A Look at Some Segments of the Consumer Market

• Taking a Bite Out of the Snack Food Market

  BY TIMOTHY FERRY

• Cosmetics Sales Hold Up Despite Recession

  BY PHILIP LIU

• Shampoo Makers Cater to Niche Consumers

  BY PHILIP LIU

• Shaver Suppliers Offer Advanced Models

  BY PHILIP LIU

• For Household Paper Products, Quality Counts

  BY PETER TZENG

Multinational competitors play a big role in a market that puts a premium on quality and innovation.

BY TIMOTHY FERRY

A casual visit to any convenience store in Taipei reveals over 50 varieties of potato chips alone, along with dozens of types of chocolates, cookies, and crackers, and dried meats and fruits for the hungry shopper. And convenience stores are only one channel that snack foods are sold through. Traditional grocers, supermarkets, and hypermarts pack even wider arrays of snacks for Taiwanese consumers – including many munchies that were all but unknown in this market in their parents’ or grandparents’ day.

“Taiwanese consumers are blessed with a wide variety of high-quality products,” observes Philip Shaw, General Manager of Kraft Foods Taiwan, the number-two producer of biscuits – cookies and crackers – in the Taiwan market. A subsidiary of Kraft Foods International, the company has been active in Taiwan since the mid-seventies.

According to Cheryl Wen of Nielsen’s retail research division, Taiwan’s total snacks and confectionary market, including dried meat and fish, dried nuts and fruits, candy and chocolate, biscuits and salty snacks, was valued at NT$33 billion (US$1 billion) for 2008, making it one of the largest markets in Asia. Other major international players include candy maker Mars, and salty snacks brands Frito-Lay (a division of PepsiCo) and Pringles (part of Procter & Gamble).

While the rest of the economy has largely tanked over the past year, the snack foods business remains mostly healthy, posting a 5.1% increase year-on-year, according to Nielsen’s figures. Ken Pang, brand manager for Pringles, attributes this to consumer response to a depressed economy. “With financial pressure growing, people are spending less money on leisure activities. They want cheaper activities to have fun – so they buy more snacks,” he explains.

Shaw describes Taiwanese consumers as “sophisticated,” with “enough disposable income to make informed choices.” He says this “creates a robust, intense, competitive marketplace.”

Nowhere is the competition livelier than in salty snacks. Three brands dominate the market – Lay's, Pringles and Doritos – with local favorite Cadina playing runner up. PepsiCo’s Lay's and Doritos brands hold the number one and three positions respectively, on a strategy of leveraging global brand value into sales for locally produced snacks catering to local tastes. Lay's, for example, produces almost all of their potato chips from locally grown potatoes, and features flavors such as Kyushu Seaweed especially for Taiwanese consumers.

Pringles takes the opposite approach. Figuring that local production lacks economy of scale, Pringles imports its products directly from the United States or Europe. That allows parent company P&G to position Pringles as a premium brand, charging over twice as much per unit as does Lay's, the biggest competitor.

Both strategies are responses to government restrictions on what can be imported from China, as raw potatoes and potato chips are both on a list of over 2,000 products that may not be brought into Taiwan from China. The official rationale for the ban is that the items either represent a risk to national security or have a serious impact on domestic industry (though the definition of what “serious impact” actually means is left vague). In the case of potatoes, the Council of Agriculture has raised another objection – phytosanitary concerns about the spread of agricultural diseases to Taiwan farms – even though PepsiCo would be relying on crops from its own farms, grown under controlled conditions.

Lay's uses only Taiwanese potatoes except for the three months – July to September – when climatic conditions make locally grown potatoes unavailable. Besides being unable to import potatoes from China – where they are readily and cheaply available – during that off-season, PepsiCo has also been unable to meet demand by extending the storage life of Taiwan-grown potatoes through use of a sprout-inhibiting chemical that is common around the world (in fact Taiwan inexplicably requires its use on imported potatoes while banning it on home produce). As a result, Lays is forced to search much further afield for potatoes, greatly adding to costs and reducing profits.

Pringles’ response is to turn the ban into an asset. P&G actually produces Pringles in China – where it benefits from economies of scale – but as the output cannot be shipped to Taiwan, the company trades off the added costs of importing the product from the United States for a market position as a premium segment.

