almond O natural Super Elephant Co., Ltd. Country of Origin: U.S. Price: NT$230/190g Mauna Loa Ambrosia-Food Ent. Ltd Dry Roasted Almonds Country of Origin: U.S. Price: NT$139/100g Source: APR Store Audit, September 2009 Locally packaged and processed brands from imported walnut and almonds have a wide range of package sizes and types as shown below. 42

44 Locally Packaged or Processed Almond and Walnut Company Product Image Comments Organic Nuts (Almond) Price: NT$210/ 100g 統一生機開發 OrganicShop (Under Uni-President group) Natural Nuts (Almond) Price: NT$200/ 200g Organic Nuts (Walnut) Price: NT$320/ 200g Natural Nuts (Walnut) Price: NT$200/ 200g VIVA Wasabi Almonds Price: NT$89-108/180g 聯華食品股份有限公司 Lian Hwa Foods Corp. VIVA Smoked Almonds Price: NT$95-119/180g VIVA Original Almonds Price: NT$95-120/180g 紅布朗國際有限公司 Home Brown Organic Salted Almond Price: NT$125/120g 金吉順食業股份有限公司 Chin Chi Shun Industrial Co., Ltd. Global Chief Garlic Almond Price: NT$85/180g 大潤發流通事業股份有限公司 RT-Mart Intl Ltd. RT-Mart Almond Price: NT$69/180g Source: APR Store Audit, September

45 3.8 Food Processing Sales For local food processor, they prefer lighter color of both almonds and walnuts. USDA has a standard for all processed almonds and walnuts that they can choose from. We can separate local processors into two different types: repackaging and confectionary. In Taiwan, the most popular is sweet almond. Bitter almonds are imported from China, and are used in Chinese medicine. Profile of Companies of Locally Packaged or Processed Almonds and Walnuts Company Name Contact Information Business Introduction 統一生機開發 OrganicShop (Under Uni-President group) 聯華食品股份有限公司 Lian Hwa Foods Corp. 紅布朗國際有限公司 Home Brown Organic Tel: Add: No.15, Dingkang Rd., Zhongli City, Taoyuan County, Taiwan Website: Products: packaged organic product Tel: Add: No.148, Sec. 1, Dihua St., Datong Dist., Taipei City, Taiwan Website: Products: snacks and foods Tel: Add: 22F, No.110, Sanduo 4th Rd., Lingya Dist, Kaohsiung City, Taiwan Website: No company website, but provide online shopping service on famous online shopping platform- PChome and the link is as below store.pchome.com.tw/homebrown Products: packaged organic product It was founded in 1999 and focus on organic product. Their products are imported form New Zealand, Australia, USA, and Italy and provide to over 500 organic stores in Taiwan. Lian Hwa was founded in 1951 in Taipei city. Its main business is manufacturing and selling various kinds of snacks and foods. The most famous branded almond is Viva. Their products are selling to the retail stores and supermarket. Home Brown Organic is selling its organic product through virtual store. It doesn t have any physical store. Product lines include dried fruits and nuts, grains, and drinking powder. 44

46 金吉順實業股份有限公司 Chin Chi Shun Industrial Co., Ltd. 大潤發流通事業股份有限公司 RT-Mart Intl Ltd. Tel: Add: No.236, Fengren Rd., Fengshan City, Kaohsiung County Website: chinchinshun.etaiwanfish.com Products: packaged dried sea food and nuts. Tel: Add: No.188, Sec. 1, Jiuzong Rd., Neihu Dist., Taipei City, Taiwan Website: Products: whole sales store Was founded in 1980 and specialized in food processing and manufacturing. Two major product categories: Sea food with brand name golden brand and nuts with brand name green series mountain. Main distribution channel are local stores and supermarket. It was founded in 1996 by Ruentex Group. Now, it has 24 retail stores in Taiwan. 3.9 Packaging Bulk whole almonds are imported in 50 lb carton boxes. Processed almonds (which have been cut into pieces and are more fragile) are packaged and sealed in 25 lb plastic bags, before being placed in a 50lb carton. All walnuts are packaged in 25lb/12.5kg plastic bags before placing in a 50lb carton. Imported pre-packaged brands, as shown above, are mainly packaged in sealed, air-proof aluminum cans. Some roasted almonds, like Kirkland, are packaged in a plastic bottle with a screw plastic cap. Locally re-packaged brands are sold in small plastic bags, ranging mainly between 100g and 200g. For organic nuts from OrganicShop, as shown above, the plastic bag is re-sealable for better preservation Labeling Bulk almonds and walnuts delivered to food processors are delivered in the importers own trade cartons which have the labeling required by the Council of Agriculture Regulations for Food Labeling and the Department of Food Sanitation Act, Articles These regulations are detailed in Chapter

47 Imported packaged almonds and walnuts and locally re-packaged almonds and walnuts have to comply with both the above labeling requirements and the Department of Health Regulation on Nutrition Labeling for Packaged Food, also detailed in Chapter Imported packaged almonds and walnuts, as shown in 3.7, usually have the labeling information, which has to be in Chinese, shown on a paper sticker which is prepared by the importer and attached by the manufacturer to the original packaging. Locally re-packaged almonds and walnuts for sale in retail stores usually have the labeling information requirements as part of their packaging. Some almonds and walnuts, however, are also sold in neighborhood markets in small plastic bags without any labeling. Any food imports that claim to be organic are required to show some certification as evidence of that, for example: USDA Organic Sanitation Standards Sanitation standards applicable to dried nuts and their packaging are referenced below. Sanitation Standards Applicable to Dried Nuts Sanitation Standard Standards for Pesticide Residue Limits in Foods Sanitation Standard for Edible Oils and Fats Sanitation Standard for Food Utensils, Containers and Packages Sanitation Standard for General Foods Standard for the Tolerance of Aflatoxin in foods Link nguagetype=2&secondmenuid=5&thirdmenuid= anguagetype=2&secondmenuid=5&thirdmenuid =194 anguagetype=2&secondmenuid=5&thirdmenuid =197 anguagetype=2&secondmenuid=5&thirdmenuid =199 anguagetype=2&secondmenuid=5&thirdmenuid =201 46

48 Sanitation Standard for Lecithin Standard for the Tolerance of Heavy Metals in Pulses and Legume Vegetables anguagetype=2&secondmenuid=5&thirdmenuid =217 anguagetype=2&secondmenuid=5&thirdmenuid = Overall Assessment Dried nuts have found multiple market applications in Taiwan both as a healthy snack food and as an ingredient and flavoring in pastries, cakes, ice cream and in beverages. Almonds are also used in Chinese medicine because of its perceived health benefits. As with frozen berries, growth in dried nuts has been largely driven by the spread of western-style coffee shops and their Taiwanese imitators and by the interest of younger consumers in new snacks, tastes and flavors. The main current source of supply is the USA and the task for Chilean exporters will be to match the quality control and price of the U.S. suppliers, which in 2009 have reduced the average unit price of walnuts by almost half. The largest part of the market is in bulk almonds and walnuts imported either directly by the larger food processors, mainly bakeries and confectionaries, or through importers and dealers serving the large number of small bakeries and confectionaries. The dried nuts are either re-packaged for sale as snack foods through retail stores or are used as ingredients in high value pastries and cakes. For entry into the bulk market, the options for Chile exporters are to focus on one or two existing importers who have established market access and reach to bakeries and confectionaries or to develop a specialized Chile importer who has a basket of Chilean products sufficient to support promotional and marketing activities. Direct entry into the retail market is probably best achieved through building direct relationships with one of the major retailers who is open to new product sources, such as RT Mart and City Super, although we would not rule out Costco and Carrefour despite their strong links to U.S. and Europe respectively. 47

49 CHAPTER IV. OLIVE OIL 4.1 Market Trends Extra Virgin Olive Oil Extra Virgin Olive Oil Imports, The import volume has gone down by 15% over the last 5 years; however, the import value has almost doubled which indicates a significant increase in landed costs Landed Cost of Imported Extra Olive Oil As shown, all the landed costs for these four major extra olive oil exporters have gone up substantially, especially Turkey and Greece. Unit cost US$/MT Country % Change Italy $3,280 $5,302 62% Spain $3,385 $4,473 32% Turkey $1,196 $4, % Greece $1,392 $3, % AAER (NT$-US$) % Source: Taiwan Customs 2009 MT Million US$ Source: Taiwan Customs 2009 Italy is the market leader in extra virgin olive oil and has expanded its market share from 49% in 2004 to 55% in Spain and Greece are its main competitors. In 2008, Italy and Spain have expanded market share at the expense of Turkey Imported Extra Virgin Olive Oil Market Share by Volume Italy 36% Others, 1% Turkey, 20% Spain 18% Greece 25% Italy 49% Spain 27% Greece 24% 48

50 Imported Extra Virgin Olive Oil Market Share by Volume Italy 49% Source: Taiwan Customs 2009 Spain 26% Greece 14% Others, 1% Turkey, 10% Italy 55% Spain 26% Greece 19% In the first half of 2009, the import volume has been strong growth in volume but not in value because of the huge increase in imported extra virgin olive oil from less expensive sources. Extra Virgin Olive Oil Imports First Half (Jan-Jun) 2009(Jan-Jun) Y-on-Y Growth Volume (MT) % Value (Million US$) % Source: Taiwan Customs 2009 As shown below, Greece has expanded its market share by volume substantially from 14% in the first half year of 2008 to 37% in the first half year of 2009 and become the second large source of extra virgin olive oil in Taiwan. Australia also gained some market share by exporting much less expensive extra virgin olive oil to Taiwan. Year-on-Year Comparison of Major Sources of Extra Virgin Olive Oil Major 2008(Jan-Jun) 2009(Jan-Jun) Exporter % of total Avg. Landed % of total Avg. Landed import volume Cost (US$/MT) import volume Cost (US$/MT) Italy 43% $5,772 40% $5,094 Spain 34% $5,031 13% $3,753 Greece 14% $3,934 37% $3,485 Chile 4% $7,030 1% $7,447 Australia 0% $9,223 5% $3,992 Others 5% - 4% - Total 100% $5, % $4,260 Source: Taiwan Customs

51 Italy, which is regarded as the premium source of extra virgin olive oil, has managed to retain its market leadership but Spain has seen a sharp decline in market share despite reducing its price closer to Greece. Extra Virgin Olive Oil from Chile is now the most expensive source and its has lost 3% market share. Pure Olive Oil Pure Olive Oil Imports, Pure olive oil imports have remained stable with a total import volume in 2008 of about 3,100 MT and a total landed value of about US$15 million. Landed Cost of Pure Olive Oil Compare with the extra virgin olive oil, pure olive oil landed cost has not increased as significantly as Extra Virgin Olive Oil Unit cost US$/MT Country % Change Italy $3,71 5 $4,602 24% Spain $3,458 $4,592 33% Greece $4,332 $8,967 48% AAER (NT$-US$) % Source: Taiwan Customs 2009 MT Million US$ Source: Taiwan Customs 2009 Italy remains the dominant supplier of pure olive oil. It has expanded its dominant share of imported pure olive oil from 75% in 2004 to 84% in Spain is the only other major supplier. Imported Pure Olive Oil Market Share by Volume Italy 74% Spain 23% Greece 2% Others, 1% Italy 84% Spain 15% Others 1% 50

52 Imported Pure Olive Oil Market Share by Value Italy 75% Spain 22% Greece 2% Others, 1% Italy 84% Spain 15% Others 1% Source: Taiwan Customs 2009 In the first half of 2009, total volumes and values of pure olive oil have posted significant decreases because of the overall economic recession. Pure Olive Oil Imports First Half (Jan-Jun) 2009(Jan-Jun) Y-on-Y Growth Volume (MT) 1,743 1,068-38% Value (Million US$) % Comparing two olive oil categories, imports of pure olive oil have remained at a little over 3,000 MT since 2006 with a small increase in landed prices. Overall imports of extra virgin oil have declined in volume against their peak in 2004, but have increased 68% in landed value because of the increase in prices Breakdown of Olive Oil Imports Products CAGR Extra Virgin MT % Olive oil US$ million % Refined olive MT 3,238 3,681 3,077 3,096 3, % and its fractions US$ million % Total MT 4,119 4,335 3,823 3,759 3, % US$ million % Source: Taiwan Customs

53 4.2 Importers Extra Virgin Olive Oil Market Share by Value 19% Diamond Shine Int'l Co. Ltd 53% 7% 7% 14% Hsei-Yi Co. Ltd RT-Mart International Limited Select Chile Import & Export Co. Others Extra virgin olive oil products are imported by many large and small trading companies. In some cases, importers import pure olive oil together with extra virgin olive oil products. However, the import value of each extra virgin olive oil importer is relatively less than pure olive oil one. The leading extra virgin olive oil importer is Diamond Shine International, a local trading company importing extra virgin olive oil products only from Greece. Hsei-Yi, the designated agent that sells Italian olive oil brand, Olitalia, in Taiwan, is the second largest extra virgin olive oil importer. RT-Mart International Limited imports extra virgin olive oil products from Italy only for their own stores. Select Chile Import & Export focus on Chile wine and olive oil import business. They import Chile olive oil brand, Olave, only. Extra Virgin Olive Oil Importers by Import Value 100 US$ million US$ million US$ million US$ 50,000 and under Source: Taiwan Trade 2009 Reviewing importing value, there is a long tail of mainly Taiwanese trading companies that import small amounts of extra virgin olive oil, including 55 companies that import 52

