""

Required Report - public distribution

**Date:** 11/17/2003

**GAIN Report Number:** TW3047

**Taiwan**

**Retail Food Sector**

**Report**

**2003**

**Approved by:**

![](media/image1.wmf)Hoa Huynh, Director, ATO Taipei

American Institute in Taiwan

**Prepared by:**

Amy Hsueh, Marketing Specialist

**Report Highlights:**

After twenty years of rapid expansion, Taiwan's food retail industry has
now entered a phase of maturity. Mergers and strategic alliances will
continue to take place over the next few years. The larger chains
continue to grow at a constant rate while small chains have begun to
stagnate.

Taiwan has become a full member of the World Trade Organization (WTO) in
2002. With the liberalization of the Taiwan market, there have
improvement of market access for U.S. consumer food products such as
high quality beef, fresh fruits and vegetable, seafood, frozen prepared
foods, and other processed foods. Many food retail chains are expanding
direct or indirect imports of new-to-market items. U.S. suppliers are
encouraged to contact these retail chains directly.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Taipei ATO \[TW2\]

\[TW\]

**Section I. Market Summary**

Modern Western-style food retail stores - supermarkets, hypermarkets,
and convenience store - have been present in Taiwan for more than twenty
years. Over the past ten years, throughout 1990's, Taiwan's food
retailers have experienced a period of rapid expansion and increasingly
fierce competition. The rapid expansion of the hypermarkets and
convenience stores has now slowed due to the overall economic slowdown
and strong competition since the last two years. Supermarkets began
slowing in 1996 because of strong competition from hypermarkets,
convenience stores, and traditional wet markets.

Industry executives indicated that Taiwan's food retail industry has
entered a phase of maturity. Mergers and strategic alliances will
continue to take place over the next few years. The larger chains
continue to grow at a constant rate while small chains have begun to
stagnate. The Netherlands cash-and-carry chain Makro was the first
foreign retailer to open a store in Taiwan in late 1989 but decided
unexpectedly to shut down its remaining six stores in Taiwan in February
2003, citing high operating costs and keen competition. In 2002, Hong
Kong-based Wellcome Supermarket merged with local Kasumi's 23
supermarket outlets and further strengthens its position as the largest
supermarket chain in Taiwan. Wellcome's new "Superstore," a combination
of traditional wet market and modern supermarket format as well as
"Jasons Market Place," which carries higher end and imported foods to
cater to the needs of city dwellers, might become fashionable for a time
in Taiwan. Globalization is a distinguishing characteristic of Taiwan's
food retail market. Foreign operators, including Wellcome, Auchan of
France, Britain's Testo, France's Geant, and Costco of the U.S. continue
to dominate Taiwan's food retail market.

According to the Ministry of Economic Affairs' statistics, Taiwan
supermarkets, hypermarkets, warehouse stores, convenience stores, and
department stores reported total sales of US\$19 billion in 2002, a six
percent increase compared to 2001. The domestic economy growth for the
first half of the year was slow due to the war in Iraq and SARS outbreak
in Taiwan between March and June 2003. However, Taiwan's economy has
gradually turned around in the second half of the year. Taiwan's
Directorate General of Budget, Accounting and Statistics (TGBAS) has
adjusted upward its economic growth forecast for 2003 to 3.15. It is
anticipated that these food retail stores will become lively as soon as
the economic recovery continues. ![](media/image2.wmf)

**Hypermarkets**

In Taiwan, growth by very large supermarkets such as hypermarkets and
cash-and-carry stores has been rapid since the first store, Makro
Taiwan, opened in late 1989. The rapid expansion of the hypermarkets has
now slowed due to an overall economic slowdown of the past few years and
intensifying competition. In 2002, Taiwan hypermarkets generated a total
of US\$4.8 billion in sales, a nearly 4 percent increase from the
previous year. Total sales turnover of this sector in 2002 dropped below
its annual 20% growth rate. The average per store sales of hypermarkets
dropped by 10-20 percent in 2002. There are now 110 hypermarkets in
Taiwan, some foreign owned and some locally owned and operated. Foreign
operators, including Carrefour, RT Mart/Auchan, Aimai Geant, Tesco, and
Costco, continue to dominate the Taiwan market, holding a 65% market
share.