Ken Pang feels it makes little sense to import food products from China anyway, at least from a marketing point of view. “Taiwanese consumers have no confidence in snacks made in China,” he says.

China safety issues

China has met with considerable notoriety for various quality and safety incidents related to its products, but none has shaken consumers’ trust as much as the melamine scandal that came to light last summer. Melamine, a chemical used in plastics manufacturing, had been added to milk products by Chinese dairy farmers to give the appearance of boosting protein levels. But eventually some 300,000 infants in China were sickened with agonizing kidney stones, mostly from consuming tainted baby formula. Six babies died from renal failure.

The scandal caused many people on both sides of the Taiwan Strait to worry that China was incapable or unwilling to guarantee consumer safety. The Taiwan media smelled blood, and when products containing traces of melamine were found in some international brands – outside Taiwan, but in the region – the media pounced. Several general managers in Taiwan who had previously offered unmitigated assurances of the safety of their products were forced to eat crow on national TV. The government also imposed a ban on imports of food items containing any dairy products of Chinese origin.

With the incident behind them, most international players in the snack foods market are reluctant to discuss the case, except to assure consumers that their production facilities match the highest U.S. standards everywhere they make their products, including China. Still, the ban and perception issues remain, forcing companies to maneuver to remain competitive.

Shaw believes the restrictions on the import of food products from China are unfortunate. “China is the jet engine of innovation” in the region, he says, and with the bans in place, consumers “lose opportunities to taste new, innovative products being developed in China right now, where innovation is proceeding at a rapid pace.”

While the snack-food market overall is holding up in Taiwan, the news in the sector is not universally good. Chocolates, for one, are not faring well in the recession. “Chocolates are an indulgence, a premium product,” says Kara Lin, chocolates category manager of Mars. Popular Mars brands include Dove and Snickers, competing against European giant Ferraro and Meji of Japan. During a ecession, spending becomes more conservative and it seems that consumers are feeling a bit less indulgent. Overall, chocolate sales are down at least 10%, according to Lin.

The chocolates manufacturers have also had their troubles with the China-import ban, though after considerable effort, they managed to persuade the authorities to remove the restrictions on certain product categories. Still prohibited, however, are peanuts (including products using peanuts as an ingredient), presumably with the interest of Taiwanese peanut farmers in mind. Unable to ship peanut-filled chocolate candies from China, Mars imports its popular Snickers bar from Russia and its M&Ms from the United States.

Unlike Shaw, Kara Lin considers Japan to be Asia’s real engine of innovation – at least in chocolates. She says the Japanese market is highly diversified with many new, innovative products introduced every year. These new products are highly welcomed because “Taiwan’s consumers are eager to see something new in the chocolates market,” she notes. “Take a look in your local 7-Eleven in September. You’ll see that the chocolates section looks totally different.”

Lin is counting on these new products to wake up the chocolates market from its torpor. With 55% of chocolates sales occurring in the winter months – especially between the two most important holidays of Chinese New Year's and Valentine's Day – autumn introductions of new products are vital to yearly profits.

Salty snacks are also a highly seasonal sector, and while they also do well during Chinese New Year's, their biggest season comes in the middle of summer. This apparently has less to do with increased numbers of people barbecuing by the seaside than it does with ancient Chinese customs. Ghost month – the seventh month of the lunar calendar – begins in either July or August every year. According to Chinese folk religion, it is the time when the gates of hell are flung open and ghosts walk the earth. During ghost month, Taiwanese provide offerings to their ancestors in exchange for worldly favors. Apparently, ghosts are as fond of chips as their living descendants. P&G’s Pang says sales during ghost month are typically two-and-a-half times that of ordinary months.

While distinct seasonality is one feature of Taiwan’s market, intense brand loyalty is another. With the consumer market highly fragmented, Pang describes consumers as being almost fanatical in their brand loyalty. “It’s very hard to gain market share from competitors,” he notes, adding that the market shares of the top brands have remained fixed for some years, regardless of whether total sales are rising or falling.