54 less than US$50,000 a year. Extra virgin olive oil is thus mainly imported by small local trading companies with small amounts of value. Pure Olive Oil Market Share by Import Value 31% 25% Costco President Taiwan Inc. Standard Foods Corp. Grace Jade Inc. 5% 6% 8% 25% Mon-ney Enterprise Co. Ltd Far Eastern Dept. Store Others Source: Taiwan Trade 2009 Top two pure olive oil importers, Costco and Standard Foods, hold half of imported pure olive oil market. Costco, one of the leading membership warehouses, holds almost 25% of imported olive oil market and provides various kinds of olive oil products from different sources such as Italy and Australia. Standard Foods Corp., which used to be a subsidiary of Quaker Oats Company in Taiwan, gained the operation right in 1986 and changed the name to Standard Foods Corp. Now Standard Foods is one of Taiwan leading nutrition foods companies. They produce olive oil products in Italy and import by themselves. Grace Jade Inc. and Mon-Ney are local trade companies. Grace Jade imports olive oil mainly from Spain and Italy. Mon-Ney purchased their products only from Spain. Far-Eastern Department Store, one of Taiwan retail groups, imports olive oil mainly from France and Italy. Pure Olive Oil Importers by Import Value US$ million US$ million US$ million US$ million US$0.2 million and under Source: Taiwan Trade

55 Comparing two olive oil categories, we found that the number of pure olive oil importers is much larger than that of extra virgin olive oil. As with extra virgin olive oil, there is long tail effect as well. Most of the Taiwanese trading companies import small amounts of pure olive oil, including 82 companies that import less than US$200,000 a year. Among these importers, one importer of Chilean olive oil has been identified. Select Chile Import & Export Co. was founded in Its major business is importing wine from Chile and it also import extra virgin olive oil from Chile. 4.3 Importers Selection Criteria Importers Olive Oil Selection Criteria Importance Attributes Country of origin Brand Awareness, Quality Price Product certificate Size and appearance Source: APR Trade Interviews Based on our interviews with importers, we found that pure olive oil and extra virgin olive oil are pretty much the same from the perspective of importers. Olive oil market is country of origin focused. Consumers have been more aware of Italian imported olive oil, compared to Spain and Greece olive oil, because country of origin also represents the quality of olive oil products. In other words, quality is a critical concern not only for importers but also for consumers. Importers appreciate the quality and product brand awareness of Italian olive oil, comparing them with other countries ones. Importers purchasing decisions are mainly influenced by consistent quality, uniqueness and taste of the product. At present, they also pay attention to the consistency of supply, since the high-demand on olive oil from Mainland China has threatened the amount of olive oil supply to other countries. Regarding organic aspect of olive oil products, importers have put more attention on it because the market seems to be more concerned about healthy food. Nevertheless, price is still a concern while purchasing organic olive oil products for the general public. 54

56 Importers prefer pure olive oil with the average size of 750ml to 1 liter per pack and extra virgin olive oil with the average size of 500ml to 1 liter for consumers. For food service clients, 3-5 liters per pack is more preferable for both categories. The size preference is based on fresh and preservation concern. Once olive oil is opened, oil deterioration easily occurs. Thus, small size is more convenient for general household. Regarding both categories, the preferred packaging is glass bottle for 500ml/750ml/1 liter pack and aluminum container for 3-5 liters pack. A glass bottle is easier to present the color of oil and aluminum container is more ideal to prevent oil from deterioration. Importers usually find their suppliers by attending food shows abroad. They purchase olive oil ordering the quantity they need and paying by letter of credits. Some small trading companies on Taiwan market have been the designated agents who sell Italian olive oil brand such as Filippo Berio and Olitalia. Importers usually do quality control by having Bureau of Standard test acidity and water content of olive oil every three months. 4.4 Distribution Channel in Taiwan Importers usually store olive oil in warehouses with a normal room temperature. Olive oil needs to be stored in cool and dry place as well to avoid direct sunlight Imported Pure & Extra Virgin Olive Oil Distribution Channels Importer Intermediat Retailer Trading Company 5% Distributor 35% Food Processor 10% 30% Hypermarket Supermarket Hotel and Restaurants Hypermarket Supermarket International Retailer 3% Hypermarket Source: APR Interviews 55

57 Pure olive oil, including Standard Food s Great Day brand, is sold through supermarkets and hypermarket for household consumption as well as to food service outlets as cooking oil. Some pure olive oil is also sold to local food processors, such as Cheng I and Cheng Tong, for blending with other edible oils and/or re-packaging for sale mainly to food service as cooking oil. Extra virgin olive oil is sold primarily through supermarkets and hypermarkets for household consumption, with small amounts sold to international hotels and western restaurants for salad dressing and other western menu dressing. Hypermarkets including Costco and Carrefour and supermarkets including Wellcome and RT Mart, import pure and extra virgin olive oil for their own store outlets. 4.5 Retail Sales Retailers Olive Oil Selection Criteria Importance Attributes Brand image Price, Size and appearance, Packaging Country of origin Product certificate Taste and flavor, Source: APR Trade Interviews In the supermarkets, there is usually a section for imported olive oil, displayed with other oil products such as soybean oil, sunflower seed oil and mixed oil locally made. In the supermarkets there are often at least 4 shelves for various vegetable oils. A large range of olive oil brands can be found in the high-end supermarket such as Breeze Center. They usually collect a full series of for each brand. The most prevalent olive oil packaging material in the supermarkets is glass bottle. The most common sizes are from 500ml to 1L per pack. There are also 3L olive oil products in aluminum containers. The shelves are mainly occupied by Italian olive oil and followed by Spanish ones. Hypermarkets usually have a section for olive oil, displayed with other kinds of oil such as mixed oil, grape seed oil, soybean oil with about 6-8 long shelves. Some 56

58 hypermarkets prefer to have a whole section for imported olive oil products only and divide them based on the country of origin, so it will be very clear for the customer to choose first from the product origin and the product itself then. The most common size varies from 500ml to 3L per pack. Glass bottle is still the main packaging material. Imported olive oil in the hypermarkets is mainly occupied by Italy and Spain. The most often seen imported brands in the retail stores are shown below. Most Popular Imported Extra Virgin Olive Oil Brands in Retail Stores Borges Importer: Mon-Ney Colavita Importer: Concordia Enterprise Overseas Inc. Extra Virgin Olive Oil Extra Virgin Olive Oil Country of Origin: Spain Country of Origin: Italy Price: NT$420/1L Price: NT$599/250ML BCosta d Oro Importer: RT Mart Huile d Olive Importer: Presicarre Co International Limited (Top) French Extra (Top) L Extra Extra Virgin Virgin Olive Oil Olive Oil Country of Origin: Country of Origin: Italy French Price: NT$169/1L Price: NT$299/500ML (Bottom) Olitalia Extra (Bottom) Italian Extra Virgin Olive Oil Virgin Olive Oil Country of Origin: Italy Country of Origin: Italy Price: NT$249/500ML Price: NT$210/250ML De Cecco Importer: Gourmet s Frantoio Importer: Costco Partner Ltd Extra Virgin Olive Oil Extra Virgin Olive Oil Country of Origin: Italy Country of Origin: Price: NT$365/750ML Australia Price: NT$589/3L 57

59 Golden Ceres Importer: Chen Hsu Great Day Importer: Standard Corp. Foods Corp 100% Extra Virgin Olive Extra Virgin Olive Oil Oil Country of Origin: Italy Country of Origin: Spain Price: NT$ Price: NT$249/1000ML /500ML Gusti Italia Importer: Cojaft Kirkland Importer: Costco International Co Ltd Signature Extra Virgin Olive Oil 100% Extra Virgin Oil Country of Origin: Itlay Country of Origin: Italy. Price: NT$599/1000ML Price: NT$349.5/2L La Espanola Importer: Chen Hsu Ottavia Importer: The Green Corp. Olive Limited 100% Extra Virgin Olive Extra Virgin Olive Oil Oil Country of Origin: Spain Country of Origin: Spain Price: NT$349/1000ML Price: NT$289/750ML Purolive Importer: The Green Sofia Importer: En Gedi Olive Limited International Co., Ltd. Organic Extra Olive Oil Extra Virgin Olive Oil Country of Origin: Italy Country of Origin: Greek Price: NT$552/750ML Price: NT$550/250ML Tacama Importer: Presicarre Co Ybarra Importer: Akebond Formosa Co, Extra Virgin Olive Oil Extra Virgin Olive Oil Country of Origin: Chile Country of Origin: Spain Price: NT$459/500ML Price: NT$215/500ML 58

60 Olave Importer: Select Chile Import & Export Co. Country of origin: Chile (Top left) Organic Extra Virgin Olive Oil (Basil/ Garlic/Lemon) Price: NT$ /250ML (Top right) Extra Virgin Olive Oil Price: NT$408/1L, NT$388/500ML (Bottom) Organic Extra Virgin Olive Oil Price: NT$488/500ML, NT$ /250ML Cheng-I Importer: Cheng-I Food Co. Ltd Super 12 Evtra Virgin Added Oil Country of Origin: Spain Source: APR Store Audit, September, 2009 Price: NT$ / 2.4L Extra Virgin Olive Oil from organic farming needs to have certification as shown below. 59

61 4.6 Food Service Sales Pure olive oil is mainly sold to restaurants and hotels both for use as a salad/food dressing and also as cooking oil in some Italian and western-style restaurants. The perceived health benefit of pure olive oil has led to increased usage as cooking oil but price is still a major barrier when compared with soybean oil and other vegetable oils. This is why some food processors have mixed pure olive oil with other low cost edible oils. Pure olive oil is distributed directly to hotels and restaurant chains by the major importers and also through large networks of dealerships to independent restaurants. 4.7 Packaging Extra virgin olive oil is mainly imported in glass bottles with an aluminum cap, although there are some imports which are packaged in decorative ceramic bottles and others in aluminum cans. Packaging weight of extra virgin olive oil is varied. The most common sizes are from 500ml to 1L per pack. Imported pure olive oil is usually imported in larger glass bottles or aluminum cans, usually of 3 liters, for sales through hypermarkets and directly to food service outlets. Some pure olive oil is mixed with vegetable oil and re-packaged as cooking oil, mainly for food service outlets 4.8 Labeling Packaged extra virgin olive oil and pure olive oil have to comply with the regulations contained in the Council of Agriculture Regulations for Food Labeling, the Department of Health Food Sanitation Act, Articles and the Department of Health Regulation on Nutrition Labeling for Packaged Food, all of which are detailed in Chapter We would particularly draw attention to Article 3 of the Department of Health Regulation on Nutrition Labeling for Packaged Food, which requires products to list, among other items, the trans fat on the nutrition chart. However, the regulation also allows that The nutrient contents of energy, protein, fat, 60

62 carbohydrate, sodium, saturated fat, sugars and trans fat may be labeled as "0" if it meets the criteria in the following chart (chart given). Trans fat refers to edible oils that become non-conjugated fatty acids after partial hydrogenation. The full regulation is referenced in Chapter For organic olive oil, the labeling must provide evidence of its organic certification e.g. USDA Organic. The labeling information has to be provided in Chinese and it is the responsibility of the manufacturer and importer to comply with the regulations. In most of cases the information is provided by means of a sticker that is usually prepared by the importer and sent to the exporter for attachment to the original packaging. 4.9 Sanitation Standards Sanitation standards that apply to olive oil and its packaging are referenced below. The main concerns are limits on heavy metals, erucic acid, food additives and aflatoxin. Sanitation Standards Applicable to Olive Oil Sanitation Standard Standards for Pesticide Residue Limits in Foods Sanitation Standard for Edible oils and Fats Sanitation Standard for Food Utensils, Containers and Packages Sanitation Standard for General Foods Standard for the Tolerance of Aflatoxin in foods Link nguagetype=2&secondmenuid=5&thirdmenuid= anguagetype=2&secondmenuid=5&thirdmenuid =194 anguagetype=2&secondmenuid=5&thirdmenuid =197 anguagetype=2&secondmenuid=5&thirdmenuid =199 anguagetype=2&secondmenuid=5&thirdmenuid =201 61

63 4.10 Overall Assessment The olive oil from Chile currently on the market includes organic extra virgin olive oil and organic extra virgin olive oil with garlic, basil and lemon as well as extra virgin olive oil. Because of this high proportion of premium olive oil, the average landed price of extra virgin olive oil from Chile is now the most expensive on the market, almost 50% higher than the averaged landed price of Italian extra virgin olive oil. We believe, however, that this concentration on organic and premium olive oil in a market where there are so many competing brands is a sound strategy. As indicated in our section on retail sales, there is a wide range of prices for extra virgin olive oil in the retail stores, ranging from NT$200 per liter to over NT$2,000 per liter, depending on the label, the type of packaging and the quality of the olive oil. The term Organic with supporting certification is a powerful discriminator. If not already in place, we would also suggest consideration of distribution through specialty organic shops and Internet sales as additional sales channels. Chile may also want to consider adding additional extra virgin olive oil brands at a lower cost level in the main hypermarkets and supermarkets to enlarge its market share in the non-premium price ranges. We think this can be done without damaging the organic extra virgin olive oil brands. In the context of this study, we have not interviewed Select Chile Import & Export Co. or Presicarre Co, the two importers of Chile olive oil that we have identified. However we noticed that Select Chile Import and Export Co also imports Chilean wine and this would seem to be a good fit since the markets for wine and extra virgin olive oil have some similarities: foodservice in premium restaurants and hotels and up-market supermarkets and hypermarkets. Presicarre, on the other hand, gives direct access to the Carrefour hypermarkets. Again, if not already in place, we would also suggest consideration of OrganicShop, which is also under the Uni-President Group and provides access to over 500 organic shops. We have not found any examples of Chilean product in the pure olive oil market, in which Standard Foods and Costco are the major players. This segment of the market operates a little differently from the extra virgin olive oil market since it is non-premium and is aiming at both the salad/food dressing market in non-premium foodservice and 62