![](media/image3.wmf)Industry executives indicated that competition
among Taiwan's hypermarkets will continue to intensify. Mergers and
strategic alliances are likely to continue over the next few years. Some
store chains have chosen to restructure to meet competitive challenges
rather than open new venues. Growth in the hypermarket sector will
remain flat with an additional 6**-**8 new stores being opened in 2003.
Most of Taiwan's hypermarkets and warehouse stores are located in
suburban areas. However, the current tendency is to compete with each
other for positioning new stores in the urban metropolitan areas, as
land prices have decreased. Recently opened hypermarkets have tended to
be smaller in area. To lower operating costs, as well as to
differentiate themselves from their competitors, many hypermarkets have
increased their volumes of imported and private label items.

Currently, each hypermarket serves an average of 200,000 people in
Taiwan. In the European Union, there is a hypermarket store for every
30,000-50,000 people. Based on this, Taiwan's Food Industry Research &
Development Institute (FIRDI) predicted that there is still much room
for growth in hypermarkets in Taiwan. However, adding that operating a
hypermarket is harder in Taiwan. Tough competition comes not only from
modern food retail stores but also from the numerous street stalls and
traditional wet markets which provide not only convenience but also
cater to local tastes.

![](media/image4.wmf)**Supermarkets**

The supermarket industry has reached a plateau after approximately 20
years of rapid expansion. Supermarkets, caught in a squeeze between
hypermarkets and convenience stores, reported sales of over US\$2.2
billion in 2002. The average growth of supermarket stores in Taiwan, in
terms of revenues generated, has declined to minus 1.5 percent in 2002.
The Wellcome Supermarket Chain was the only exception with a 7 percent
sales increase.

Continued economic slowdown plus fierce competition from hypermarkets
and convenience stores, have made it difficult for small supermarkets to
survive. Mergers among supermarkets are expected to continue over the
next few years, forming an aspect of concentration on one or two large
chains.

The idea of "freshness" for supermarkets serves as a tool to attract
customers, and to generate profits. Fresh items carried in supermarkets
have seen an increase in recent years, reaching about 50 percent of the
total items carried. Fresh fruit and vegetables, meat, and seafood are
also used by supermarkets to differentiate themselves from hypermarkets
and conveniences stores as well as to guarantee the profitability of a
store and attract more customers. Additionally, supermarket stores will
continue to extend their services such as home delivery, and other
internal services, for example, bakeries, photo studios, laundry, and
ready-to-eat hot and prepared foods. Industry executives indicated that
in the 21^st^ century, only those supermarkets that provide customers
with \"convenience,\" \"reasonable prices,\" and \"freshness\" will
survive.

**Convenience Stores**

![](media/image5.wmf)Taiwan's top five convenience store chains,
including 7-Eleven, Family Mart, Hi-Life, Circle K, and Niko Mart,
together opened a total of 592 new outlets in 2002. This segment
generated nearly US\$4 billion in sales in 2002, an increase of 11
percent from the previous year. Total sales turnover of this sector in
2002 dropped below its annual 17% growth rate, mainly due to the overall
economic slowdown and growing competition from department stores, and
foreign food retailers, such as Costco, Geant, Auchan, Costco, and
Wellcome. In terms of number of stores, 7-Eleven continued to lead as
the largest convenience store chain in Taiwan. As of September 2003,
there were 7,371 chain convenience stores in Taiwan. 7-Eleven, with
nearly 3,500 outlets island-wide, accounts for 46 percent of the market,
followed by Family Mart (19%, 1454 stores), Hi-Life (12%, 901 stores),
OK (10%, 739 stores), and Niko Mart (5%, 320 stores). These five major
chains altogether account for over 90% of the total market. Of the 7,371
stores, 56 percent stores are located in Northern Taiwan. These chains
have all set a high growth target for the next few years. However, with
the rate of over 500 new stores opened by these five chains each year,
the take for individual stores is going down. Reportedly, 7-Eleven is
expected to further expand to 4,000 outlets island-wide by the end of
2005.

In 2002, the most popular products sold in Taiwan's convenience stores
were home meal replacement (HMR) and fresh ready-to-eat food items, such
as lunch boxes, Japanese style rice rolls (sushi), hot dogs, sandwiches,
buns, pizzas, fried rice/noodles, and hamburgers. Taiwan's "eat-out'
market is valued at approximately \$9 billion and is growing
significantly. Convenience stores, currently accounting for 8 percent of
the market, continue to make efforts in developing and marketing new
convenience foods, especially lunch boxes, breakfasts, and dinners. And,
at the same time they continue to extend service items, such as on-line
shopping/home delivery packages, international express mail, and public
utility fee collection. Currently, these leading five convenience store
chains account for over 10% of Taiwan's baked bread market, worth
US\$700 million. They continue to earn market share at an annual sales
volume growth of 15-20%.