Pringle’s biggest obstacle to competing in the local market, he says, remains its difficulty in providing Taiwanese consumers with customized flavors – a direct result of the import ban on potatoes from China. Besides adding two weeks to two months to transport schedules, the need to import goods from the United States means Pringles only offers flavors that are popular with Americans, such as Pizza or Sour Cream and Onion. “American products are not customized for Asian tastes,” he concedes. To get around this limitation, new production facilities are being set up in Malaysia. Products made there will feature flavors that are more geared to the Taiwanese palate.

Kraft Foods provides another example of glocalization – purveying global brands according to the specific needs of local markets – with its Oreo products. Last year the Wall Street Journal ran a News In-depth article on the success of Oreo and its brand-extending cousins in the China market. Recognizing that Oreo was underperforming in China, the newspaper reported, Kraft Foods experimented in that market, launching a less-sweet version and a chocolate-covered wafer cookie also called Oreo. Not to be outdone, Kraft Foods Taiwan joined the trend toward innovation; a cream-filled Oreo wafer-roll unique to the Taiwan market is now being introduced.

Despite the current sluggish economy, the companies in Taiwan’s snack foods market all appear optimistic about the future. “I believe in Taiwan,” says Shaw. “It’s a dynamic, robust country with an incredible technological base, educational level, and a vocal and active populace. I believe Taiwan will recover before the others in the region.”

Cosmetics Sales Hold Up Despite Recession

In Taiwan, with its strong sunshine, skin-care products account for the biggest share of the overall market.

BY PHILIP LIU

Despite the economic downturn, cosmetic brands have managed to maintain brisk sales in the Taiwanese market thanks to aggressive marketing and the frequent launch of new products. 

The major brands, including those in both the premier and medium-priced categories, for instance, continued to do well in their Mother's Day campaign this year, one of the most important sales periods of the year. Customers were attracted by hefty discounts that in some cases reached as high as 50%. According to a survey by the United Daily News, Cosme Decorte, a high-end brand, achieved sales of NT$118 million (US$3.58 million) during the period, more than double last year's NT$50-60 million (US$1.5-1.8 million), the highest growth among major brands. IPSA boasted 40% growth, followed by Estee Lauder with 30%, Albion with 24%, RMK with 15%, and Lancome of France with 18%. But SK-II from Procter & Gamble (P&G) was the overall champion, bringing in NT$500 million (US$15.2 million) in Mother’s Day sales.

Among the best-selling products were those aimed at helping users maintain youthful, clean, and lustrous skin, often through the application of biotechnology or nanotechnology. Cosmetics promising a whitening effect are especially appealing to women in Taiwan concerned that the island’s ample sunshine throughout the year will cause spots or skin coloration.

Growing numbers of customers have also been attracted to organic cosmetic products that emphasize friendliness to sensitive skin by utilizing purely natural ingredients. Popular organic brands in the market include Burt’s Bees, Ren, and Dr. Bronner’s.

Similarly, mineral makeup, which lacks preservatives and chemical dyes, has been quite popular this year, although its color – the result of the ferric oxide contained in the mineral materials – often is not as vivid as with traditional products. Many brands, such as Estee Lauder, Guerlain Paris, M.A.C., and Laura Mercier, launched mineral-makeup lines this year.

If cosmetic purchases have not been greatly affected by the economic downturn, it may be due, at least in part, to what has become known as the “Lipstick Theory,” posited by Leonard Lauder, former president of Estee Lauder, in 2001. Seeking to explain the spike in lipstick sales after the 9/11 terrorist attacks in the United States, he concluded that during periods of gloom or uneasiness, women like to cheer themselves up by wearing brighter-looking lipstick and other makeup.

The relatively good recent sales conditions have encouraged P&G to expand its presence in the cosmetics market from the medium-priced sector, where it has long been strong with such brands as Max Factor and Cover Girl, to the premier sector in cooperation with Italy’s Dolce & Gabbana. In addition, Korea’s LG Group has set up a Taiwan branch after serving the market through an agent for six years, and Chanel has opened its largest boutique in the Asia-Pacific region – a 1,260-square-foot outlet in the New Moon Shopping Center in Yilan County. With the opening of the Taipei-Yilan Expressway, the boutique is attracting growing numbers of domestic tourists as well as local Yilan customers.