64 household use and also the cooking oil market, where it is sometimes mixed with other edible oils. For this market, we would recommend Chile either seeking a tie-up with a hypermarket or supermarket chain, such as Carrefour and RT Mart, or with a Taiwan food processor with strong links in the foodservice segment. 63

65 CHAPTER V. CONDENSED JUICE 5.1 Market Trends Condensed Juice Imports, Both the volume and value of imports have grown steadily. 20,000 10, , ,903 15,242 17,545 14, Landed Cost of Imported Condensed Juice Price of condensed orange juice from U.S. has decreased significantly Unit cost US$/MT Country % Change Brazil $1,12 8 $1,835 62% United States $1,74 9 $1,209-30% China $1,147 $609 47% AAER (NT$-US$) % Source: Taiwan Customs 2009 MT Million US$ Source: Taiwan Customs Breakdown of Condensed Juice Imports Products CAGR Apple Juice, MT 2,812 3,079 3,681 4,287 2, % Concentrated US$ million % Orange Juice, MT 6,621 6,890 6,183 4,853 7, % Condensed US$ million % Grape Juice, MT 3,447 4,118 5,217 6,950 6, % Condensed US$ million % Others MT % US$ million % Total MT 14,837 15,242 16,903 17,545 19, % US$ million % Source: Taiwan Customs 2009 Note: Others include grapefruit juice, any other single citrus juice, pineapple juice, tomato juice, mango juice, and mixtures juice. 64

66 The main imported condensed juices are orange, grape and apple juice. The supply of orange juice has shifted from Brazil to USA because USA orange yield has been recovering from the 1980's freezes and sell worldwide with a relatively cheaper price. Israel is the third major supplier. Imported Orange Condensed Juice Market Share By Volume Others 3% Israel 21% Brazil 76% Others 3% USA 41% Brazil 28% Israel 28% By Value Others 3% Israel 21% Brazil 76% Others 3% USA 29% Brazil 36% Israel 32% Source: Taiwan Customs 2009 Spain is the major supplier for condensed grapes because the growing environment in Spain makes the grapes sweet and less sour, which fit the Taiwanese taste the most. China and Chile has taken USA s market share over years. Imported Grape Condensed Juice Market Share By Volume Others 5% USA 27% Italy 19% Spain 49% Others 15% China 13% Spain USA 48% 11% Chile 12% 65

67 By Value USA 38% Others, 5% Spain 43% China 6% USA 16% Others, 13% Spain 53% Italy, 14% Chile 12% Source: Taiwan Customs 2009 China is almost the sole supplier of condensed apple juice. Because of the financial crisis in 2008, the apple condensed juice maker was suffering and not able to produce and condensed apple juice supply declined by 11% compared with Imported Apple Condensed Juice Market Share by Volume By Volume Others 3% China 97% Others 2% China 98% By Value Others 7% China 93% Others 3% China 97% Source: Taiwan Customs 2009 Condensed Juice Imports First Half (Jan-Jun) 2009(Jan-Jun) Y-on-Y Growth Volume (MT) 8,345 7,916-5% Value (Million US$) % The overall decline is mainly because of reduced apple condensed juice from China. Condensed orange juice and condensed grape juice is increasing. In recent study, grapes have been shown to contain antioxidants and the demand from Taiwanese 66

68 people has increased. Due to the supply of condensed apple juice has decreased, the price of apple juice is increasing, Condensed orange juice has slightly increased because USA started to export its surplus. 5.2 Importers Orange Condensed Juice Market Share by Value 28% 38% Wei Chuan Foods Swire Coca-Cola Beverages, Taiwan 34% Others Source: Taiwan Trade 2009 Wei Chuan processes their own brand Daily C which is the most well-known orange juice in Taiwan. Swire Coca-cola authorize Taiwan Hon Chuan Enterprise Co., Ltd. to manufacture Minute Maid for them. Orange Condensed Juice Importers by Import Value 5 US$2.5-5Million US$1-1.5 Million US$ Million US$ million US$ million 0 US$50,000 and under Source: Taiwan Trade

69 Grape Condensed Juice Market Share by Value 15% 18% 23% 44% Taiwan Green Nation Chia Meei Food Industrial Wei Chuan Foods Others Source: Taiwan Trade 2009 Taiwan Green Nation imports condensed grapes juice from Spain, Italy and U.S.. Chia Meei is the biggest beverage OEM companies in Taiwan. Wei Chuan processes for their own brand Daily C which is also the most well-known grape juice in Taiwan. Grape Condensed Juice Importers by Import Value US$ 2.5-5Million US$ Million US$ Million US$ Million 0 US$ Million Source: Taiwan Trade 2009 Apple Condensed Juice Market Share by Value 36% 17% 23% 24% Chia Meei Food Industrial Babi International Taiwan Green Nation Source: Taiwan Trade 2009 Chia Meei is the biggest beverage OEM companies in Taiwan. It manufactures many beverages for branded companies. Babi International, which is authorized to use Tree-Top trademark to distribute in Taiwan, collaborates with a local manufacturing company to repackage and put on their label. 68

70 Apple Condensed Juice Importers by Import Value 5 US$ Million US$ Million US$ Million US$ million Source: Taiwan Trade 2009 Four importers imported USD 1,155,189 (total volume 741MT) condensed grape juice from Chile in Importers of Chile Condensed Juice Grape Condensed Juice Company Name Contact info Comments 台灣綠源股份有限公司 Taiwan Green Nation Corporation. 佳美食品工業股份有限公司 Chia Meei Food Industrial Corp. Tel: Fax: tradingdept@greennation.com.tw Website: Add: 10F-1, No. 84, Sec. 2, Fu- Hsing S. Rd., Da-An District, Taipei City, Taiwan 106 Tel: Fax: juice@chiameei.com.tw Website: Add: 56, Ta-Wei Rd., Ta-Li City Tauchung County 412 The import value for condensed juice is more than USD 800,000. The import value for condensed juice is around USD 200,000. 連豐香料企業有限公司 Lines & Tendency Corporation 蓓醴股份有限公司 Winemaker Partner Co., Ltd Tel : Fax : info@lntcorporation.com Add : 5F, No.52 Zhouzi Street, Neihu District Taipei, Tel : Fax : winemakerpartner@hotmail.com Website: Add: 1F, No.5, Houzhuang 7th St.,Beitun District, Taichung, The import value for condensed juice is around USD 80,000. The import value for condensed juice is less than USD 50,

71 5.3 Importers Selection Criteria During the interview, both Lines & Tendency Corporation and Babi International mentioned to us the random testing quality control is done by the importers before delivering to food processors. However, in most of the cases, the relationship between importers and suppliers is trustworthy. They do strict quality control only when criteria change or to new suppliers. Importers Selection Criteria for Condensed Juice Importance Attributes Packaging, Supplier s co-operation Taste and flavor Country of origin Price Size and appearance Source: APR Trade Interviews Importers usually paid by Free on Board (FOB) and are responsible for the shipping. Because the product is liquid juice, importers need to avoid damage during shipping. Therefore, they request suppliers to pay special attention to the packaging material. Importers care the most about the packaging. Most of the condensed juice is packed in coated metal drums because coated metal drum is firm and solid as well as easy to stack. Condensed Juice is packed into 55 gallon coated metal drums and shipped to Taiwan. Importers then directly sell to the food processors. There is a standard measurement for condensed juice, Brix and Acid. Brix is used to measure the dissolved sugar-to-water mass ratio of a liquid. Lines & Tendency Corporation told us different food processors have different requirement for Brix. While doing quality control, the QC staff will use equipment to determine if the condensed juice is what they are looking for. In many cases, the requirements are made by food processors. Furthermore, for those self-imported food processors, authorized to use trademark like Coca-Cola, Tree Top, and Tropicana, have an obligation to send their final product back to exam. Except for orange juice, the country of origin for both apple and grape did not change too much within 5 years. One of the reasons, as we mentioned before, is the relationship between suppliers and importers are strong. For concentrated orange 70

72 juice, supply has shifted from Brazil to USA because USA orange yield has been recovering from the 1980's freezes. Comparing with other attributes, price and size and appearance are the least things for importers to take into concern. For those food processors with big demand, importers will ship directly with their original packing from suppliers. Other than that, they will repack to smaller plastic bottle to dealer and for food service 5.4 Locally Produced Condensed Juice Taiwan has locally produced fruit and vegetable juice for food service industry. Fruit and vegetable juice including concentrated fruit and vegetable juice, 100% natural fruit and vegetable juice, 30% fruit and vegetable juice, 10%-30% fruit and vegetable juice. There is, however, very little supply of locally produced condensed juice. It is mainly to help the local growers to clear surplus stocks. There are 5 local producers we have identified in the following chart, which produce a total of over 356 MT with US$242 million a year of fruit and vegetable juice. On average, the unit price for locally produced concentrated juice is higher than imported concentrated juice. Local Condensed Juice Producer Company Name Contact info Comments Was founded in 1986 with a focus on ingredient supply for restaurants. Humble beginning 鴻栗食品企業有限公司 Hong Li Food Enterprise Co., Ltd Tel: Add: No.38-50, Gongdong 1st Rd., Shengang Township, Changhua County 509, Taiwan Website: Products: Condensed Juice, Instant Coffee started with wholesale operation. Success quickly leads to expansion established a wholly owned subsidiary, Hong Li Food. Today, Tangwell focuses on manufacturing and Hong Li focuses on exports. Products are sold to well known restaurants across Asia, Australia, United States, and Europe. 71

73 Tel: Add: No.7, Aly. 26, Renyi Ln., 金饌生化科技有限公司 Jin Xiushui Township, Changhua Zhuan Lifesciences County 504, Taiwan Enterprise Co., Ltd Website: Products: Condensed Juice, Juice Powder Tel: Add: No.150, Yongjing St., 瑞成冷果食品工廠 Yongjing Township, Changhua Jui-Cheng Frozen Food* County 512, Taiwan Products: Condensed Juice, Ice Stick Tel: Add: No.139, Minzu Rd., Shanhua Township, Tainan 親果樂食品工廠 County 741, Taiwan QinGuoLe Food* Products: Condensed Juice, Canned Juice Jin Zhuan s business include OEM and products like concentrate Juice, juice powder, non-natural flavor powder. Not available Not available 竹田農產產業有限公司 Chu Tien Agriculture Co Ltd. Tel: Add: No.67, Dongzhu, Fuli Township, Hualien County Website: Products: Condensed Juice Chu Tien s products are mainly sell to food service. However, they have a small portion of products sell directly to end customers through their website. Note: *No official English Name 5.5 Distribution Channel in Taiwan 80% of the end products are sold through hypermarket, supermarket and convenience store to the consumers. A small portion of non-processed condensed juice is sold to food service, like restaurants, breakfast vendors and hotels through their dealers. 72

74 Imported Condensed Juice Distribution Channels Importer Intermediat Retailer Trading Company 54% Food Processor Hypermarket Supermarket Convenience Store 10% Dealer Food Service Hypermarket Supermarket 30% Convenience Store Branded Food Company 3% Dealer Food Service Source: APR Trade Interviews 64% of the imported condensed juice is imported by professional importers, which ship condensed juice either directly to the food processors own factory or to OEM companies for well-known brands in Taiwan. In addition, professional importers will repackage and sell to small enterprises, like small food processors, wet markets, hotels and restaurants, through dealers. The juice making factories mainly repackage the condensed juice for sale as a beverage for consumers under their own brand name. In most of the cases, these beverages are sold through the hypermarket, supermarket, and convenience chain stores by the food processor s own distribution channel. Branded food companies like Babi International, Wei Chuan and Swire Coca-cola import condensed juice for their own branded product usage. Babi International, which is authorized to use Tree-Top trademark for distribution in Taiwan, collaborates with a local manufacturing company to repackage and put on their label. Wei Chuan and Swire Coca-cola own their own factories to do this. 73