To meet fierce competition, these chains continue to eliminate poorly
performing products, and at the same time, focus on promoting only
popular items and aggressively sourcing new products with market
potential from all over the world. In 2002, 7-Eleven first launched its
"My Health Dairy" which includes various types of nutritional
supplements. Because of the success of these functional food items, more
convenience stores are scrambling for a share of the functional food
market valued at US\$900 million annually.

Although the market is mature, it is still expected to grow at a steady
pace for the next two or three years. Market observers indicated that
Taiwan's convenience stores are entering a phase of market saturation
from the period of rapid expansion from 1988 throughout the 1990s.
According to a report by the Taiwan cabinet-level Fair Trade Commission,
Taiwan leads all other countries around the world in terms of the number
of stores per capita. With a population of 23 million people, there is
one convenience store for every 3,400 people in Taiwan. Expansion will
continue over the next few years. With Taiwan's WTO accession in 2002
and the resulting market liberalization, 7-Eleven, Family Mart and other
convenience stores are expanding direct or indirect imports of
new-to-market items. U.S. suppliers are encouraged to contact these
convenience store chains directly. A list of these retail chains is
available at the ATO Taipei upon request.

**Department Stores**

Most department stores in Taiwan have supermarkets in their basements.
The main effect of these supermarkets is to draw customers to the store
by carrying a wide range of gourmet products. In the past, these
supermarkets were not profit centers for the store. However, recently
they have become more popular and better revenue earners. This segment
generated total revenues of US\$6 billion in 2002, compared to US\$1.8
billion generated in 1993. The department store industry will continue
to expand over the next few years.

Currently, the Taiwan-Japan joint ventures Shin Kong Mitsukoshi and
Pacific Sogo, and local Far Eastern Department Store, altogether
dominate the Taiwan market. Together with Sogo and Mitsukoshi, other
Japanese operators, including Takashimaya, and Hanshin have become the
mainstream of the Taiwan's department store industry.

**Imported Food vs. Domestic Products**

Currently, about 15-20% of the products sold in Taiwan's supermarkets
and hypermarkets, as well as about 15% of the products sold in
convenience stores are imported, and this is increasing. After Taiwan's
WTO accession in early 2002 and the resulting tariff reduction and
further market liberalization, imports from all over the world have been
increasing.

**Trends in services offered by retailers**

Each food retail chain will continue to increase the number of products
carried and services offered to attract more customers. With many women
working, the eating-out population and single-person households are
becoming more common. As a result, small packaged products and
ready-to-cook dishes are becoming more popular. The percentage of
convenience foods, microwaveable foods, vegetarian foods, organic foods,
and health foods will continue to increase in retail stores. Retail
stores will continue to extend their service items, such as home
delivery and other service businesses inside their stores\--examples
include bakeries, restaurants, dry-cleaning, photo studios, and
ready-to-eat hot and prepared food kiosks.

**Private Label**

To offer differentiation and to increase markups, many of Taiwan's
retail chains, including 7-Eleven, Makro, Wellcome, Geant, Costco, and
Tesco, are aggressively expanding and promoting private label products
(both imported and domestically produced). As the average selling price
of private label products is 15-20% lower than branded items, they are
increasing in popularity in the market.

**Demographics**

Taiwan is 13,900 square miles in area. About two-thirds of the island is
covered with lushly forested mountains. People on the west coast spend
more on food than people living on the east coast. Taipei and Kaohsiung
have the highest expenditures for food. The majority of all department
stores, convenience stores, supermarkets, and hypermarkets are located
in the northern portion of the island.