The premium brands are generally sold at department store boutiques, staffed with beauticians who not only sell products but also provide makeup advice. “We have 300 to 400 trained beauticians stationed at department store boutiques island-wide to help customers find the products that are most suitable to them,” says Abigail Lin, a P&G manager. The company offers its SK-II brand products at these boutiques, while selling its lower-priced Olay brand at open-shelf outlets, such as drugstores and hypermarkets.

While sales of premier cosmetics remain brisk despite the sluggish economy, many customers of medium-priced products are reportedly switching to lower-priced brands, purchasing them at open-shelf outlets or through direct-sales networks and online stores. Some recently established e-tailers have relied on cosmetics as a major revenue source.

Drugstores, a major outlet for medium- and low-priced cosmetics, have continued to do brisk business amid the recession. For instance, president Kao Min-hang of Cosmed, a leading drugstore chain under the Uni-President Enterprises Group, reports that the company expects to achieve 10% overall revenue growth this year, the same as in 2008. Sales of cosmetics, which the chain introduced six years ago, have been growing at a 30% annual clip for the past two years. 

Meanwhile, Avon Taiwan, a leading direct-sales brand, saw its membership shoot up by over 20,000 people in 2008 to a total of 270,000, while its revenue hit NT$4.4 billion (US$133 million), according to Wang Zi-yun, president of the company. 

Still, the economic downturn has made for heightened competition, forcing some brands to exit the market, including F&P of the United Kingdom. The problem has been compounded by the appreciation of the yen and euro, which forced Japanese and European brands to raise their prices.

In general, Taiwan’s cosmetics market has been expanding at a steady pace in recent years, reflecting the overall rise in the standard of living. The annual market size is estimated at NT$120-$150 billion (US$3.6-$4.5 billion), according to  Lai Huey-min, a project leader at the Biomedical Engineering Research Laboratories of the government-sponsored Industrial Technology Research Institute (ITRI). Lai notes that the biggest-selling category in the domestic market is skin-care products – especially products providing a whitening and moisture-maintenance effect – which differs from the emphasis on perfume among Europeans, makeup among Americans, and hair-dyeing products among Southeast Asian populations.

P&G’s Abigail Lin says that the Taiwanese cosmetic market ranks third in size in the Asian region, trailing only Japan and Hong Kong. “The demand for functional cosmetics and anti-aging products in Taiwan has been growing robustly in recent years,” she notes. 

While the market is overwhelmingly aimed at female customers, male-cosmetics lines have also emerged in recent years, notably facial or eye-area essential lotions for brightening facial skin and relaxing eye pouches to alleviate signs of aging or fatigue. Popular male-cosmetics brands include Biotherm, Armani Men, and YSL Lab Series.

Import brands dominate

Overall, the domestic cosmetics market has been dominated by famous international brands from Europe, the United States, and Japan. Korean brands have also carved out a significant market share. Leading international brands have an especially strong presence in the premier sector, mainly sold at department stores. La Mer, a top-grade facial cream costing NT$50,000 (US$1,515) a jar, for instance, is the favorite of many well-to-do women during sale campaigns by the department stores.

ITRI’s Lai estimates that foreign brands account for over 70% of the domestic cosmetics market. But local brands are taking a larger and larger share of the pie, especially in the medium- and low-priced sectors. Some indigenous brands, such as Dr. Wu and For Beloved One, have made their way onto the top sales list of drugstore and online outlets in the first half of 2009.

Taiyen Biotech Corp. (formerly the state-owned Taiwan Salt), for instance, branched out into cosmetics in 2004 after Taiwan’s accession to the World Trade Organization deprived it of its monopoly over domestic salt production. Last year its Lu-Miel series of collagen-based products, including essence, lotion, and cream, took in NT$200 million (US$6 million) in revenue, accounting for over 10% of the corporate total. Further growth is expected in 2009, partly due to the rollout of male-cosmetic series La Miel and other new products. To facilitate the growth, the company plans to expand the number of its outlets – mostly franchised operations – from the current 140 to 200 by year-end.