75 5.6 Retail Sales The major supermarkets and hypermarkets normally buy packaged fruit juice from food processors or their OEMs. Only Costco imports Tropicana orange juice and Kirkland grape juice from USA. It is interesting to see that Tropicana in USA has an excusive agreement with Costco, which can sell original Tropicana in Taiwan. However, the Tropicana sold via local hypermarket, supermarket and convenience stores is manufactured by Taisun, a local food company. The most often seen imported brands in the retail stores are shown below. Most Popular Imported Condensed Juice Brands in Retail Stores Brand Product Image Importers Comments Kirkland Signature Costco Newman s own Grape Juice Country of Origin: USA Price:NT$174.5/2.84L Tropicana Costco Tropicana 100% Orange Juice Country of Origin: USA Price:NT$239.5/2.84L Golden Circle Wellcome Taiwan company Ltd. Tomato Juice Country of Origin: Australia Price:NT$49/1000ML First Choice Wellcome Taiwan company Ltd. Grape Juice/ Apple Juice Country of Origin: Australia Price: NT$115/2L Source: APR Store Audit, September,

76 Retailers Packaged Condensed Juice Selection Criteria Importance Attributes Brand image, Packaging, Size and appearance Price Taste and flavor, Suppliers Country of origin Source: APR Trade Interviews Due to the beverage market is saturated in Taiwan, there are plenty of flavors that consumers can choose from. Consumers are expecting supermarkets and hypermarkets can provide an all-in-one shopping experience. Wellcome, a chain supermarket in Taiwan, signs a yearly contact with its suppliers, and on a daily basis, the mother company will collect demand from each store and ask for the requested volume of products. Suppliers will then deliver it through their distribution network. In Wellcome, the staff will set up promotion plans based on the market competition and their quota of purchasing. Brand image, such as company s reputation, is the main concern for retailers. This will directly influence consumers purchasing decision. Also, company s reputation means on time delivery for retailers. They want to minimize the opportunity cost. Hypermarket, supermarket, and convenience stores have different requirements for size and packaging. The attractiveness of the packaging is another important influential driver for the consumer. Because of growing health awareness among Taiwanese consumers, packaging that emphasizes information on nutritional benefit is highly accepted For hypermarkets, the target customers are family, therefore hypermarket will request big size with easy to stack packaging. For convenience store, target customers are those with an immediate need and therefore convenience stores request pocket size package, which is easier to carry. Since the beverage market is saturated and can be seen as a commodity product., condensed juice sales have been pretty steady over the years and this is the key reason that retailer are very optimistic of the future trend as long as there are some new flavor in condensed juice. The competition is high in all market segments. Retailers are highly price sensitive. 75

77 The sanitation inspection certificate and supplier s quality control is another of the evaluations for retailer to put the product on their shelf. Products in the current retail market emphasize on the benefit of the nutrition. Therefore, the country of origin is the least concern for retailers. Locally Packaged or Processed Condensed Juice Company Product Image Comments 佳美食品工業股份有限公司 Chia Meei Food Indus. Co. Nectar Tomato Juice Price: NT$158.3/ 960ML 統一企業股份有限公司 Uni-President Ent. Co. Fresh Taste From The Orchard Orange Juice Price: NT$48-59/900ML Fresh Taste From The Orchard Grape Juice Price: NT$48-59/900ML Daily C Orange Juice Price: NT$57-65/900ML Price: NT$69/1250ML 味全食品工業股份有限公司 Daily C Grape Juice Price: NT$69/1250ML Wei Chuan Foods Co. Wei Chuan Orange Juice Price: NT$20/946ML 光泉牧場股份有限公司 Kuang Chuan Dairy Co., Ltd Sian Guo Yuan* Orange Juice Price: NT$63-69/1480ML Price: NT$47/960ML 76

78 Sian Guo Yuan* Grape Juice Price: NT$69/1480ML 台灣比菲多醱酵股份有限公司 Taiwan Befitas Bio-Tech Laboratory Inc Florida Orange Juice Price: NT$125/3L 家樂福 Presicarre (Carrefour s Taiwan division) Carrefour Grape Juice Price: NT$40/900ML 宏全國際股份有限公司 Taiwan Hon Chuan Enterprise Co., Ltd. Minute Mate Orange Juice Price: NT$29-45/1250ML Minute Mate Grapefruit Juice Price: NT$29-39/1250ML 泰山企業股份有限公司 Taisun Enterprise Co., Ltd. Tropicana 100% Orange Juice Price: NT$59/900ML 家鄉事業股份有限公司 Country House Inc Sunkist 100% Grape Juice Price: NT$49/949ML *No official English product name. 5.7 Food Processing Sales Chia Meei is the biggest condensed juice provider in Taiwan. Chia Meei also provide OEM service for their customers. Apart from that, Chia Meei is also the supplier for Uni-President, I-Mei and others. 77

79 The importer normally receives the condensed juice in metal coated drums and directly sends for processing. We have ranked the food processors selection criteria for condensed juice according to respondents on the following scale. Again it is more a qualitative assessment rather than a statistical one. Processors Packaged Condensed Juice Selection Criteria Importance Attributes Flavor and taste Company s reputation, Price Suppliers Packaging Country of origin Source: APR Trade Interviews Flavor and taste are the most important concerns for food processors. When purchasing condensed juice, they would specify their need of the taste and flavor to their suppliers. However, country of origin is the least thing they will take into consideration. It is difficult to judge what a good flavor or taste of the condensed juice is, since each of the beverage finished product requires a different combination of flavors. However, there is equipment that can measure the brix and acid, which is widely used by importers and food processors. The most popular Brix is 66±1 for orange, 70±1 for apple, and 68±1 for grapes. As we mentioned before, the reputation and stability of the importers and the suppliers is very important for food processors. They cannot take the chance of under-utilization of their factories since beverages are commodity products and there is a low margin for food processing. In addition, since the big food processing companies buy in bulk, they expect importers to give them a competitive discount. The major exporting country for condensed apple juice is China; Spain for condensed grape juice and USA and Brazil for condensed orange juice. As long as the previous mentioned criteria have been reached with a reasonable price, food processing company would not care too much about the country of origin. 78

80 Profile of Companies of Locally Packaged or Processed Condensed Juice Company Name Contact Information Business Introduction 佳美食品工業股份有 限公司 Chia Meei Food Industrial Co. Tel: Add: 56, Ta-Wei Rd., Ta-Li City Taichung Hsein Website: Products: Condensed Juice, Canned Food, and Frozen vegetables Chia Meei was found in it is the biggest juice, condensed juice, and fruit can provider in Taiwan. 味全食品工業股份有限公司 Wei Chuan Foods Co. 統一企業股份有限公司 Uni-President Enterprises Co. 光泉牧場股份有限公司 Kuang Chuan Dairy Co., Ltd. 台灣比菲多醱酵股份有限公司 Taiwan Befitas Bio-Tech Laboratory Inc 家樂福 Presicarre (Carrefour s Taiwan division One of the famous food Tel: manufacturing companies in Add: NO.125, Sungjang Rd, Taipei, Taiwan. All the products sell Taiwan: through the supermarket and Products: Drink, Milk, Sauce, General chain stores, including its own food, Instant food, and Health food Matsusei supermarket.. Founded in 1967, has become the Tel: biggest food enterprise in Taiwan. Add: 301,Chung Cheng Rd., It is separated into 6 groups: Yungkang City, Tainan Hsien, Taiwan provisions, dairy and beverage, Website: instant food, general food, Products: Milk, Drink, Noodles, consumer health, and logistic. It Bread, general Food, Provisions, owns the most growing Health Food. convenience chain store, 7/11. Tel: Was founded in 1956 as a milk Add: 3F., No.502, Rui Guang Rd, Nei provider in Taiwan. Its product is Hu District, Taipei City, Taiwan disturbed through Supermarket Website: and their own convenience store, Products: Diary and Beverage Hi-Life. Tel: Founded in 2001, Taiwan Befitas Add: 2F-1, No.500, Sec.4, Chung Bio-Tech Laboratory started a Hsiao E. Rd., Taipei, Taiwan brand call ed Befitas. They have Website: their own branded product. Products: Juice, and Favored Yogurt Tel: Presicarre Co is the Taiwan Add: B1, No.5, Lane 20, Sec.2, division of Carrefour. In 1987, NanGang Rd., NanGang District, Carrefour formed a joint venture Taipei City Taiwan11553, with Uni-President to establish Website: Presicarre. 79

81 Products: wholesales store 宏全國際股份有限公司 Taiwan Hon Chuan Enterprise Co., Ltd. 泰山企業股份有限公司 Taisun Enterprise Co., Ltd. 家鄉事業股份有限公司 Country House Inc Tel: Add: 1F, No.6, 2nd Rd., Taichung Industrial Park, Taichung, Taiwan Website: Products: Beverage OEM Tel: Add: No.6, Hsing Gong Rd., Tien-Chong Town, Changhua Hsiang Website: Products: Beverages Tel: Add: NO.18, 3rd Ave., Taichung Industrial Zone, Taichung City, Taiwan Website: Products: Juice and Wine. Hon Chuan is focus on beverage related manufacturing, including beverage OEM and label and cap manufacturing. Was founded in 1950 as the cooking oil processor. Now, it is not only in cooking oil, but also in beverage. Tropicana in USA has authorized its trade mark to Taisun The most famous self-branded for Country House is Sunkist. They also imported wine and beers from all over the world. 5.8 Packaging Imported packaged condensed juice is packaged in plastic bottles with a plastic cap. They are mainly in larger sizes of 1 to 3 liters. Most condensed juice, however, is imported in bulk in coated metal drums because coated metal drum is firm and solid as well as easy to stack. Condensed juice is mainly packed into 55 gallon coated metal drums and shipped to Taiwan. Importers then directly sell to the food processors. The food processors re-package condensed juice mainly in plastic bottles with a plastic cap and some in Tetrapak paper cartons with an aluminum foil. Condensed juices that sell through supermarkets and convenience stores are usually from 300ml to 1000ml. For hypermarkets the size is usually from 2 liters to 3 liters per plastic bottle. 5.9 Labeling Labeling of both imported packaged and locally re-packaged condensed juice for retail sale have to comply with the regulations contained in the Council of Agriculture 80

82 Regulations for Food Labeling, the Department of Health Food Sanitation Act, Articles 17-19, and the Department of Health Regulation on Nutrition Labeling for Packaged Food all of which are set out in detail in Chapter The information has to be provided in Chinese and for imported packaged condensed juice the information is usually provided by means of a paper sticker prepared by the importer and sent to the manufacturer to attach to the original packaging. Locally re-packaged condensed juice has the labeling information contained in the food processors own packaging. Drums of condensed juice delivered to the food processors do not have to provide nutrition labeling Sanitation Standards The major sanitation standards set out by the Department of Health under the Food Sanitation Act which effect imports of condensed juice and the containers they are packaged in are set out below. Sanitation Standards for Condensed Juice Sanitation Standard Standards for Pesticide Residue Limits in Foods Sanitation Standard for Food Utensils, Containers and Packages Sanitation Standard for General Foods Sanitation Standard for Edible Natural Colorants Sanitation Standard for Beverage Link nguagetype=2&secondmenuid=5&thirdmenuid= anguagetype=2&secondmenuid=5&thirdmenuid =197 anguagetype=2&secondmenuid=5&thirdmenuid =199 anguagetype=2&secondmenuid=5&thirdmenuid =214 anguagetype=2&secondmenuid=5&thirdmenuid =218 81

83 5.11 Overall Assessment Chile already has a substantial 12% share of the import of condensed grape juice, in competition mainly with Spain and USA. It has also developed relationships with four major importers including Chia Meei, which is the biggest single OEM beverage processor in Taiwan. Chile has thus established a strong platform for growth and the main focus for Chilean exporters is probably to continue to build up their reputation for consistent and reliable supply, which is the food processors main concern to avoid downtime in the processing factory. One of the great strengths of the major Taiwanese food and beverage processors, such as Uni-President, Wei Chuan and Kuang Chuan Dairy, is their forward integration into their own retail outlets to provide them with a solid consumer base-load. Uni-President operates the 7/11 franchise and has a joint venture with Carrefour; Wei Chuan has a joint venture with the Japanese Matsusei supermarkets and Kuang Chuan has its own Hi-Life convenience chain stores. We think that developing relationships with these key domestic processors and retailers will be a critical step in expanding Chile s market share. There are also some opportunities to export packaged product directly to some of the major retailers, where Costco and Wellcome already have their own overseas sources. Wellcome, which has its own private label, First Choice, may be a potential target. We are not aware of what other condensed juices Chile may be able to offer. Clearly there is strong competition from established U.S. brands in imported orange juice but there are many other opportunities for providing condensed juice to local food processors for packaging and sale under local labels. There is also strong competition from China on apple juice, but there are always concerns about quality control on products from China and food processors would probably be interested in an alternative source. As we have noted before, Taiwan food processors, retailers and consumers are always looking for new tastes and flavors and sources of supply. 82

84 CHAPTER VI. FROZEN PORK 6.1 Market Trends Frozen Pork Imports, The total volume of imported frozen pork was in decline until volumes rebounded in Landed Cost of Imported Frozen Pork The unit price is increasing largely because of increases in animal feed prices. 40,000 39, Unit cost US$/MT Country % Change 20, ,914 26,146 18, , USA $1,49 3 $1,974 26% Canada $1,12 4 $1,674 48% AAER (NT$-US$) % Source: Taiwan Customs MT Million US$ Source: Taiwan Customs 2009 The major sources of imported frozen pork are United States and Canada. Canada has taken some market share from the U.S. with an overall lower average landed price, but the differential is now narrowing. Imported Frozen Pork Market Share by Volume Canada 46% USA 50% Others, 4% Others, 5% 83