**Advantages and Challenges Facing U.S. Agriculture in Taiwan**

+-----------------------------------+-----------------------------------+
| Advantages                        | Disadvantages                     |
+-----------------------------------+-----------------------------------+
| U.S. products are perceived by    | Lack of knowledge of U.S. brands  |
| Taiwan                            | by importers and retailers.       |
|                                   |                                   |
| consumers to be of high quality.  |                                   |
+-----------------------------------+-----------------------------------+
| The majority of Taiwan consumers  | Lack of brand awareness by        |
| can afford                        | consumers                         |
|                                   |                                   |
| imported food products.           |                                   |
+-----------------------------------+-----------------------------------+
| Taiwan's WTO accession in early   | Competition among major world     |
| 2002 and resulting in further     | agricultural and food exporters   |
| market liberalization and import  | for a share of Taiwan's growing   |
| tariff reduction have provided    | food import market will further   |
| U.S. exporters with more market   | intensify after WTO accession.    |
| opportunities                     |                                   |
+-----------------------------------+-----------------------------------+
| The growing modern retail         | Lack of importer and retailer     |
| industry is looking for new       | knowledge and training in         |
| imported food products.           | purchasing, handling, and         |
|                                   | merchandising U.S. products.      |
+-----------------------------------+-----------------------------------+

**Section II. Road Map for Market Entry**

**[Entry Strategy]{.underline}**

![](media/image6.jpeg){width="3.8333333333333335in"
height="3.0395833333333333in"}**Direct** - The best method to reach
Taiwan's retail buyers is to initially contact them directly via e-mails
or faxes. Product catalogues and price lists are essential. Sample
products are very helpful. U.S. suppliers can obtain a list of major
Taiwan retail stores from the ATO Taipei.

**Indirect** - U.S. companies may wish to concentrate on establishing
their business relationships with a reliable and efficient importer and
distributor, who in turn will sell the imports to retail stores. The ATO
Taipei maintains listings of potential importers for U.S. suppliers. A
visit to Taiwan is an excellent way to start to establish a meaningful
relationship with potential Taiwan buyers. U.S. suppliers are encouraged
to bring product samples to Taiwan to provide to potential buyers as
many importers and retailers rely heavily upon subjective factors when
deciding on new products to represent.

**On Line Procurement** - Some retail chains, especially those with
foreign joint venture partners such as Carrefour and RT Mart, currently
purchase on line a very limited number of product items.

**A. SUPERMARKETS, HYPERMARKETS AND WAREHOUSE OUTLETS**

**[Market Structure]{.underline}**

**Imported Processed Foods**

Taiwanese buyers in retail stores tend to buy and import directly those
products that are already well known in the market. The reason according
to purchasing managers is that they do not want to risk trying out a new
product. Instead, stores prefer to buy new-to-market imported products
from local suppliers. A trend for supermarkets/hypermarkets is to begin
importing directly from a consolidator who can arrange one consolidated
shipment for a variety of new and/or already in-the-market products.
However, purchasing managers of these Taiwan retail stores state that
they welcome offers with market potential from any reliable and
dependable supplier. Carrying a wide variety of high quality products
and new-to-market products is regarded as crucial to the profitability
of a store. Industry sources estimate that currently up to 96% of
imported processed foods are imported through importers. The direct
imports by retail stores are anticipated to increase.

**Imported Unprocessed Foods**

\-- Fresh fruit: Industry sources estimate that approximately 15 percent
of imported fresh fruit is now imported directly by supermarkets,
hypermarkets, and warehouse stores. The remaining 75 percent is imported
by importers/distributors. Direct import of fresh fruit by retail stores
is expected to continue to increase over the next few years.

\-- Fresh and Frozen meat. On average, the ratio of direct and indirect
beef imports by Taiwan's hypermarkets is 40:60. Supermarkets currently
do not import beef directly but buy from local importers. Almost 100
percent of pork is purchased by supermarkets and hypermarkets from local
pork processors/wholesalers.

\-- Fresh and Frozen seafood. It is estimated that approximately 3% of
seafood is imported directly by retail stores. The remaining is sold to
retail stores through importers, wholesalers, and distributors.