Taiyen also plans to approach the huge Chinese market aggressively. Chairman Hung Hsi-yao reports that the company has set up a rep office in Beijing, which will soon be upgraded to a subsidiary. In cooperation with Taiwanese businessmen in China, it will establish 18 sales outlets in Jiangsu Province starting from September this year.

Established five years, Formosa Biomedical Technology under the Formosa Plastics Group has made major inroads into the domestic cosmetics market. One flagship product is the Forte series, which relies on molecular proteins to enhance the skin's elasticity and ability to retain moisture. The company is promoting the product, which was developed through technological cooperation with Lipotec, one of the world’s leading peptide producers, at boutiques in major department stores.

Other indigenous brands are gearing up to join the fray. Allied Industrial Corp., a specialty-chemical producer listed on the over-the-counter market, for instance, has launched the Proskin Q10 series of skin-care cosmetics; featuring a Q10 material that the company developed itself, the product is said to be 10 times more absorbable by the human body than competing products. It is being marketed at drugstores in both Taiwan and China.

Taiwan Hopax Chemical Industrial, also a chemical maker, has rolled out Novena, an anti-pimple product that uses “Ocean Dew,” an ingredient extracted by its research team from chitosan. The product, being sold at drugstores in Taiwan, has been certified by the Personal Care Products Council of the United States. The company plans to further develop skin-whitening and other cosmetics products.

The government is seeking to encourage development of the indigenous cosmetics industry, for example by promoting adoption of a GMP (Good Manufacturing Practices) system for cosmetics production. The system, being overseen by the Department of Health, is based on ISO 22716, which is also the basis for similar programs instituted by ASEAN (the Association of Southeast Asian Nations) and the European Union, two major overseas markets for Taiwan-made cosmetics. China is also scheduled to implement the system in two to three years. Annual exports of Taiwan-made cosmetics now exceed NT$7 billion (US$212 million), about one-fourth the total production value of NT$30 billion (US$909 million).

ITRI’s Biomedical Engineerings Research Laboratories contracted with 16 local cosmetic firms to provide technical assistance to help them gain the GMP certification. So far, five of them have been certified: Formosa Biomedical Technology, Kao (Taiwan), Winner International, Unicare Biotechnology, and Maxigen Biotech.

The research organization is also providing technical assistance in product development. Under its guidance, Nan Liu Enterprise, a non-woven fabric maker, for instance, successfully expanded into the production of facial masks and skin-care products. These now generate some NT$2 billion-$3 billion (US$60 million-$90 million) of revenue annually.

Lai Huey-min considers that the abundant local talent pool in the chemical field gives Taiwan a solid base for developing the cosmetics industry. But to ensure its ultimate success, he says, the industry will have to “step up cooperation with the medical field for development of more effective products, establish a trustworthy GMP system, and establish its brand image in the market.”

Shampoo Makers Cater to Niche Consumers

BY PHILIP LIU

In the face of acute competition, shampoo brands have been switching their focus to niche sectors in the Taiwanese market, so as to meet the needs of increasingly sophisticated and demanding local consumers.

Many new products stress their nourishing effect on hair and the inclusion of vegetal ingredients, said to be conducive to lustrous, healthy hair and free from adverse effects of the chemicals found in many shampoo products on the market. L’Occitane, a French brand, for instance, has launched a new series featuring herbal ingredients for soothing cleansing of the scalp. It carries a retail price tag of NT$780 (US$23.60) for a 300-milliliter bottle.

Rene Furterer, another French brand, is offering its Astera shampoo, also with vegetal ingredients to soothe sensitive scalps and prevent dryness, with a price tag of NT$1,100 (US$33.30) for a 150-milliliter bottle. Another new shampoo from Rene Furterer is Volumea, which targets fine and flat hair. It can be used to create a fluffy hairstyle and is priced at NT$1,080 (US$32.70) for 150 milliliters. 

Kao Corp. (Taiwan) has introduced Essential shampoo, imported from Japan, aimed at teenage girls and priced at NT$199 (US$6) for a 550-milliliter bottle. It is advertised as adding luster and softness to the hair, thanks to its contents of high-density honey and milk protein.