85 Imported Frozen Pork Market Share by Value Canada 39% USA 56% Canada 46% USA 49% Others, 5% Others, 5% Source: Taiwan Customs 2009 Frozen pork imports in the first half of 2009 have almost doubled, despite the economic recession. This is because of the 30% decline in domestic pig rearing in 2008 due to the increases in the cost of imported corn from the US, the main pig feed in Taiwan. The pressure on U.S. corn prices has arisen largely because of the increasing use of corn as a feedstock for ethanol production as a transport fuel as well as greater demand for corn imports from China. These are probably long term trends that will continue to affect domestic pork production in Taiwan Frozen Pork Imports First Half (Jan-Jun) 2009(Jan-Jun) Y-on-Y Growth Volume (MT) 9,906 18,214 84% Value (Million US$) % Source: Taiwan Customs 2009 Domestic pork is regarded as very high quality and frozen pork imports are needed to make up the deficit in the more popular cuts. Boneless hams, shoulders, tenderloin, loins and cuts, and bellies with bone are the two major categories of frozen pork imports. Hams are used in Stew Pig Knuckle which is a very popular Taiwanese food. Spare ribs are used in all kinds of fried pork dishes. A detailed breakdown of frozen pork imports is shown below. 84

86 Breakdown of Frozen Pork Imports Products CAGR Hams, shoulders, tenderloin, loins and cuts, boneless MT US$ million 17, , , , , % -7.69% Belly (including spare ribs), with bone MT US$ million 11, , , , , % % Belly (including spare ribs) boneless MT US$ million 1, , , % 14.19% Hams, shoulders MT , % and cuts with bone US$ million % Others boneless MT 7,224 3,834 2,527 2,845 6, % US$ million % Others, with bone MT 2,090 2, , % US$ million % Other carcasses and half-carcasses of swine, frozen MT US$ million , % 0% Whole carcasses not more than 8kg, frozen MT US$ million % 0% Loins & cuts with MT % bone US$ million % TOTAL Source: Taiwan Customs 2009 MT 39,966 26,146 18,357 13,682 28, % US$ million % 6.2 Locally Produced Pork Domestic pork is the main source for domestic consumption and consumers in Taiwan generally prefer warm body pork. In Taiwan, pig farms have both domestic and imported species. Domestic species include Taoyuan and Lanyu. Imported species includes Yorkshire (Large White), Landrace, and Berkshire. However, hybrid breeding is also common in pig farms. The most common one is mating 3 species, including Yorkshire, Landrace, and Berkshire. 85

87 TLRI (Black No.1) is a successful example of domestic hybrid pig. Imported frozen pork accounts for about 4% of total pork consumption by volume and less than 3% by value. Taiwan Pork Supply and Demand Balance Domestic Production MT 771, , , , , , , , , ,618 US$ million 1,843 1,539 1,353 1,318 1,507 1,682 1,503 1,397 1,421 1,781 Export MT ,372 US$ million Import MT 1, ,976 32,540 39,966 26,146 18,357 13,682 28,914 US$ million Domestic Consumption MT 772, , , , , , , , , ,160 US$ million 1,844 1,539 1,354 1,336 1,542 1,735 1,542 1,422 1,439 1,827 Source: Council of Agriculture Total pork consumption has been gradually declining from a high of about 941,000 MT in 2001 to about 733,000 MT in This is to a large extent the result of the declining availability of locally produced pork. Domestic pig rearing suffered from an outbreak of foot-and-mouth (FMD) in the mid-1990s and farmers had to destroy a large part of the pig population. FMD also curtailed exports to Japan. Since then, the government has followed a policy to regain Taiwan s status as FMD-free, but it is still probably two or three years away. In the meantime, the government has been promoting the re-building of the local pig industry but the re-building program has been undermined by the steep rise in imported U.S. corn for pig feed as well as the additional risks and costs of the FMD eradication program. 86

88 Distribution of Locally Produced Pork Pig Farm Slaughterhouses Warm-Body 45% Wet Market There are 10,779 pig farms in 2009 There are 59 Slaughterhous es in % Food Service Frozen Processing 4% Supermarket 6% Hypermarket Source: APR Interviews The declining availability of locally produced pork has opened up some opportunity for imported frozen pork but there is strong customer resistance to imported frozen pork as a substitute for locally produced pork. This is based partly on consumer preference for warm-bodied local pork and partly on public perceptions of health risks associated with imported frozen meat in general. Imported frozen pork reached a peak of about 40,000 MT in 2004 and has since fallen back to about 29,000 MT in 2008, about 4% of total consumption by volume. Overall, problems with local pig rearing has led primarily to a reduction in pork consumptions rather than an opportunity for imported frozen pork which continues to be viewed as an inferior product to locally produced pork. Looking forward, the government hopes that FMD eradication will lead to a resumption of pig rearing for export to Japan that will stimulate pig rearing as a whole. Thus, while there will continue to be opportunities for frozen pork imports to make up deficits in some cuts of pork where frozen pork is acceptable to consumers, we do not think there will be a long term, sustained increase in frozen pork imports. 87

89 Importers The major importers of frozen pork are the domestic slaughterhouses such as Chaisan, Jin Ku, Tsan Jang and Pu Hui. Frozen Pork Import Market Share by Value 54% 11% 13% 10% 4% 4% 4% Chaishan Foods Jin Ku Food Tsan Jang Enterprise Lovely House Fast Food Pu Hui Foods Enterprise Huesbro Industrail Source: Taiwan Trade 2009 Frozen Pork Importers by Import Value US$2.5-5 Million US$ Million US$1-1.5 Million US$0.8-1 Million 0 US$ Million US$ Million Source: Taiwan Trade Importer s Selection Criteria The most popular imported frozen pork parts are boneless hams, shoulders, tenderloin, loins and cuts for food processors. Because of the program to eradicate foot-and-mouth disease, the Taiwan government has set a very strict standard for imported frozen pork. Any importing country has to be approved by government and importers are not allowed to import from infected areas. 88

90 Importers Selection Criteria for Frozen Pork Importance Source: APR Trade Interviews Attributes Country of origin, Quality Shipping Price Supplier s reputation Taste and flavor Chaishan Foods, one of the biggest slaughterhouses in Taiwan imports frozen pork from mainly the USA. They say their reason is to meet local demand for certain parts of pork that are in short supply domestically. Due to the risk that frozen pork might be ruined during the shipment, Chaishan prefer to use CIF (Cost, Insurance & Freight) in order to control the quality of shipment. Because they use imported frozen pork for low-end processing or for low cost restaurants, importers expect the imported frozen pork s price to be cheaper than local pork. Taiwan has also set up regulations against using ractopamine in livestock. Ractopamine is used as a feeding additive to promote leanness in pigs raised for their meat. However, a study shows that ractopamine is harmful for human bodies. Therefore suppliers need to pass the ractopamine exam process. Compared with local pork, importers mention that imported pork does not taste as good as local warm body pork. Therefore, bulk imported frozen pork is sold to small food processors for pork meat balls, pork dumplings and pork sausages and to costsensitive restaurants. 6.5 Distribution Channel in Taiwan Most of the frozen pork is imported by slaughterhouses, such as Chaishan, Jin Ku, and Tsan Jang who have their own temperature controlled warehouse for -35 rapid frozen system and -0 frozen storage system and their own temperature control vans with temperature under 0. These slaughterhouses then distribute imported frozen pork, usually in plastic wraps, to foodservice restaurants and hotel chains and food institutions for mass catering and to mainly small food processors for pork meatballs, pork dumplings and pork sausages. 89

91 In addition to these major importers, there are smaller importers that supply both to smaller slaughterhouses and also directly into food service outlets. It is important to note that imported frozen pork does not qualify for the CAS (Certificate of Agricultural Standards) and HCAAP (Hazard Analysis and Critical Control Points) quality certificates which can only be given to final products that use 100% domestic meat. Thus, imported frozen pork is mainly distributed either by the slaughter houses or other importers into non-premium foodservice restaurants and chains and food institutions where price is more important than taste and flavor and the pork is not identified to the end-consumer as imported pork. The major food processors use very little imported frozen pork because they cannot apply the quality certificates and can only rely on their own brand name. Therefore, imported frozen pork is mainly used by small local food processors and butcheries that make meatballs, dumplings and pork sausages for small local restaurants, the night market and street vendors. Imported Frozen Pork Distribution Channels Importer Intermedia End Use Slaughter House 30% Food Processor Hypermarket Supermarket Convenience 20% Food Service 19% Dealer Self-Imported 8% Food Service Food Processor 3% Dealer End Customers Source: APR Trade Interviews 90

92 6.6 Retail Sales No imported frozen pork is sold in the retail stores. The pork sold on the shelf in Taiwan is local chilled pork. As mentioned above, only 100% local meat can have the CAS and HCAAP quality marks and Taiwan household consumers prefer domestic warm belly pork. 6.7 Food Processing Sales In Taiwan, branded food processors apply for CAS certificate to add trust from their customers. However, CAS standard requires them to use 100% domestic livestock and vegetable. From the interview with Black Bridge Foods, imported frozen pork is only used in low end product production, which most of the branded food processor are not willing to do. Therefore, the food processors which use imported frozen pork are OEM factories making pork products for food service and non-branded outlets on the wet market. The only large food processor we found that uses any imported frozen pork is I Mei, which uses imported frozen pork in their dumplings. It is, of course, possible that others do use some imported frozen pork but in that case they are not allowed to display the CAS and HCAAP marks. 6.8 Packaging Imported frozen pork is imported in plastic bags of 12kg-15kg and then placed in a carton. It is sold to restaurants and hotels in the same package. Imported frozen pork is not currently sold in retail stores in Taiwan. Locally produced chilled pork sold in retail stores is usually packed in polystyrene packs with a transparent plastic cover. Pork Package in Retail Store Retail Store Product Image Comments Costco Rib Net Weight :1462g Price: NT$

93 新光三越百貨公司 Shin Kong Mitsukoshi Supermarket Rib Net Weight :260g Price: NT$ 130 Source: APR Store Audit, September, Labeling As mentioned above, imported frozen pork is currently not sold in retail stores in Taiwan. For locally produced chilled packaged pork in retail stores, the information required includes item name, unit price, net weight and total value and is usually provided by means of a sticker Sanitation Standards The major sanitation standards set out by the Department of Health under the Food Sanitation Act which effect imports of frozen pork and the plastic bags they are imported in are as follows. A mentioned above, one of the Taiwan authorities main concern is the presence of ractopamine, which is used as a feed additive. Sanitation Standards for Frozen Pork Sanitation Standard Sanitation Standard for Food Utensils, Containers and Packages Sanitation Standard for Frozen Foods Sanitation Standard for Foods Treated with Ionising Radiation Standard for the Tolerance of Polychlorinated Biphenyl in Foods Link anguagetype=2&secondmenuid=5&thirdmenuid =197 anguagetype=2&secondmenuid=5&thirdmenuid =198 anguagetype=2&secondmenuid=5&thirdmenuid =206 anguagetype=2&secondmenuid=5&thirdmenuid =207 92

94 Sanitation Standard for Fresh Meats Pesticide Residue Limits in Livestock and Poultry Products Sanitation Standard for Lecithin Standard for the Tolerance of Heavy Metals in Edible Offal of Cattle, Sheep, Pig and Poultry Sanitation Standard for Nitrous Oxide to be Used in Food anguagetype=2&secondmenuid=5&thirdmenuid =210 anguagetype=2&secondmenuid=5&thirdmenuid =211 anguagetype=2&secondmenuid=5&thirdmenuid =217 anguagetype=2&secondmenuid=5&thirdmenuid =240 anguagetype=2&secondmenuid=5&thirdmenuid =245 Frozen pork imports are also subject to inspection and quarantine by the Council of Agriculture Bureau of Animal and Plant Health Inspection and Quarantine. Chile is currently listed as free of foot and mouth disease, rinderpest, African swine fever, glanders, and Newcastle disease. The details are referenced in Chapter Overall Assessment Much of the assessment for imports of frozen pork depends on global factors. Taiwan consumers, both by preference and through the government s use of CAS and HCAAP quality marks prefer locally produced pork. The Taiwan authorities, like others around the world, have a strong political commitment to local farmers. Thus, frozen pork imports are tolerated as an inferior product that is used to make up shortfalls in domestic supply. Currently, domestic supply is being curtailed by the high cost of imported grain pig feed. Since many of Taiwan s pig farmers are small holders and often part-time, they cannot afford the upfront additional cost. If imported grain remains expensive, any further recovery in pig farming in Taiwan will probably hinge on achieving FMD-free status and the recovery of exports to Japan. In that scenario, there will probably be a continuing deficit of local pork for domestic consumption. 93

95 On the other hand, if the price of imported pig feed declines, local pig farmers will move back into the market and the deficits in supply will reduce again. For potential exporters of frozen pork from Chile, the issue is primarily a question of price competition with the U.S. and Canada to meet any supply deficits. Unlike imported beef, imported frozen pork is not regarded as a premium product. Provided Chile pork meets government standards, we do not think there remains any overwhelming political attachment to U.S. and Canada. 94