**[Company Profiles]{.underline}**

**[Major Hypermarket/Warehouse Store Profile]{.underline}**

+-----------+------------+--------+-----------+---------+------------+
| *         | **[Owne    | *      | **[2      | **[Loc  | **[        |
| *Retailer | rship]{.un | *[2002 | 002]{.und | ations] | Purchasing |
| and       | derline}** | Sales  | erline}** | {.under | Agent      |
| Outlet    |            | US\$   |           | line}** | Type]{.un  |
| Type**    |            | Mil]{. | **[No.of  |         | derline}** |
|           |            | underl | Outl      |         |            |
|           |            | ine}** | ets]{.und |         |            |
|           |            |        | erline}** |         |            |
+-----------+------------+--------+-----------+---------+------------+
| Carrefour | Fre        | 1,301  | 28 (29)   | Nat     | Direct,    |
|           | nch/Taiwan |        |           | ionwide | importer,  |
| Hy        |            |        |           |         | w          |
| permarket |            |        |           |         | holesaler, |
|           |            |        |           |         | agent      |
+-----------+------------+--------+-----------+---------+------------+
| RT Mart   | Fre        | 1,012  | 21 (21)   | Nat     | Direct,    |
|           | nch/Taiwan |        |           | ionwide | importer,  |
| Hy        |            |        |           |         | w          |
| permarket |            |        |           |         | holesaler, |
|           |            |        |           |         | agent      |
+-----------+------------+--------+-----------+---------+------------+
| Aimai     | Fre        | 434    | 13 (14)   | Nat     | Direct,    |
| Geant     | nch/Taiwan |        |           | ionwide | importer,  |
|           |            |        |           |         | w          |
| Hy        |            |        |           |         | holesaler, |
| permarket |            |        |           |         | agent      |
+-----------+------------+--------+-----------+---------+------------+
| Costco    | U          | \*\*   | 3 (3)     | Nat     | Direct,    |
|           | .S./Taiwan |        |           | ionwide | importer,  |
| Warehouse |            |        |           |         | w          |
|           |            |        |           |         | holesaler, |
|           |            |        |           |         | agent      |
+-----------+------------+--------+-----------+---------+------------+
| Tesco     | UK         | \*\*   | 3 (4)     | Nat     | Direct,    |
|           |            |        |           | ionwide | importer,  |
| Hy        |            |        |           |         | w          |
| permarket |            |        |           |         | holesaler, |
|           |            |        |           |         | agent      |
+-----------+------------+--------+-----------+---------+------------+
| Dollars   | Local      | 174    | 3 (4)     | S       | Direct,    |
|           |            |        |           | outhern | importer,  |
| Hy        |            |        |           | Taiwan  | w          |
| permarket |            |        |           |         | holesaler, |
|           |            |        |           |         | agent      |
+-----------+------------+--------+-----------+---------+------------+
| Taiwan    | Local      | 40     | 3(3)      | Nat     | Impoter,   |
| Sugar     |            |        |           | ionwide | w          |
|           |            |        |           |         | holesaler, |
|           |            |        |           |         | agent      |
+-----------+------------+--------+-----------+---------+------------+

*Source: Distribution News; Retailing Mart*

\* Figures inside the parentheses represent number of outlets as of
October 2003.

\*\* Not available

\-- Makro Taiwan, a joint wholesaler/distributor for Dutch-based SHV
Holdings and Taiwan-based Holmgren Goup, unexpectedly shut down its six
remaining stores in Taiwan in February 2003, citing high operating costs
and keen competition.

\-- Due to its failure with marketing in convenience stores over the
past 7 years, the state-run Taiwan Sugar Corporation plans to continue
to shift its retail business focus to hypermarkets. In addition to sugar
production and other diversified domestic/overseas investments, TaiSugar
has established three hypermarkets in Southern Taiwan since 2001, and
plans to expand to 9 stores within the next couple of years.

\-- Taiwan's leading food retail store, Carrefour Hypermarket Chain,
recently indicated that localization, product differentiation, private
labels, and flexible new store openings are the main factors of its
success in Taiwan. In order to tally with Taiwan's limitations on land
use, Carrefour has established two types of stores in Taiwan. The "blue"
stores are hypermarket format stores located in commercial or
residential areas. The "green" stores are cash-and-carry niche,
concentrating on industrial areas. Carrefour will open two additional
stores by the end of 2003, bringing its total number of stores to 31 by
2003.

\-- Tesco, one of the most aggressive hypermarkets chains in Taiwan,
inaugurated its first store in Northern Taiwan in June 2001 and opened
its fourth outlet in Taipei City in late 2003. Tesco originally intended
to set up 20 outlets around the island within five years. However, the
expansion plan has slowed down due to the overall economic slowdown and
severe competition. Tesco announced in October 2003 that it will expand
to 10 outlets island-wide by 2006.

\-- RT Mart, a joint venture of French hypermarket operator Auchan SA
and local Ren Tai Group, merged with Trans Asia Hypermarket and joined
in a strategic alliance with Safe and Save Hypermarket Chain in 1998 to
become the second largest hypermarket chain, behind Carrefour, in
Taiwan. RT's Marketing Manager indicated in a media interview that
Taiwan's hypermarket has become mature. Expansion plans for all chains
operating in Taiwan will slow, with each opening an additional one to
two stores each year. RT has set a growth target of 22 outlets and
US\$1,100 for 2003.

