No. 4, Nanchang Road, Section 1
Business Mission: To create a dignified working environment for emplo yees; To protect the health of the consumption of tobacco and liquor; To insist on innovation, assertiveness, responsibility, honesty and faith.
Taiwan Tobacco & Liquor Corporation (TTL) is Taiwan's leading man ufacturer and distributor of beer, wine, and tobacco products. The co mpany, the operational arm of the former Taiwan Tobacco and Liquor Bo ard monopoly, has retained control of more than 80 percent of the isl and's beer market, 53 percent of the liquor and wine market, and 45 p ercent of the tobacco market since the total abolition of the governm ent's monopoly on these markets in 2002. TTL's leadership is based on popular and dominant brands such as Taiwan Beer, Long Life cigarette s, YuSan Kaoliang, and other traditional alcoholic beverages. The com pany operates nine wineries and distilleries and three breweries, as well as cigarette production facilities. TTL also operates its own 13 5-branch retail chain, and distributes its product through more than 50,000 sales outlets, including other retailers, vending machines, st reet sellers, and the like. Formed in 2002, TTL is slated to be priva tized as part of the Taiwan government's commitment to meeting condit ions imposed by its acceptance into the World Trade Organization (WTO ). The company public offering is expected to be completed by 2006, b ut has been slowed by labor union disputes. Although most of TTL's sa les remain focused on the Taiwan market, the company also ships a num ber of its brands, including flagship Taiwan Beer, worldwide, with ma jor markets including Japan and the United States. TTL has begun an a ttempt to enter the mainland Chinese market, but has met resistance f rom the Chinese government.
From Colonial Monopoly to State-Owned Treasure Chest in the 1940s
The Taiwan Tobacco & Liquor Corporation stemmed from the Japanese occupation of the island at the end of the 19th century. The colonia l governor quickly set up a monopoly controlling the island's lucrati ve opium production through the establishment of the Taiwan Pharmaceu tical Factory. By the beginning of the 20th century, the colonial gov ernment had extended its monopoly to include salt and camphor as well . Initially, these products were placed under separate bodies, includ ing the Taiwan Salt Bureau and the Taiwan Camphor Bureau. In 1901, ho wever, these, together with the opium factory, were placed under a si ngle body, the Monopoly Bureau of the Taiwan Governor's Office.
Taiwan developed its own tobacco industry in the early years of the 2 0th century, as a large number of Taiwanese farmers converted their l ands to growing tobacco. The rise of tobacco use on the island create d a lucrative and, in large part, captive revenue stream, and the Mon opoly Bureau quickly extended its range, taking control of Taiwan's t obacco monopoly in 1905.
Taiwan's alcoholic beverage market, at least among the native Chinese population, remained dominated by traditional Chinese wine and liquo r varieties, such as the rice-based Shaohsing, and Kaoliang, distille d from sorghum. The Japanese taste for beer, imported from Japan, soo n began to spread among the Taiwanese, however. By the end of World W ar I, demand for beer had grown sufficiently to necessitate the const ruction of a brewery in Taiwan itself. By 1919, the island's first br ewery, in Chienguo, had launched production.
Initially, the Chienguo brewery's production was rather limited, at j ust 1.5 million bottles per year. Yet Chienguo Beer, as it was origin ally known, became an instant hit among the island's beer drinkers, a nd especially among the Japanese, who brought the beer brand home wit h them. Before long, the Chienguo factory had begun to export its bee r to Japan, where the brand rivaled even that market's dominant beer brand, Sapporo. Soon, beer exports had exceeded beer imports.
The popularity of the Chienguo brewery's beer provided the colonial g overnment with a new and fast-growing revenue stream. In 1922, theref ore, the Monopoly Bureau extended its reach again, to include product ion and sale of alcoholic beverages. Throughout the remaining two dec ades of Japanese occupation, the Monopoly Bureau continued to add new monopolies, including matches and even the standardization of weight s and measures used on the island. In 1943, the Monopoly Bureau added petroleum products to complete the scope of its monopoly holdings.
The end of Japanese occupation following World War II spelled the end of the Monopoly Bureau. Yet control of the various sectors under tha t bureau offered a strong source of revenue for the newly installed T aiwan Government Executive Administration Office. In 1945, the Chiang Kai-shek-led government created a new body, the Taiwan Provincial Mo nopoly Bureau, which took over the monopolies on tobacco, liquor, cam phor, matches, and weights and measures. That body was reformulated a s the Taiwan Tobacco and Wine Board in 1947. At this time the board's oversight was reduced to just three monopolies: camphor, wine, and t obacco. In 1951, the board, previously a self-standing entity, was pl aced under the control of the Finance Department. In 1968, the board' s role was further streamlined to its two major revenue streams, alco holic beverages and tobacco.
Throughout the decades of military dictatorship in Taiwan, the Tobacc o and Wine Board played an important role as a financial motor for th e country's rapidly evolving economy. The strong revenue stream and c onsistent profits enabled the government to invest in developing new industries, particularly Taiwan's thrust into the electronics sector in the late 1970s and 1980s. The Tobacco and Wine Board also develope d an extensive sales network around Taiwan, setting up its own retail stores (more than 135 by the mid-2000s) and developing a network of more than 50,000 sales outlets throughout Taiwan.