96 CHAPTER VII. FROZEN POULTRY: CHICKEN AND TURKEY 7.1 Market Trends Frozen Chicken Frozen Chicken Imports, Imports grew rapidly after Taiwan joined WTO but fell back in 2007 when landed prices increased by 62%. 100,000 50, , , , ,221 49, Landed Cost of Imported Frozen Chicken Most of the price increase took place in Unit cost US$/MT Country % Change Canada $793 $1,222 54% USA $755 $1,263 67% AAER (NT$-US$) % Source: Taiwan Customs 2009 MT Million US$ Source: Taiwan Customs 2009 Imported Frozen Chicken Market Share by Volume Other 4% USA 96% Other 23% USA 77% Imported Frozen Chicken Market Share by Value Others 3% USA 97% Other 23% USA 77% 95

97 The USA is the major source of supply of frozen chicken, but Canada has made inroads into the U.S. market share by not increasing its prices as much as the US. In the first half of 2009, volumes remained the same but prices from the U.S. fell substantially because of anti-dumping measures taken by China at the end of Frozen Chicken Imports First Half (Jan-Jun) 2009(Jan-Jun) Y-on-Y Growth Volume (MT) 43,682 43,876 <1% Value (Million US$) % Source: Taiwan Customs 2009 Frozen Turkey Frozen Turkey Imports, Frozen turkey is used as a substitute for both chicken and pork, especially when the pork price increased in ,000 9,000 17,228 12,626 12, , , Landed Cost of Imported Frozen Turkey U.S. commands a premium over Canadian turkey. Unit cost US$/MT Country % Change Canada $822 $743-9% United States $1,278 $1,696 32% AAER (NT$-US$) % Source: Taiwan Customs MT Million US$ Source: Taiwan Customs 2009 The USA remains the dominant supplier of turkey to Taiwan. 96

98 Imported Frozen Turkey Market Share by Value Other 5% USA 95% Other 7% USA 93% Imported Frozen Turkey Market Share by Volume Other 4% USA 96% Other 3% USA 97% Source: Taiwan Customs 2009 Turkey imports have shown strong growth in the first half of 2009 because of the increasing price of chicken and pork. In Taiwan, turkey is used mainly as a substitute for chicken and pork rather than as a seasonal specialty. Frozen Turkey Imports First Half (Jan-Jun) 2009(Jan-Jun) Y-on-Y Growth Volume (MT) % Value (Million US$) % Breakdown of Poultry Imports Products CAGR Frozen MT 49,106 74,365 95,397 55,221 68, % Chicken US$ million % Frozen MT 17,228 12,626 9,904 7,199 12, % Turkey US$ million % Total MT 66,334 86, ,301 62,542 81, % US$ million % Source: Taiwan Customs

99 7.2 Importers Frozen Chicken Market Share by Value 26% K & K Foods Chang First Trading 50% Brothers Frozen Food Source: Taiwan Trade % 8% 6% 5% Tailifu Pu Hui Foods Enterprise Others K&K Foods, the leading importer, with about a quarter of the total market share of frozen chicken, is a food processor that buys local and imported frozen chicken for making chicken nuggets and other chicken products. Another four importers, Chang First Trading, Brothers Frozen Foods, Tailfu, and Pu Hui Foods Enterprise, who hold another quarter of the market, are slaughter houses that buy imported frozen chicken to make up their deficits for supply mainly to food service. Frozen Chicken Importers by Import Value US$10-50 Million 60 US$5-10 Million US$1-5Million US$0.3-1 million US$ million US$0.1 million and under Source: Taiwan Trade 2009 Frozen Turkey Market Share by Value 48% 20% 15% 17% Huesbro Industrial Fu Tong Food Enterprise Tsan Jang Enterprise Others Source: Taiwan Trade

100 Huesbro, Fu Tong and Tsang Jang are slaughterhouses that also import frozen turkey for cutting and distribution either to small food processors who mix turkey with chicken and pork to make meat products for foodservice or directly to food service. Fu Tong is also an end food processor in Taiwan that mainly produces sausages and burger patties. Frozen Turkey Importers by Import Value US$2.5-5Million US$0.6-1 Million US$ Million US$ million 0 US$0.1 million and under Source: Taiwan Trade 2009 There has been no frozen chicken or turkey imported from Chile. 7.3 Importer s Selection Criteria When in 2003, the bird flu (Avian influenza) had the first confirmed case of human infection, importers in Taiwan raised the concern of bird flu and the connection with place of origin. Other than that, all the poultry has to be frozen under rapid freeze conditions. The freezing technology and sanitation are two important concerns for importer to select their suppliers. Base on the interviews, we have identified and ranked the following attributes as selection criteria used by importers. 99

101 Importers Selection Criteria for Frozen Poultry Importance Attributes Bird Flu (Avian influenza), Country of origin Quality, Supplier s reputation Size and Appearance, Price, Taste and flavor Source: APR Trade Interviews Because of the Bird Flu, the government and the retailers care about if any of their suppliers have come from an infected area. The major imported country for both turkey and chicken is U.S. The U.S. is the biggest supplier of chicken and turkey around the world. U.S. has very high standards in processing frozen chicken. Purchasing with reputable supplier is to make sure the quality of the product, especially for the self-imported food processor that we mention in 5.7. Taiwanese importers mainly import drumsticks, hearts and feet which are popular in Taiwan but not in the United States. Various chicken parts are packaged separately in plastic bags and placed in cartons. Consistency in each packaging is a key requirement. 80% of the frozen poultry is used in food processing into chicken products, such as chicken nuggets, and in the case of turkey as a substitute for chicken or pork in meat products. Food processor are price sensitive because the raw material cost affects their end product cost as will as the margin. Turkey is used as a substitute for chicken in mixed meat products because the unit price of turkey is cheaper that chicken. Only small amounts of frozen poultry are distributed directly into food service, including some whole turkeys for seasonal demand at Thanksgiving and Christmas festivals celebrated to a small extent in Taiwan. 100

102 7.4 Locally Produced Frozen Chicken Taiwan raises most of its own chickens for food service and also for chilling and sale in retail stores. Frozen imported chicken is used to make up domestic supply deficits. Imports of frozen chicken in 2008 accounted for 11% of total chicken consumption by volume and 9% by value. As noted in Section 7.1 above, imports of frozen chicken grew rapidly after 2001, when Taiwan joined the World Trade Organization, to a peak of over 95,000 MT in 2006 and then fell back to about 69,000 MT in The total value of imported chicken continued to increase because of the large increase in price of imported chicken in Taiwan Chicken Supply and Demand Balance, Domestic Production MT 625, , , , , , , , , ,622 US$ million Export MT ,114 1, ,038 3,128 2,595 US$ million Import MT ,521 32,873 49,106 74,365 95,397 55,221 68,604 US$ million Domestic Consumption MT 625, , , , , , , , , ,632 US$ million Source: Council of Agriculture. There are more than 10 species of chicken reared in Taiwan. For most Taiwanese consumers, the critical difference in taste is between free-range chicken, generally referred to in Taiwan as mountain chicken, which is hand killed and battery or factory-raised chicken, which is automatically killed. The ratio between the two is about 50/50 and the hand-kill attracts a price premium of about 26%. 101

103 Breakdown of Auto-Kill and Hand-Kill Chicken Volume % Breakdown Auto-Kill 51% 52% 54% 53% 55% 59% 54% 53% 51% 50% Hand-Kill 49% 48% 46% 47% 45% 41% 46% 47% 49% 50% Unit Value NT$ per catty Auto-Kill $22.16 $18.83 $18.49 $19.92 $17.74 $20.09 $21.37 $19.10 $21.02 $25.11 Hand-Kill $25.81 $22.34 $22.14 $22.98 $20.60 $26.15 $27.98 $25.51 $26.66 $31.67 Difference $3.65 $3.51 $3.65 $3.06 $2.86 $6.06 $6.61 $6.41 $5.63 $6.56 Source: Council of Agriculture. 1 catty = 0.6kg. 7.5 Distribution Channel in Taiwan Importers of frozen chicken have their own -25 freezer and -35 rapid refrigerator system in their warehouse. Most of them work with professional carriers to deliver their product to their customers, which are mainly food processors. Imported Frozen Chicken Distribution Channels Importer Intermedia End Use Slaughter House 26 Food Processor Hypermarket Supermarket Convenience 5% Dealer Food Service 15% Hypermarket 14% Supermarket Self-Imported 35% Food Service Food Processor 5% Dealer End Customers Source: APR Trade Interviews 102

104 The slaughterhouses cut the turkey into pieces for food processing. Because the unit price is cheaper than the frozen chicken, these turkey pieces are used to mix with frozen chicken in the end products. Only during Thanksgiving season, importers will import whole turkey for local restaurants and hypermarkets. Slaughterhouses import frozen chicken for sales directly or through dealers to food processors, for making chicken products, such as nuggets and dumplings and for supply to institutional and low cost food service. However, the relationship between slaughterhouses and dealers is not strong because restaurants and food vendors using frozen chicken are price sensitive and the dealer has to earn the business by cheaper price. Most of the dealers work with one or two importers to achieve their own competitive advantage. Food processors, such as K & K Foods import their own frozen chicken both for making chicken food products such as chicken nuggets and dumplings and also for supply to western-style foodservice outlets, notably McDonald s. 7.6 Retail Sales As mentioned above, Taiwan consumers generally prefer warm body chicken bought in neighborhood wet markets and butcheries. There is, however, a growing segment of frozen chicken parts sold in hypermarkets and supermarkets for small household of single professionals or young married without children who want to prepare small chicken dishes at home. Customers, however, look for the CAS mark for locally produced frozen chicken as an assurance of quality and food sanitation and most of the frozen chicken that is sold in the retail stores is locally grown chicken that has been chilled. Very little imported frozen chicken is sold in retail stores. However, when local supply is not enough, some hypermarkets may carry imported frozen chicken. Presicarre, for example, purchases some frozen chicken drumsticks from importers. Imported Frozen Chicken Company Product Image Comments 家樂福 Presicarre (Carrefour s Taiwan division) Large Chicken Drumstick Country of Origin: U.S. Price: NT$9/100g Source: APR Store Audit, September

105 Costco and some premium supermarkets do have whole turkey on the shelf, but only during Thanksgiving, but not through the whole year. 7.7 Foodservice and Food Processing Sales By far the biggest market for total chicken consumption is in food service. The Taiwanese regularly eat out for breakfast, lunch, dinner and midnight snacks. They like chicken so much they eat all parts of the chicken, except the head. In family restaurants, the preference is for free-range chicken that is raised in numerous smallholdings and supplied warm body either directly to the restaurant or to the local wet-market or butchery. This chicken is mainly boiled and chopped and eaten in its skin. Chicken is also used in soup, especially with traditional herbs, some of which give the chicken a black color, which is very popular. Boiled chicken is also used in curries and stews. Another popular dish is sliced chicken marinated in rice wine, known as drunken chicken. Generally, Taiwanese consumers prefer the taste of chicken drumsticks to chicken breast. Chicken livers are generally sold separately as a lower cost dish and chicken feet are cooked and basted in spicy sauce for serving as a specialty in dim sum restaurants. Battery-raised chicken is mainly supplied to food service institutions and central kitchens for mass catering and preparation of lunch boxes where low cost is the major consideration. It is also used in low cost restaurants and night markets where it is often deep-fried. Households also purchase whole warm-body chicken from local wet markets and butcheries, although there is a growing segment of small households that purchase frozen chicken parts from supermarkets and hypermarkets. In this case they prefer domestic reared frozen chicken which carry the CAS quality mark which gives them some assurance that the chicken has not been contaminated with growth chemicals. Imported frozen chicken is used partly by food processors to make processed and packaged chicken products, such as chicken nuggets and dumplings, and partly by low cost fried chicken outlets including western-style chains such as McDonalds and Kentucky Fried Chicken. The largest chicken food processor is K&K Food, which is the exclusive supplier of chicken products for McDonald s in Taiwan, and purchases frozen chicken from the 104

106 U.S. The end products for food processors can be in several forms, including chicken nuggets, hamburger patties, sausages, lunch boxes. When local farmers cannot meet demand, food processors will import frozen poultry to make up the shortfall in domestic supply for making food products or supply to foodservice outlets where the focus is on low cost and the origin of the meat is not disclosed. The shortfall is mainly in drumsticks, because Taiwanese prefer the texture of drumsticks. Imported turkey pieces are used to mix with chicken or pork in the end products. 7.8 Packaging There is very little pre-packaged imported frozen chicken sold in retail stores in Taiwan. In the example of Presicarre, the packaging is a simple plastic wrap. Locally produced and chilled chicken sold in retail stores are usually in a plastic wrap or in a polystyrene pack with a transparent plastic cover. The most common packaging in hypermarket and supermarket in Taiwan is shown below Locally Produced Chicken Packaging in Retail Store Retail Store Product Image Comments Costco Whole Chicken Price: NT$ 285 新光三越百貨公司 Shin Kong Mitsukoshi Supermarket Chicken Drums Net Weight :272g Price: NT$ 87 Source: APR Store Audit, September,