**Major Supermarket Store Profile**

+------------+----------+---------+----------+---------+-------------+
| Retailer   | **Own    | **2002  | **2002** | **Loca  | *           |
| and Outlet | ership** | Sales   |          | tions** | *Purchasing |
| Type       |          | US      | **No.of  |         | Agent       |
|            |          | \$Mil** | O        |         | Type**      |
|            |          |         | utlets** |         |             |
+------------+----------+---------+----------+---------+-------------+
| Wellcome   | H        | 347     | 122      | Nat     | Direct,     |
|            | ongKong/ |         | (146)    | ionwide | importer,   |
|            |          |         |          |         | wholesaler, |
|            | Taiwan   |         |          |         | agent       |
+------------+----------+---------+----------+---------+-------------+
| Sung       | Local    | 162     | 73 (75)  | North/  | Direct,     |
| Ching/     |          |         |          | central | importer,   |
|            |          |         |          | Taiwan  | wholesaler, |
| Marukyu    |          |         |          |         | agent       |
+------------+----------+---------+----------+---------+-------------+
| Taipei     | Local    |         | 20 (15)  | Taipei  | Direct,     |
| Agr.       |          |         |          |         | importer,   |
|            |          |         |          |         | wholesaler, |
|            |          |         |          |         | agent       |
+------------+----------+---------+----------+---------+-------------+
| Sinon      | Local    | \*\*    | 27 (27)  | Central | Direct,     |
|            |          |         |          |         | importer,   |
|            |          |         |          | Taiwan  | wholesaler, |
|            |          |         |          |         | agent       |
+------------+----------+---------+----------+---------+-------------+
| Sun-Mart   | Local    | \*\*    | 8 (8)    | Taipei  | Direct,     |
|            |          |         |          |         | importer,   |
|            |          |         |          |         | wholesaler, |
|            |          |         |          |         | agent       |
+------------+----------+---------+----------+---------+-------------+

*Source: Distribution News*

\* Figures inside the parentheses represent number of outlets as of
October 2002.

\*\* Not available

\-- In 2002, Shin Tong Yang Foods Group's Kasumi Supermarket withdrew
from the Taiwan market and was acquired, with the approval from Taiwan's
Fair Trade Commission, by the Wellcome Supermarket Taiwan.

With the acquisition of twenty-two stores from Kasumi, Wellcome further
strengthens its position as the largest supermarket chain in Taiwan.
Wellcome currently operates 146 outlets island-wide, which doubles
Wei-chuan Foods Group's Sung Chin/Marukyu, in second position, in terms
of number of stores. Wellcome currently accounts for 15 percent of the
market and reportedly plans to expand to 160 outlets by 2003 and 200
outlets by 2005.

\-- Wellcome Supermarket launched its first "Jasons Market Place," a new
store format which mainly carries higher-end and imported foods, in
November 2003. Jasons' organic/healthy food corners - its distinguishing
characteristics - carry an estimated 1,200 items of HMR and other food
products with low fat, low salt, high fiber, and non-dairy. In addition,
Wellcome has located in the Taipei Metropolitan area two superstores.
The Wellcome superstores are a format combining concept of a modern
supermarket with a traditional wet market. It carries a high percentage
of fresh items, such as fresh produce, meat, poultry meat, and seafood.

\-- Wei Chuan Foods Group's two supermarket chains, Sung Ching and
Marukyu, joined in a strategic alliance with each other in late 2000.
The two chains formed a joint purchasing team. Currently, the team
mainly purchases dry goods. As soon as the number of stores reaches 100,
the two chains will merge.

\-- Sinon, the largest supermarket chain in central Taiwan, has focused
on restructuring poorly performing stores instead of opening new venues
over the past three years since the 1999 earthquake hit. The company
planned to expand stores to 33 in 2003. To differentiate themselves from
competitors, the company continues to expand their fresh items and
further strengthen the management of these fresh items.

**B. Convenience Stores**

# Entry Strategy

![](media/image7.jpeg){width="3.8333333333333335in" height="2.75in"}The
same importers, wholesalers, and distributors that provide for the
supermarkets and hypermarkets provide for the convenience stores. Taiwan
convenience store chains either import directly or purchase from local
importers and manufacturers. U.S. suppliers can sell directly to these
convenience stores by contacting their purchasing managers. In addition,
U.S. suppliers should locate a reliable and efficient
agent/importer/distributor to ensure that products are consistently
available in the market. The ATO in Taipei maintains listings of major
convenience store chains and potential importers/distributors. U.S.
companies interested in expanding their businesses with these retail
stores should contact ATO/Taipei for lists of potential buyers.

