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Taiwan vs Tsingtao: Beer wars
By Michael Taylor

TAIPEI - It's a typical Friday evening at Papaya, an evening restaurant on Nanjing East Road in Taipei. Across the smoke-filled room, bleary-eyed office workers celebrate the end of the workweek over seafood dishes, fried tofu, and cries of "ganbei!" ("dry glass!"). In Taiwan, this is not an option - and as the beer goes down, inhibitions fall away along with the frustrations of the workweek.

Of course, hard-working people unwinding over a few beers is hardly an unusual event in many countries. Taiwan's beer consumption, at about 26 liters per capita every year, is in line with the global average. And like the major markets, it is slowly contracting as public drunkenness gradually sinks into social unacceptability - and Taiwan's law-enforcement authorities toughen up what in years past had been rampant drinking and driving.

Yet Taiwan's beer market is far from dull. It provides an interesting snapshot of the overall liberalization of Taiwan's economy over the past decade or so. By far the dominant label remains the ever-popular Taiwan Beer, a lager brewed by the government-owned brewer that until last year was an actual government agency. Fueled by a craze for Japanese brands in the mid-1990s - as well as a short-lived popularity for imported dark beers - the total market share for imports peaked at roughly 30 percent in 1997, after which many tipplers went back to the local brand. "Of course I drink Taiwan Beer," says a Taipei food-stall patron. "I'm a Taiwanese."

That commonly held attitude probably stems from before 1987, when the monolithic local brand was the only legal choice. Longtime observers say the bland packaging belied a frequently alarming variety of flavors in the containers. "The old breweries were not built for quality," says an international businessman involved in capital equipment sales. Corrupt officials were more interested in kickbacks than decent beer, he says, adding that the low-bid brewing equipment the government purchased did not bottle the beer properly: "In the old days, you'd look at the date, and if it was more than four weeks old, you wouldn't drink it."

In fairness, Taiwan Beer now regularly wins international recognition for its quality, and the sales executive says the latest brewery, built a few years ago, is one of the most modern in the world. Chang Liang-show, beer division director of the Taiwan Tobacco & Liquor Corp (TTL), the brewer that was only incorporated last year, admits that the onset of competition forced Taiwan Beer to clean up its act: "Opening to foreign imports was of course a challenge for us, but it was good for the overall beer market."

Foreign labels accounted for just 18 percent of Taiwan's NT$45 billion (US$1.3 billion) market in 2001, with Taiwan Beer taking the other 82 percent. But Taiwan's World Trade Organization (WTO) entry in January 2002 changed things yet again, making Taiwan's beer market into a truly open one by allowing the import of beer manufactured in the mainland People's Republic of China (PRC). The chief agent so far: China's Tsingtao Beer, which launched sales in Taiwan last April.

Sales figures are sketchy, but the brand's Taiwanese marketer, Sanyo Whisbih, reports that Tsingtao garnered an amazing 6-8 percent of annual beer sales in 2002. In the context of the major markets, a 1 percent change in market share is a major story, so the performance of Tsingtao is truly remarkable - and many foreign marketers believe the company's true market share is even higher. It has since been joined by other mainland brews - most notably, Beijing-based Yanjing Beer. Clearly, the Greater China beer wars have begun.

Perhaps the easiest explanation for Tsingtao's success is that it is inexpensive, at least at the wholesale level. This has dealt a blow to other imports, which had always blamed their own high prices on the import duties they had to pay to the government (actually, to the predecessor of TTL - in other words, they had to pay import taxes to their biggest competitor). And Sanyo Whisbih, which owns a chain of convenience stores and also markets Whisbih, an amphetamine-like drink highly popular with truck drivers and heavy equipment operators, has done a remarkable job of marketing the brand.

Yet while not all Tsingtao consumers will admit it, the phenomenal success of the first mainland Chinese alcoholic beverage to be legally imported into Taiwan is in part also due to feelings of cultural identity with the mainland. "It's a real Chinese beer," notes one pub owner whose own parents emigrated from China in 1949 and who proudly and adamantly defines his nationality as "Chinese - not Taiwanese".

It may be a bit of a stretch to call Tsingtao an agent of Taiwan-China unification, but things are clearly good on this side of the Strait for the mainland brewer. The same cannot be said of the mainland's reception for Taiwan Beer. Last month, Democratic Progressive Party (DPP) Legislator Tsai Chi-fang called for a boycott of Tsingtao and Yanjing beers on the grounds that Beijing has refused to allow the registration of Taiwan Beer (and also Kinmen Kaoliang, a fiery distilled liquor made on Taiwan's front-line island of the same name).

According to Tsai, the PRC's refusal was based on a rule that bans registering geographic names as trademarks (an interesting argument given that Tsingtao itself is named after Qingdao, the coastal city in Shandong province). But the subtext of the ban on the use of the name is clear: allowing "Taiwan Beer" to appear on mainland shelves would somehow give assistance to supporters of Taiwanese independence from China. Beijing has instead insisted on the use of "TTL Beer" as an alternative name. Not good enough, says the lawmaker, who warns that the dispute will be taken to the WTO if China refuses to allow the use of the Taiwan Beer brand.

Is it all simply political grandstanding? Given that industry sources, when questioned about the potential for Taiwan Beer in China, simply shake their heads and laugh, the answer, more than likely, is yes. Taiwan Beer has never found much of an export market, with few outside of Taiwanese communities having ever heard of the brand. The brand could hardly be expected to compete on cost in the mainland, and while it might find a market in the hundreds of thousands of Taiwanese business people now residing in China, its core market is clearly in Taiwan.

That is unlikely to change, despite the bureaucratic shackles that TTL's Chang Liang-show complains have limited his company's market potential. Chang, a 30-year veteran brew master, is surprisingly outspoken on the subject. "I understand this industry better than any of these people [in the Taiwan administration], but even though I'm the head of the beer division, I am not allowed to market our products myself," he says. "They changed the organization's name, but we're still run in the same old way."

Now that the cross-Strait taps are flowing, the same old way - unremitting government interference, for reasons that have little to do with the business of making and selling beer - may not be good enough to maintain the same old market share. But many Taiwanese will nevertheless continue to drink the local beer - for reasons of politics, cultural identity, or simply because they like the taste.

(©2003 Asia Times Online Co, Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.)
 
Mar 25, 2003



 

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