107 7.9 Labeling For packaged frozen chicken in retail stores, labeling information is limited to the item name, unit price, net weight, and total value and is usually shown on a paper sticker Sanitation Standards The major sanitation standards set out by the Department of Health under the Food Sanitation Act that effect imports of frozen poultry are as follows. Sanitation Standards for Frozen Poultry Sanitation Standard Sanitation Standard for Food Utensils, Containers and Packages Sanitation Standard for Frozen Foods Sanitation Standard for Foods Treated with Ionising Radiation Standard for the Tolerance of Polychlorinated Biphenyl in Foods Sanitation Standard for Fresh Meats Pesticide Residue Limits in Livestock and Poultry Products Sanitation Standard for Lecithin Standard for the Tolerance of Heavy Metals in Edible Offal of Cattle, Sheep, Pig and Poultry Link anguagetype=2&secondmenuid=5&thirdmenuid =197 anguagetype=2&secondmenuid=5&thirdmenuid =198 anguagetype=2&secondmenuid=5&thirdmenuid =206 anguagetype=2&secondmenuid=5&thirdmenuid =207 anguagetype=2&secondmenuid=5&thirdmenuid =210 anguagetype=2&secondmenuid=5&thirdmenuid =211 anguagetype=2&secondmenuid=5&thirdmenuid =217 anguagetype=2&secondmenuid=5&thirdmenuid =

108 Sanitation Standard for Nitrous Oxide to be Used in Food anguagetype=2&secondmenuid=5&thirdmenuid =245 Imported frozen poultry also has to meet with the phytosanitary requirements of the Council of Agriculture for the import of meat. These are mainly concerned with preventing the transmission of infectious diseases and providing sanitary inspection of slaughter houses and other related facilities. They are implemented by the Bureau of Animal and Plant Health Inspection and Quarantine (BAPHIQ). BAPHIQ operates a system of quarantine and inspection in co-operation with authorities in exporting countries to ensure that these regulations and standards are achieved. Chile is currently listed as being free of highly pathogenic avian influenza. The full laws and regulations are referenced below. Regulation Council of Agriculture Website Laws and regulation Quarantine Requirements for the Importation of Poultry Meat Bureau of Animal and Plant Health Inspection and Quarantine Reference doc Overall Assessment Provided that Chile can meet the Taiwan authorities regulatory and phytosanitary requirements, there is a good opportunity to compete with U.S. and Canada on the supply of chicken parts and turkey to Taiwan. The main issue is one of price. Frozen chicken and turkey are regarded as inferior to locally produced product and are only used to make up shortfalls in supply for food service and food processing where they are sold without identification. Except for small amounts of turkey at Thanksgiving and Christmas, imported frozen chicken and turkey are not sold in the retail stores because of consumers preference reinforced by the government s CAS quality mark, which is only for domestic product. Thus, the opportunity for imported frozen chicken and turkey depends on being below the price 107

109 of locally grown product. Entry into the market depends largely on establishing a consistent and reliable supply relationship with some of the larger slaughterhouses that are responsible for Taiwan s meat supply both to food processors and for food service markets. Although McDonald s is probably tied to K & K Foods for U.S. chicken parts, chicken is a very popular dish in all Taiwanese restaurants and there are many opportunities in low cost food service. It is fundamentally a trading opportunity. If there is a shortfall in the production of locally produced chicken or the cost differential is too high, there is a marginal opportunity to import frozen chicken for sales in low cost foodservice or food processing where the origin and quality of the chicken is not important. 108

110 CHAPTER VIII. FROZEN AND PREPARED SCALLOP 8.1 Market Trends Frozen Scallops Frozen Scallop Imports, Scallops imports have grown sharply since , , , Landed Cost of Imported Frozen Scallops Landed prices from U.S. have increased dramatically, while prices from China have reduced. Unit cost US$/MT Country % Change Japan $4,563 $5,721 25% United States $4,505 $15, % Russia $4,570 $4979 9% Canada $4,684 $4339-7% China $4,589 $2,841-38% AAER (NT$-US$) Source: Taiwan Customs % MT Million US$ Source: Taiwan Customs 2009 China has taken market share from US, Canada, Japan and Russia. This is because the unit price from China has dropped by 38%, Imported Frozen Scallop Market Share by Volume Others, 13% Others, 18% Canada 12% Russia 10% USA, 21% Japan 44% China 47% Japan 35% Japan remains the market leader by value. 109

111 Canada 13% Russia 11% Imported Frozen Scallop Market Share by Value Others, 9% Others, 18% Others 20% USA, 21% Source: Taiwan Customs 2009 Japan 46% China 32% Japan 48% Imports of frozen scallop in the first half of 2009 have declined by about 15%. Frozen Scallop Imports First Half (Jan-Jun) 2009(Jan-Jun) Y-on-Y Growth Volume (MT) 1,721 1,486-14% Value (Million US$) % Prepared scallops Prepared Scallop Imports, Import volumes have increased sharply since Landed Cost of Imported Prepared Scallop Landed prices from both China and Japan have decreased. Unit cost US$/MT Country % Change Japan $22,59 0 $18,724-17% China $5,165 $3,811-26% AAER (NT$-US$) Source: Taiwan Customs % MT Million US$ Source: Taiwan Customs

112 Imported Prepared Scallop Market Share by Volume Others 2% China 29% Others, 18% Others 6% Japan China 69% 52% Japan 42% Imported Prepared Scallop Market Share by Value China 2% Japan Others 97% 1% Others 1% China 3% Japan 96% Source: Taiwan Customs 2009 Because of the huge differential in price, China has the market leadership by volume but Japan has most of the market by value. In the first half of 2009, scallop prices from Japan jumped from $18,724 to $40,095 per ton. Prepared Scallop Imports First Half (Jan-Jun) 2009(Jan-Jun) Y-on-Y Growth Volume (MT) % Value (Million US$) % The main issue with scallops arises from the EU s decision in 2001 to ban the imports of scallops from China as an anti-dumping measure. Thus, China has been left with a surplus supply of scallops for which it has had to find alternative markets in Taiwan and elsewhere. 111

113 Breakdown of Frozen Scallop Imports Products CAGR MT ,039 3, % US$ million % Breakdown of Prepared Scallop Imports Products CAGR MT % Scallops dried US$ million % Prepared or preserved MT % scallops frozen US$ million % Other prepared MT or preserved % scallops (compoy) US$ million % Prepared or preserved MT % scallops canned US$ million % Total Source: Taiwan Customs 2009 MT % US$ million % 8.2 Importers Frozen Scallop Market Share by Value 11% Johnson Seafood 59% 9% 7% 8% 6% Sushi Express Ming-Sheng Seafood Costco President Taiwan Great Hung Enterprise Others Source: Taiwan Trade

114 Johnson Seafood and Ming-Sheng import for their own retail stores and for distribution to restaurants and hotels. Sushi Express is a large restaurant chain that imports mainly for its own restaurants. Costco imports frozen scallops from Japan for its own stores. Great Hung Enterprise imports all kinds of sea food for distribution mainly to restaurants. Frozen Scallops Importers by Import Value US$1-1.5 Million US$0.4-1 Million US$ Million US$ million US$50,000 and under Source: Taiwan Trade 2009 Prepared Scallop Market Share by Value 25% Tou Hou Trading 47% Jin Chu Trading 14% Che ShengTrading 14% Others Source: Taiwan Trade 2009 Tou Hou, Jin Chu and Che Sheng, the major importers of prepared scallops, are small trading companies. Jin Chu, sells imported prepared scallops to DiHua Street, which is famous for its sundry wholesales goods markets. 113

115 Prepared Scallop Importers by Import Value US$1-1.5 million US$ million 20 US$ million US$ million US$50,000 and under Source: Taiwan Trade 2009 There is only a very small amount of frozen scallops imported from Chile in The total imported volume is 125KG for US$ Importer s Selection Criteria Importers Selection Criteria for Frozen and Prepared Scallops Importance Attributes Supplier s reputation Size and appearance, shipping Supplier s co-operation, packaging Price, Country of origin Source: APR Trade Interviews Suppliers reputation is the most emphasized factors by the importers Due to frozen scallops have to be processed in rapid refrigerated system, it s important that the supplier has a high standard of sanitation. Both Jin Chu and Johnson say that they keep a long term relationship with their suppliers. For prepared scallops, there is hardly any quality control. Jin Chu says it is because there is trust between them and his suppliers. There are different varieties of frozen and prepared scallops in the market. There are raw frozen and cooked frozen and the scallops can be in shell, half shell and without shell. The size of scallops for each package should be very consistent because most 114

116 of the packages will not be repacked and are directly shipped to the customers. Other than that, the shipping is a major concern for the importers. Shipping through the refrigerated cargo container is another expense for importer to take into consideration. For some importers, they consider shipping expense as part of their cost. Jin Chu mentioned that considering imports from Chile, he would concern a lot about the shipping expense. Packaging is one way to secure the product during the shipment. Importers will request special attention to the packaging. The most popular packaging is either 500g or 1000g in plastic bag. But for prepared scallops, the importer will request them to put in cans. 24 cans are put in a cardboard box. The cartons are normally stored in the importer s own temperature controlled warehouse until they are delivered to the customer. Re-packaging of frozen scallops is done if sold through the retail store or directly to the end consumers. Surprisingly, country of origin and price is relatively less important than supplier s reputation. Currently, Japan and China are two major export countries for scallops. The sustainability and the quality are the major concern for importers. For frozen scallops there is still demand over supply. Although the price will differ by country, there are still demands for frozen and prepared scallops. 8.4 Locally Produced Frozen and Prepared Scallops There is no scallop aquafarm in Taiwan and all the frozen and prepared scallops are imported. 8.5 Distribution Channel in Taiwan Importers of frozen and prepared scallops need to have access to low temperature storage and delivery systems. Products required temperature might be different. Therefore, Jin Chu rent a temperature control warehouse and allow specialists to run the facility for them. Johnson and Sushi Express own not only their own distribution center but also low temperature vans to distribute the products to customers, mainly the food service industry. Some of the importers cooperate with logistic companies for delivery. Frozen and prepared scallops are not common dishes in our daily 115

117 consumption. Only small quantities of prepared or frozen scallops are sold to the retail stores, except during festivals like New Year. Imported Frozen and Prepared Scallops Distribution Channels Importer Intermediat End Use Trading Company 42% Own Retail Store Hypermarket Self-Imported Food Processor Retailer 35% 5% Dealer 10% 8% Food Service End Customers Own Restaurant Food Service Hypermarket Source: APR Trade Interviews Importers of frozen and prepared scallops sell mainly to restaurants. Due to the special storage for frozen scallops, most of the importers will have frozen vans to deliver the order. For some high demand restaurants, importers will serve them directly through importers distribution channel by polystyrene box in bulk. Other than restaurants, some importers like Ming-Sheng also set their own retailer stores for end consumer to purchase. Products that sell to the end consumers are repacked in small polystyrene box. Apart from that, many of food services are with small and irregular demand. Importers have to work with dealer to serve those small restaurants. Some of the dealers have physical stores for consumers and restaurants to pick up on their own. Therefore, dealers won t need to be responsible for the damage during the transportation. Prepared scallops normally will not sell to the hypermarket or supermarket. They have a special distribution channel, DiHua Street, which is famous for sundry wholesales goods markets. For a better quality concern, SuShi Express has not only 3 distribution centers in Taiwan but also owns frozen vans for delivering. Sushi express owns a chain 116

118 restaurant, which will deliver to their chain restaurants on daily base. Sushi Express also offer provide OEM service to their customers and deliver thought their own distribution channel. It also provides online shopping for end consumers. The only retailer that directly imported frozen scallops from Hokkaido, Japan is Costco. Costco advertise the country of origin as their selling point. The rest of the retailers purchase from the importers and repackage it. We will mention in the following section. 8.6 Retail Sales As we mention in the previous section, frozen and prepared scallops are seasonal products for retailers. It s not their core products. Except Costco, which imports frozen scallops directly from Hokkaido, Japan, the major supermarkets and hypermarkets normally buy bulk frozen from importers and repackage themselves in polystyrene. We have identified critical purchasing criteria from retailer. Retailers Packaged Frozen Scallops Selection Criteria Importance Attributes Country of origin, Size and appearance Price Shipping Supplier s reputation Source: APR Trade Interviews For Costco, country of origin is their main selling point, which helps them to get a premium markup. However, on-shelf is not constant in Costco. Size and appearance is the second concern for Costco. If the supplier can t not provide consistent size in the same package, Costco will rather not purchase. Other than Costco, RT Mart and Geant provide imported frozen scallops from Vietnam and China. Not all the supermarket and hypermarket sell frozen scallops, like we mentions before, scallops are not used in common dishes. The revenues generated by frozen scallops is small. Due to frozen scallops is not highly demanded among end consumers, purchasing price is important for retailers. Frozen scallops can be only purchased in premium supermarket or hypermarket. These premium supermarkets 117

119 and hypermarket offer all in one experience for end consumers. The unit retailer price will differ according to purchasing price. In terms of shipping and supplier s reputation, retailers expect their supplier can deliver product on time and without any damage like, defrosted. The most often seen imported brands in the retail stores are shown below. Most Popular Imported Frozen and Prepared Scallop Brands in Retail Stores Retailer Product Image Importers Comments Costco Costco Boiled Scallops Country of Origin: Japan. Price: NT$419/1kg RT Mart Chin-Hu Fishery Enterprise Co. Ltd. Scallops Country of Origin: Vietnam Price: NT$23/ 100g Geant Sushi Express Co. Ltd. Scallops Country of Origin: China Price: NT$249/ 1kg Source: APR Store Audit, September, 2009 In some supermarkets, frozen scallops are shipped in bulk directly and delivered to the retail store where they are re-packaged. Matsusei Supermarket said that each of the packages weighs 500kg per plastic bag when delivered. The store staff will then break it and put in plastic wraps. 118