# Market Structure

Major Taiwan convenience store chains import directly. They also rely on
importers, agents, and distributors for products. Major Taiwan
convenience store chains have their own distribution centers to
distribute products, both dry and chilled/frozen goods, to each outlet.
The other convenience stores have ties with other distribution centers.

**[Company Profile]{.underline}**

**[Major Convenience Store Profile]{.underline}**

+-----------+------------+--------+-----------+---------+-----------+
| *         | **O        | **2002 | **2002**  | **Loca  | **P       |
| *Retailer | wnership** | Sales  |           | tions** | urchasing |
| and       |            | US\    | **No.of   |         | Agent     |
| Outlet    |            | $Mil** | Outlets** |         | Type**    |
| Type**    |            |        |           |         |           |
+-----------+------------+--------+-----------+---------+-----------+
| 7-Eleven  | Local      | 2,082  | 3,183     | Nat     | Direct,   |
|           |            |        | (3,417)   | ionwide | importer, |
|           |            |        |           |         | wh        |
|           |            |        |           |         | olesaler, |
|           |            |        |           |         | agent     |
+-----------+------------+--------+-----------+---------+-----------+
| Family    | Ja         | 630    | 1,302     | Nat     | Direct,   |
| Mart      | pan/Taiwan |        | (1,454)   | ionwide | importer, |
|           |            |        |           |         | wh        |
|           |            |        |           |         | olesaler, |
|           |            |        |           |         | agent     |
+-----------+------------+--------+-----------+---------+-----------+
| Hi-Life   | Local      | 405    | 820 (901) | Nat     | Direct,   |
|           |            |        |           | ionwide | importer, |
|           |            |        |           |         | wh        |
|           |            |        |           |         | olesaler, |
|           |            |        |           |         | agent     |
+-----------+------------+--------+-----------+---------+-----------+
| Circle K  | U          | 289    | 680 (739) | Nat     | Direct,   |
|           | .S./Taiwan |        |           | ionwide | importer, |
|           |            |        |           |         | wh        |
|           |            |        |           |         | olesaler, |
|           |            |        |           |         | agent     |
+-----------+------------+--------+-----------+---------+-----------+
| Niko Mart | Local      | 133    | 320 (337) | Nat     | Direct,   |
|           |            |        |           | ionwide | importer, |
|           |            |        |           |         | wh        |
|           |            |        |           |         | olesaler, |
|           |            |        |           |         | agent     |
+-----------+------------+--------+-----------+---------+-----------+

*Source: Distribution News*

\*Figures inside the parentheses represent number of outlets as of
September 2003. \*\* Not available

\-- Family Mart joined in a strategic alliance with the State-run Taiwan
Sugar Corporation's Milin Convenience Store Chain in June 2003, bringing
its total number of stores to 1,500 by 2003.

\-- In 2002, 7-Eleven first launched a series of "My Health Dairy"
nutritional supplement products. Reportedly, sales have been successful
that other convenience stores have followed the example of 7-Eleven to
sell these functional foods in their respective stores. The market size
of functional foods in Taiwan is estimated at US\$870million.

\-- Currently, total annual sales of fresh ready-to-eat food items in
7-Eleven stores reach US\$371 million, accounting for 16% of the total
revenues of 7-Eleven. It is expected that sales will increase and
account for 20% of total sales by 2005.

\-- Circle K celebrated its 15th anniversary in October 2003. Circle K
mainly focused on restructuring, shutting down 60 poorly performing
stores during 2002. It has set a growth target to reach 1,000 total
outlets by 2005.

\-- Niko-Mart, in the fifth position, has maintained a slow growth rate
in relation to the other chains. It has only grown by 52 outlets in five
years. Its target for growth is 380 stores by 2003.

\-- Family Mart, Hi-Life, OK and Niko-Mart jointly formed a new company,
CVS.COM Co., Ltd., in October 2000. Part of the objective of this newly
established company is to seek new products to be sold in the four
convenience store chains. U.S. companies are encouraged to contact the
company directly.