Many new shampoo products emphasize an ability to help prevent thinning hair, a problem plaguing many people, men and women alike. Procter & Gamble’s Pert, for example, recently brought out an herbal-essence series, capable of strengthening hair and preventing thinning. It is priced at NT$169 (US$5) for a 750-milliliter bottle.

Avalon’s Biotin B-Complex thickening shampoo is also aimed at alleviating thinning-hair by nourishing hair follicles and enhancing hair health with its rich contents combining such nutrients as biotin, wheat protein, and B-complex vitamins. It is sold at NT$650 (US$19.70) for a 400-milliliter bottle.

In the face of the challenge from CAD (cosmetic antidandruff) products, Head & Shoulders (also from P&G), a leading antidandruff shampoo on the local market, has this year launched a new product boasting the twin benefits of antidandruff and hair moisture maintenance. It invited Jolin Tsai, a famous local singer, to be its spokesperson. The demand is strong in Taiwan for antidandruff shampoo, as 74% of local people are estimated to have a dandruff problem, according to a report in the United Evening News.

While foreign brands dominate the local shampoo market, a number of local brands are emerging, especially those stressing vegetal ingredients, including extract of soapberry (wuhuanzi in Chinese), a cleansing substance used in ancient China that is regarded as rich in vitamins and protein.  

Soapberry Biotech Progress Co., for instance, has rolled out Spa shampoo combining the extracts of soapberry and an herbal plant, thus bringing both cleansing and soothing effects.

The Shiatzy Group, a renowned fashion design company and the local agent for L’Occitane, has launched its own soapberry-based shampoo, branded dp (Desire & Passion). To ensure sufficient raw-material supply, the company in recent years has planted several million soapberry trees on a 100,000-acre site in a mountainous area near the city of Panzhihua in Sichuan Province.

In addition to brick-and-mortar sales outlets, virtual channels are playing an increasingly important role in the local shampoo market. Shampoo and other low-cost daily necessities, such as tissue paper and detergents, account for half the NT$300 million monthly revenue of PChome Online. Procter & Gamble began selling its Pert shampoo on the Momo TV shopping channel on June 16, at a price 20% below that being offered at physical outlets, although a minimum order is required. 

According to a survey by Taylor Nelson Sofres, the retail value of the local shampoo market was estimated at NT$4.2 billion (US$127 million) for 2007. Last year’s data is not yet available.

Shaver Suppliers Offer Advanced Models

BY PHILIP LIU

Despite the economic downturn, major electric-shaver brands have rolled out innovative new models in Taiwan this year, featuring attractive designs, cutting-edge materials, and sophisticated functions for delivering a clean and comfortable shave.

Philips, the leading shaver brand in Taiwan, with market share of more than 50%, launched its Arcitec shaver, the top model in its RQ series. An artistic version of the model is available in a limited edition exclusively for Taiwan; it incorporates a ceramic base designed by Wang Xiajun, a renowned Taiwanese glass and ceramic artist. The model boasts a carbon-fiber body plated with chrome, similar to a Formula 1 racing car, and its sophisticated functions include an intelligent face-conforming system, patented rotating twin-blade design, supplementary sideburns blade, lithium battery, and automatic cleaning system. The product sells for NT$24,000 (US$727), making it the most expensive shaver in Taiwan. To help whet consumer appetite, Philips is offering a giveaway with each purchase: a produce processor that ordinarily retails for NT$7,000 (US$212).

The model hit the market just before Father’s Day, which in Taiwan falls on August 8. That is the most important sales season for local electric shavers, with more than 500,000 units sold, accounting for over 40% of the annual total. The only more popular Father’s Day gift, surveys have found, is cash in a red envelope.

Braun of Germany this year launched its Prosonic shaver, featuring sonic vibration technology, sensitive flexing head for maximum facial conformity, automatic cleaning device, and washable design. The model, retailing for NT$14,888 (US$451), is sold with a high-end coffee pot as a giveaway.

Panasonic, another leading brand in the electric-shaver market, debuted its Lamdash model for Father’s Day. It features four blades that can cut facial hair from various angles and at the roots through the assistance of sonic vibration. Other features are close facial conformity and automatic cleaning. The price tag is NT$15,000 (US$455).