120 Locally Packaged Frozen and Prepared Scallop Company Product Image Comments 松青超市 Matsusei Supermarket Scallops Price: NT$40/ 100g Country of Origin: China 新光三越 ShinKong Mistukoshi Scallops Price: NT$43/ 74g Source: APR Store Audit, September 2009 Profile of Companies of Locally Packaged Frozen and Prepared Scallop Company Name Contact Information Business Introduction Tel: 松青超市 Matsusei Supermarket, part of Add: 23F., No.100, Sec. 1, Xintai 5th Matsusei Wei Chuan Foods Co, was Rd., Xizhi City, Taipei County Supermarket (under joint venture with Fressay in Website: Wei Chuan Foods) Japan. Products: Supermarket Tel: 新光三越 Founded in 1989, ShinKong Add: No.19, Songgao Rd., Xinyi Dist., ShinKong Mistukoshi (SKM) has Taipei City 110, Taiwan Mistukoshi (under become the biggest Website: Shin Kong Group) department store in Taiwan, Products: Department store 8.7 Packaging Frozen scallops are imported in either 500g or 1000g plastic bags placed in a carton. Prepared scallops are imported in cans with 24 cans per carton. The cartons of frozen scallops are normally stored in the importer s own temperature controlled warehouse until they are ready for delivery to the customers. The importers then transfer the plastic bags from the original carton into their own trade cartons for delivery to hypermarkets and food service outlets in the original plastic packaging. 119

121 Frozen scallops sold through hypermarkets are normally in 1000g plastic bags and 15 plastic bags are placed in one carton and shipped to the hypermarkets and food service outlets. Frozen scallops sold through supermarkets are normally delivered in 500g plastic bags. The store, e.g. Matsusei Supermarket, then breaks open the plastic bag and re-packages the frozen scallops into plastic wraps of g each Labeling For repackaged frozen scallops in retail stores, labeling information is limited to the item name, unit price, net weight, and total value and is usually shown on a sticker. Prepared scallops in cans should comply with full labeling requirements as set out in Chapter X, but it is too much trouble for most importers and they sell only to the grey market in Dihua Street. 8.9 Sanitation Standards The major sanitation standards set out by the Department of Health under the Food Sanitation Act which effect imports of frozen and prepared scallops are as follows: Sanitation Standards for Frozen and Prepared Scallops Sanitation Standard Link Food Safety Control for Seafood Processing.pdf Standards for Pesticide Residue nguagetype=2&secondmenuid=5&thirdmenuid= Limits in Foods Sanitation Standard for Fishes anguagetype=2&secondmenuid=5&thirdmenuid and Shrimps =192 Sanitation Standard for Canned anguagetype=2&secondmenuid=5&thirdmenuid Foods =

122 Sanitation Standard for Food Utensils, Containers and Packages Sanitation Standard for Frozen Foods Standard for the Tolerance of Polychlorinated Biphenyl in Foods Sanitation Standard for Nitrous Oxide to be Used in Food anguagetype=2&secondmenuid=5&thirdmenuid =197 anguagetype=2&secondmenuid=5&thirdmenuid =198 anguagetype=2&secondmenuid=5&thirdmenuid =207 anguagetype=2&secondmenuid=5&thirdmenuid = Overall Assessment The frozen scallop market has been boosted by the availability of low cost scallops from China since they were banned from the EU as an anti-dumping measure. The only alternative source of frozen scallops is Japan, which supplies very expensive scallops. We thus think there is an opportunity for Chile scallops provided they can establish a reputation for consistent and reliable supply at a lower cost than Japan but with better quality control and safety than scallops from China. The best market entry channels are directly to some of the large seafood restaurant chains that import their own seafood of the major international retailers who also import directly from source rather than working through a small trading company. 121

123 CHAPTER IX. HERB INFUSION 9.1 Market Trends The main category for herb infusions is Other plant and part of plants (including seeds and fruits) used for perfumery, fresh or dried, whether or not cut, crushed or powdered. Herb Infusion Imports, % of the volume is from Other plant and part of plants (including seeds and fruits) used for perfumery etc. From the imported volume and value kept stable Landed Cost of Imported Total Herb Infusion Prices have remained relatively stable. Germany has the highest average landed prices. Unit cost US$/MT Country % Change Iran $2,344 $2,664 12% Germany $5,317 $6,937 30% China $1,427 $1,481 3% India $1,396 $1,877 34% AAER (NT$-US$) % Source: Taiwan Customs 2009 MT Million US$ Source: Taiwan Customs 2009 The total imports of herbal infusions of 260 MT in 2008 are mainly herbal teas, both in bulk for re-packaging and in packaged form, and some bulk herbs for distribution to traditional Chinese medicine shops in Taipei s Di Hua Street and similar traditional outlets. The main supplier of herbs for the traditional Chinese medicine shops is Iran, but we have not been able to identify any specific products. Germany is the main supplier of herbal teas. 122

124 Imported Herb Infusion Market Share by Volume Others 27% India 7% China, 17% Iran 38% Germany, 11% India, 9% Others 38% Iran 32% China, 13% Germany, 8% Imported Herb Infusion Market Share by Value Others 27% Iran 35% India 4% China, 10% Germany, 24% Source: Taiwan Customs 2009 Others 38% India, 11% China, 6% Iran 27% Germany, 18% Imports declined in the first half of Herb Infusion Imports First Half (Jan-Jun) 2009(Jan-Jun) Y-on-Y Growth Volume (MT) % Value (Million US$) % Breakdown of Herb Infusion Products CAGR Mate* MT % US$ million % Other plant for MT % US$ million perfumery % Total MT % US$ million % Source: Taiwan Customs

125 * Mate is a kind of herbal tea from South America. 9.2 Importers Herb Infusion Market Share by Value 89% 11% Shuan Young Enterprise Others Source: Taiwan Trade 2009 The herb infusion market is small and very fragmented. Shuan Young Enterprise is the only importer of any size that we have been able to identify. Herb Infusion Importers by Import Value US$ million 40 US$50,000 and under 0 1 Source: Taiwan Trade 2009 Most of the players are small trading companies, such as Chou Jae Trading, detailed below. Herb Infusion Importer Company Name Contact info Comments 洲界貿易有限公司 Chou Jae Trading Co., Ltd Tel : Add : No.3, Ln. 101, Liaoning St., Zhongshan Dist., Taipei City 104, Taiwan Chou Jae Trading is a small trading company. Most of its herbal tea is imported from Germany. 124

126 9.3 Importers Selection Criteria Importers Selection Criteria for Herbal Tea Importance Source: APR Trade Interviews Attributes Supplier s reputation Size and appearance, Quality Shipping We interviewed Shuan Young, the biggest herbal tea importer in the market. It imports herbal tea from Germany, which it re-packages under its own brand name Magnet. For Shuan Young, the suppliers credibility is the first consideration for them and it emphasizes stability of supply. Shuan Young purchase herbal tea material in a large volume and it expects the supplier can ship their order on time. Size and appearance is the second concern for them. Herbal tea material will be sifted for quality control. For the quality concerns, the government will do the random test for pesticide residual. Shuan Young expects all the imported herbal material should meet the standard. The shipping should be kept in a certain temperature and humidity to keep the quality of the herbal tea material. Apart from Shuan Young, the herbal tea importers are very small family companies, many of them based in the Dihua Street area of Taipei, which import in bulk both for Chinese medicine shops and for packaging and sale in retail outlets. 9.4 Locally Produced Tea Tea remains the most popular beverage in Taiwan and total tea consumption has steadily increased with the introduction of new tea drinks, both packaged and ready-to-drink. On the other hand, local tea production has steadily declined due to the reduction in the total tea planted area. In Taiwan, Oolong tea, green tea, and black tea are the three major varieties. Among them, the planted area of Oolong tea (partial fermented) is the largest. Nantou holds 49% of the total planted area in Taipei, followed by Chiayi (14%) and Taipei County (12%). 125

127 Thus by 2008, locally produced tea has fallen to 37% of total tea consumption while imported tea has increased to 63%. Taiwan Tea Supply and Demand Balance Total Planted Area in Taiwan Hectare 20,222 19,701 18,938 19,342 19,310 18,208 17,620 17,205 16,256 15,744 Domestic Production MT 21,119 20,349 19,837 20,345 20,675 20,192 18,803 19,345 17,502 17,384 US$ million Export MT 3,072 3,035 2,451 2,592 2,713 2,388 2,175 1,963 1,975 2,328 US$ million Import MT 10,891 12,236 15,301 17,282 18,513 19,568 20,775 24,318 25,051 25,712 US$ million Total Domestic Consumption MT 28,939 29,550 32,687 35,034 36,475 37,372 37,404 41,700 40,577 40,768 US$ million Source: Council of Agriculture There are two segments for tea beverage, including ready to drink and packaged tea (including Tea Bag and Loose Leaf Tea): Ready to Drink 000 Liters 691, , , , , , , , , ,124 US$ million *Packaged Tea (including Tea Bag and Loose Leaf Tea) MT 5,579 4,436 4,193 4,370 4,753 5,172 5,627 6,122 6,485 5,537 US$ million Total * Selected Tea: including fermented and non fermented tea, Oolong tea, Pouchong tea, flavored tea, and other partial fermented tea. Source: MOEA 126

128 Taiwan produces some locally made herbal tea from rose, jasmine and, more recently, grass. Some consumers believe that herbal tea by grass can reduce the internal heat in the body and the Taiwan Herbal Medicine Association has done some research and promotion on grass herbal tea. There are, however, no statistics available on locally produced herbal teas and the amount are very small. The decline in locally produced teas overall is likely to continue and the overall deficit in tea supply, including herbal teas, will therefore continue to grow. 9.4 Distribution Channel Imported Herb Infusion Distribution Channels Importer Intermediate End Use Wholesalers 69% Dealers DiHua District 15% Food Processors Food Service Hypermarket Supermarket Trading Company 11% 5% Food Processors Convenience Store Food Service Source: APR Trade Interviews Herbal infusions are mainly imported by the wholesalers based in Dihua Street in Taipei, who import herbal infusions in bulk for sale directly and through dealers to Chinese medicine shops, Chinese restaurants for use in Chinese food dishes and to food processors for packaging for retail sale. Trading companies like Shuan Young import herbal tea material and outsourcing to a packaging company to package for them. Other trading companies import branded herbal tea from UK and Germany and sell to the high-end supermarkets. 127

129 9.5 Retail Sales Imported branded herbal infusions are sold in the high-end supermarket like Breeze Super, Jason s Market and Shin Kong Mitsukoshi. They are sold at almost double the price compare with locally packaged herbal infusion. The most often seen imported brands in the retail stores are shown below. Most Popular Imported Herb Infusion in Retail Stores Brand Product Image Importers Comments Wedgwood Queens Land Tea Waterford Wedgwood (Taiwan) Limited Marketmate Corporation Wedgwood Pepper mint Country of Origin: U.K Price: NT$220/15g Wedgwood Lemon Garden Country of Origin: U.K Price: NT$150/15g Queens Land Tea Good Evening Country of Origin: Germany Price: NT$190/40g Queens Land Tea Fitness Country of Origin: Germany Price: NT$190/40g Pukka Herbs Zensol International Co Pukka Relax/Cleanse Country of Origin: U.K Price: NT$380/20Tea Bag Source: APR Store Audit, September 2009 Locally packaged brands from imported bulk herbal infusion have a wide range of package size and types that are shown below. 128

130 Locally Packaged Herb Infusion Company Product Image Comments 家樂福 Presicarre (Carrefour s Taiwan division) 曼寧花草茶 Magnet Herbal Tea Rose Tea Price: NT149/43g Magnet Triangle tea Price: NT150/12 Tea Bags Magnet Herbal Tea Price:NT99/40g Magnet Herbal and Fruit Tea Price:NT150/24g 千佑企業 ChianYeoo Enterprise Cranberry Herbal and Fruit Tea Price: NT99/15g 薌園生技股份有限公司 Sweet Garden Biotechnology Food Co, Ltd. Roselle Hawthorn Instant Crystal Beverage Country of Origin: TW. Price: NT$95/16 Tea Bags Source: APR Store Audit, September 2009 Profile of Companies of Locally Packaged Herb Infusions Company Name Contact Information Business Introduction 薌園生技股份有限公司 Sweet Garden Biotechnology Food Co, Ltd 家樂福 Presicarre Co Tel: Add: 9F, No.81, Sec.1, Taichung Port Rd. Taichung City, Taiwan Website: Products: Beverages which can improve or maintain health. Tel: Add: B1, No.5, Lane 20, Sec.2, NanGang Rd., NanGang District, Taipei City Taiwan11553, Website: Sweet Garden Biotechnology has 2 different brands, including sweet garden and gold sweet garden. Its product includes instant beverage and grain powder, which claim being able to improve or maintain health. Presicarre Co is the Taiwan division of Carrefour. In 1987, Carrefour joint venture with Uni-President, Taiwan corporate, for Presicarre. 129