![](media/image8.jpeg){width="4.416666666666667in"
height="3.0055555555555555in"}**C. Traditional Markets**

**[Entry Strategy]{.underline}**

The importers, distributors and wholesalers are the same who supply the
supermarkets, hypermarkets, and convenience stores. Unlike supermarkets,
hypermarkets, and convenience stores, the wholesalers and regional
wholesale markets play the most important role in distribution of
products for traditional markets. Sales of imported goods in traditional
markets should not be overlooked. Industry sources estimate that around
55 percent of imported fruit from the United States is sold in wet
markets island wide.

**[Market Structure]{.underline}**

Traditional markets, including wet markets and mom & pop grocery stores,
rely heavily on wholesalers for products. Currently, modern warehouse
stores, such as Costco Wholesale also provide products for traditional
markets.

Grocery products are usually supplied by local wholesalers, although
agricultural products are often purchased at regional wholesale markets.

**[Company Profile]{.underline}**

**Mom and Pop Grocery Stores**: Mom and Pop grocery stores are still
common in smaller towns on the island. Grocery products are usually
supplied by local wholesalers. Although these 'mom and pop' grocery
stores tend to be well located in the heart of residential areas, they
are limited by the lack of shelf space and offer fewer varieties of
products. Local consumers are increasingly turning to the greater
product variety offered by supermarkets, hypermarkets, and convenience
stores.

**Wet Markets**: According to statistics released by Taiwan's Ministry
of Economic Affairs, there are 631 public/private wet markets and 639
street stall gathering places in Taiwan. These businesses generate
approximately US\$13 billion in annual sales. The major items sold in
these traditional markets\--meat, seafood, and fresh produce\--account
for over 50% of total wet market sales. Beginning in July 1999, Taiwan
authorities have implemented a five-year program to upgrade and remodel
traditional wet markets.

**Section III. Competition**

In 2002, Taiwan imported US\$0.7 billion worth of consumer food products
from many different sources, of which 68% was imported from the United
States. The United States was the number one supplier of consumer food
products to Taiwan, followed by France, Canada, Denmark, Singapore,
Italy, and the United Kingdom. The United States dominates the fresh
vegetables (99% market share), fresh fruit (96%), poultry meat (94%),
prepared/preserved red meat (93%), processed fruit and vegetable (89%),
tree nuts (83%), and fruit & vegetable juices (81%) import markets and
is very competitive in other consumer ready food products.

With Taiwan' accession to the WTO in January 2002, import tariffs for
agricultural products have dropped from 22 percent to the current 14
percent. With the liberalization of the Taiwan market, there is improved
market access for U.S. beef, fresh fruit and vegetables, seafood, frozen
prepared foods, and other processed foods. However, competition among
major world's food and agricultural exporters for a share of Taiwan's
growing food import market will further intensify. U.S. products carry a
high quality image in Taiwan. Promotions or product samplings should be
conducted to ensure that consumers are aware that their purchases are
from the United States.

![](media/image9.wmf)

**Section IV. Best Product Prospects**

**A.** **Products Present in the Market Which have Good Sales
Potential**

\-- Fruit and Vegetable Juices

\-- Ice Cream, cheese, yogurt and other dairy products

\-- Edible oil, including sunflower oil, corn oil, and safflower oil

\-- Frozen/microwaveable foods/other convenience foods

\-- Fresh fruit and vegetables

\-- Fish and seafood

\-- Food ingredients

\-- Meat and meat products

\-- Baked products

\-- Snack products

\-- Nuts and dried fruit

\-- Gift packs (examples: wine/spirits, imported fresh fruits, and
coffee are currently popular gift pack items in Taiwan)

**B. Products Not Present in Significant Quantities but Which Have Good
Sales Potential**

\-- Health oriented (low-fat, high-fiber, and low-cholesterol) snack
foods

\-- Organic/health foods

**V. Post Contact and Further Information**

If you have any questions or comments regarding this report or need
assistance exporting to Taiwan, please contact the U.S. Agricultural
Trade Office in Taiwan at the following address. Also, you are welcome
to visit the ATO/Taipei homepage [(]{.underline} or USDA/FAS homepage
(http:/www.fas.usda.gov) for information on exporting to Taiwan.

Agricultural Trade Office Taipei

American Institute in Taiwan

Room 704, 136 Renai Road, Section 3

Taipei, Taiwan

Tel: (886-2) 2705-6536

Fax: (886-2) 2706-4885

e-mail: ato@mail.ait.org.tw

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