Nicole Hsu, a manager at Philips Taiwan, reports that premium electric shavers have enjoyed brisk sales in Taiwan this year, in line with the trend toward polarization seen in the market during the economic downturn.

Meanwhile, razor makers have also introduced new models with more sophisticated functions, in order to meet the increasingly demanding needs of customers (it is estimated that some five million consumers on the island shave with razors, compared with three million for electric shavers). Gillette, which is part of Procter & Gamble, has brought out Gillette Fusion Power, featuring five blades capable of dispersing the cutting force for less irritation and more comfort, a supplementary blade for difficult corners such as sideburns, a lubricating aloe bar, and a chip-controlled vibration effect capable of massaging the skin and assisting with clean cutting. The product is priced at NT$399 (US$12).

Schick has introduced a similarly high-end product, called Titanium Revolution, featuring vibration function, titanium-coated blade, and a supplementary blade for mustache-shaping. The price tag is also NT$399. The titanium-coated blade has the merits of smooth and sharp cutting, as well as higher resistance to germs, an important consideration given Taiwan’s high humidity.

Michelle Wang, manager of Schick Taiwan, says that the titanium series has won favor with many Taiwanese men, who tend to emphasize shaving comfort more than sharpness of the razor, due to their lesser amount of beard. She reports that the titanium series now makes up half of the company’s total sales, which she says accounts for 65% share of the local razor market.

One result of the economic downturn has been brisk sales of disposable razors, which are usually priced at NT$10-$40. The total size of the local razor market is estimated by the Nielsen Company at NT$700 million (US$21 million) a year. 

Wang notes that the local market for shaving foam is very small, since most local men consider it too troublesome to use the product. For those who do use it, growing numbers are switching to gel, as it produces a finer foam, enhancing shaving comfort. Shaving gel now occupies 20% of the market. Another new product is shaving foam that doubles as face cleansing foam.

Despite its small scale, the market is still flooded with numerous brands, including many that provide other grooming products for men. 

Do You Brush 1.2 Times a Day?

The overall market size of Taiwan’s Oral Care product market in 2008 was estimated by the Nielsen Co. to be NT$45 billion (US$1.36 billion). Oral Care includes the toothpaste, toothbrush, mouthwash, floss, and inter-dental categories. Toothpaste is the largest segment, representing around 60% of the market, but the toothbrush, mouthwash, floss, and inter-dental categories are growing faster as consumer frequency of use increases. Toothpaste penetration, or usage per capita, is among the highest of all categories offered in stores, with 88% of all consumers using it daily. Although the market size for mouthwash, floss, and inter-dental (a modified toothbrush used for cleaning between teeth) is currently small in Taiwan compared with Western markets, with penetration estimated at below 10%, the growing trend indicates a big future opportunity as consumers begin to realize the health benefits from using these products.

In terms of toothpaste usage, the per capita consumption is 423 grams a year, which means Taiwanese people brush their teeth 1.2 times a day on average (assuming 1 gram of toothpaste per brushing). That level of brushing scores above the Asian average (0.6 times a day) and is close to that of the well-developed markets of North America (1.4 times a day), Hong Kong (1.4 times) and Singapore (1.3 times). For toothbrushes, the Taiwanese consumption level (1.8 pieces per year) is in the top three among Asian markets. Dentists recommend replacing a toothbrush every three months due to bristle wear, and they also recommend replacing it after a cold or flu. Therefore, the ideal would be four toothbrushes per year, though only Switzerland comes close to that number. The leading toothbrush brands in the Taiwan market are Oral B from Procter & Gamble, and Colgate and Darlie from Hawley & Hazel Chemical (Taiwan) Co., a Colgate-Palmolive joint venture.

The Oral Care market in Taiwan is considered to be highly competitive. In toothpaste, Darlie is the market leader, followed by Colgate in second and Sensodyne, a product of GlaxoSmithKline, third.