As the sole producer and distributor of alcoholic beverages and tobac co products for Taiwan, the board was responsible for ensuring that p roduction levels met consumer demand. As such, and as Taiwan's popula tion grew, the board added new factories, breweries, and other produc tion sites around the island. The board also built up a portfolio of brand names, not least of which was its Taiwan Beer brand, based at t he original Chienguo brewery. Over time the Taiwan Beer brand became the board's international spearhead, following the Taiwanese expatria te community to the United States in particular, but also rebuilding a following among Japanese consumers as well. Another brand created b y the board at this time was the incongruously named, but highly popu lar, Long Life brand of cigarettes. Other brands included Prosperity Island, Triumph, and President. At the same time, the board oversaw p roduction of the group's other alcoholic beverages. This segment, how ever, remained limited, in large part, to the traditional Chinese spi rits, Shaohsing and Kaoliang.
Free Market Competitor in the 2000s
The end of military dictatorship in Taiwan in the mid-1980s brought a bout the first steps toward a liberalization of the state's alcoholic beverages and tobacco minority. The creation of a democratic structu re led to the creation of a liberalized, market-driven economic polic y, and to Taiwan's aspirations for joining the World Trade Organizati on (WTO). As part of that effort, the government began lowering trade barriers, including abolishing its monopoly over tobacco and alcohol ic beverages. In 1987, the government took the first step toward full liberalization of both of these markets by allowing the first import s of wine into Taiwan. Under pressure from the U.S. government, Taiwa n also accepted the first imports of U.S. cigarette brands that year. These were followed by imports of European tobacco products soon aft er.
Consumer acceptance of grape-based and other fruit-based wines was sl ow; as such the board's control over the Taiwanese alcoholic beverage market remained solid. Nonetheless, as wine drinking grew in popular ity in Taiwan, entering a boom phase in the mid-1990s, the board dive rsified its production as well, adding its own wine varieties.
The Taiwanese consumer responded more quickly to the arrival of the f irst foreign whiskey imports, authorized in 1991. By 1992, the countr y had widened its spirits imports to include brandy, gin, and other s pirits. Into the 1990s, the board saw its market share shrink rapidly , and by 1998, imports represented nearly 25 percent of the alcoholic beverage market. Helping to offset the board's dwindling market shar e was a steady increase in Taiwanese alcoholic beverage consumption. At the same time, the board remained relatively protected by a system of tariffs on imports. Although some imports, particularly those fro m Japan, were less heavily taxed than others, the system nonetheless helped buffer the board from full-scale competition into the late 199 0s.
Taiwan's commitment to meeting the requirements of WTO membership by 2002 brought a new effort by the government to liberalize its markets . In 1999, the government implemented a new Tobacco & Alcohol Adm inistrative Law (or TAAL). The new legislation provided the blueprint for the conversion of the board into a private enterprise and the in troduction of full-fledged competition in both the tobacco and alcoho lic beverage markets. As part of that process, the board was split in to two parts. The board's administrative function was regrouped into a new bureau, placed under the Ministry of Finance. Meanwhile, the bo ard's production and distribution units were regrouped into a new sta te-owned corporation. At the same time, the government leveled import taxes and duties.
The restructuring of the board lasted into the early 2000s. Finally, in 2002, the breakup was completed, and a new corpo- ration, Taiwan T obacco & Liquor Corporation, was formed. The creation of TTL also marked the launch of full-scale competition, including the admittanc e of the production of alcoholic beverages by private companies. That process had been started in 1999, with the production of wine and ot her fermented beverages. Production of distilled spirits was permitte d in 2001. The brewing of beer followed in 2002, and signaled the sta rt of TTL's own move toward private control.
TTL began preparing for a future public offering, targeting 2005 as t he date of its transformation into a private enterprise. That process was hampered, however, by the need to reach agreement with the compa ny's labor union, particularly involving projected cuts of more than 1,000 workers from the company's payroll. TTL also was burdened by it s obligation to purchase tobacco from Taiwan's tobacco farmers, despi te the fact that the company's warehouses were already overstocked.
In the meantime, the appearance of new domestic producers had begun t o take a toll on TTL's sales. By 2005, the group's grip on the local liquor and wine market had slipped to 53 percent. The company's share of the tobacco market also had suffered, dropping to 45 percent. Onl y the group's Taiwan Beer subsidiary appeared to withstand the tide o f competition, but the group's control of the Taiwan beer market had slipped back to 80 percent by 2005.
To shore up its sagging sales at home, TTL began instituting its own international expansion strategy. While continuing to target the U.S. , Japanese, and European markets, TTL's main target became the Chines e market. The company chose its Long Life brand as the spearhead for its entry into the Chinese market, sending over a first shipment in l ate 2004. At the same time, TTL prepared to launch its Taiwan Beer br and onto the mainland. This effort was held up, however, by the Chine se government, apparently in retaliation for the re-election of indep endence-minded President Chen Shui-bian. Nonetheless, China, which al so sought entry into the WTO, was expected to play by the rules. With the world's largest consumer population just a short boat ride away, TTL appeared certain to remain a major name in the tobacco and alcoh ol markets in the region.
Principal Divisions: Marketing & Sales; Liquor; Beer; Toba cco.
Principal Competitors: Shanghai Cigarette Factory; Sumatra Tob acco Trading Company, N.V.; Chuxiong Cigarette Factory; Ben Thanh Tob acco Co.; Japan Tobacco Inc.; Central Group of Cos.; Itochu-Shokuhin Company Ltd.; Yamae Hisano Company Ltd.; Nanlien International Corpor ation.