With more than 60 years’ experience in the Taiwan market, Darlie focuses on “Freshness and Beauty.” According to Hawley & Hazel, Darlie has maintained the leading position in toothpaste because of the “unique minty freshness” of Darlie Base. Darlie also expanded into the whitening segment where Darlie All Shiny White is the leading toothpaste, and Darlie introduced innovations like Natural Herbal and TeaCare with Longjing Green Tea essence to meet local consumer preferences.

Colgate, the worlds’ leading brand, focuses on promoting oral health with its “Oral Health Expert” image. And Colgate Total is the first toothpaste that contains a patented formula to provide a 12-hour anti-bacteria shield. Sensodyne specializes in the sensitive segment. Smaller brands like Day and Night, Sunstar, Whiteman and Smiling are also available in the market, but their combined market share would rank them a distant fourth compared with the leading brands.

For Household Paper Products, Quality Counts

BY PETER TZENG

For Taiwan’s manufacturers of household disposable paper products (including toilet paper, facial tissues, paper towels, napkins, diapers, and incontinence products), differentiation is the key to success in this NT$16 billion (US$485 million) a year industry. But when all brands get nearly the same job done and are disposed of in seconds, how do companies differentiate themselves from competitors? The answer is threefold: quality, environmental friendliness, and price.

Due to the efforts of consumer awareness groups and strong advertising campaigns, Taiwanese shoppers are particularly drawn to high-quality disposable paper products. For example, they have an exceptionally strong preference for products made from virgin rather than recycled pulp, because they are free of carcinogenic optical brighteners and less likely to cause hygiene issues. Global industry giant Kimberly-Clark has long dominated the high-quality market with popular virgin pulp brands such as Kleenex, Scott, and Huggies. Its mere size enables it to invest more resources into R&D and product development to design these high-quality products. As a result, Kimberly-Clark Taiwan is able to price its products higher than its competitors while still retaining a significant portion of the market share. Its Kleenex products, for instance, are typically priced 10-15% higher than comparable tissues, yet Kimberly-Clark still maintains a 42% share of the facial tissue market in dollar value.

Despite the preference for virgin pulp, Taiwanese consumers are also following the world trend towards more sustainable practices. Cheng Loong Corp. (manufacturer of Andante products) earlier this year launched its new Dandelion brand – a line of tissue products made from 100% recyclable material – to target this rising market. Paper Division Vice President Charles Chang says he has high expectations for this brand, suggesting that the government should encourage Taiwanese consumers to use more recycled materials.

Kimberly-Clark, on the other hand, has determined through cost-intensive “life cycle assessment” research that using recycled fiber actually contributes 2.5 times more to global warming than using virgin fiber from a sustainable forest, as Kimberly-Clark does. Chen Chung-ming, director of the company’s Family Care division, notes that too many people mistakenly believe that using recycled products is automatically environmentally friendly, and suggests that the government publicize this misconception.

Taiwanese consumers are also known to be very price sensitive. In Q1 2008, expectations of an imminent price rise in this market segment led to excessive demand and a resultant shortage in supply. Moreover, the financial crisis has heightened this price sensitivity. As a result, many inexpensive private label retail brands have emerged, now comprising a 16% share in terms of market value. Their strength derives from the especially high density of convenience stores in Taiwan and the common practice of “passing off” – designing packaging that resembles that of a well-known brand so as to mislead consumers. Representatives from Cheng Loong, Fuburg Industrial, and Kimberly-Clark all noted that one of the biggest frustrations the industry faces today is these price-cutting retail brands – especially since some stores even use these products as loss leaders to entice customers.

Future prospects for the industry are less than ideal. Demand will likely remain constant given the market’s maturity and Taiwan’s low population growth rate. Increasing demand for pulp from China and India has led to a steady increase in pulp prices, further squeezing profit margins. And in the long run, durable products may replace disposables due to sustainability considerations.

Given Kimberly-Clark’s vast global resources, local rivals such as Yuen Foong Yu and Cheng Loong have had trouble matching the quality it has to offer, and thus must compete against the private labels with their low prices. Last year, Yuen Foong Yu even reported negative profits. But these brands are not giving up without a fight. Asked how his company differentiates itself from competitors, Cheng Loong’s Chang proudly mentioned one of its recent innovations: Hello Kitty designs on tissue paper.