An Interview with TTL’s Chairman/TTL’s Three-pronged Strategy to Restoring Luster to the Longstanding Brand
2017-02-20 01:22:16 Economic Daily News (Reporter: Kuan-ying Huang/Taipei)
※Warning: Do not drink and drive. Consumption of alcohol by minors is strictly prohibited.
According to TTL Chairman Jung-hui Wu, the century-old company is faced with an open, competitive market and therefore it must be proactive in reaching out to more consumers. As a result, three major strategies are employed to restore the luster of the longstanding firm, including: differentiation, rejuvenation and asset revitalization.
TTL generated revenue of NT$73.4 billion last year and contributed nearly NT$10 billion to the treasury annually. Consisting of alcohol, tobacco and biotechnology business units, TTL offers a plethora of product lineups. Faced with external competition from international brands and internal crisis of talent gap, TTL needs to overcome some daunting challenges.
TTL Chairman Jung-hui Wu
Since assuming office last July, Jung-hui Wu has demonstrated plenty of initiative. First, he focused promotional efforts on TTL’s star products by reinforcing channels for 18 Days Draft Beer and whisky label OMAR. This is followed by reforming the company’s organizational structure, where the Division of Marketing & Sales was established to oversee the external promotional strategy of various production departments.
TTL intends to further revitalize the company through different approaches. For example, Taipei Beer Brewery will launch young consumers’ favorite craft beer named “Baby” (homophonous with Taipei Beer Brewery in Chinese) in conjunction with Taipei 2017 Universiade’s urban marketing trend. In addition, Wuri Brewery will upgrade the Experience Pavilion to improve its attractiveness, while Nantou Brewery will be transformed into OMAR Single Malt Whisky’s brand image plant. The interview summary is provided below:
Q: TTL has exhibited declining revenue over the recent years, how are you going to rectify the situation?
A: I will transform TTL’s culture and products. In 2015, TTL’s revenue was NT$74.3 billion, and the figure was reduced to NT$73.4 billion by 2016. As a matter of fact, revenue has declined year after year since 2012 mainly due to fierce competition and a sense of complacency within TTL. I will regard 2016 as the company’s trough in terms of performance, and the trend will be reversed in 2017 through an increase in revenue.
TTL’s primary business is tobacco sales, worth about NT$40 billion a year, other categories such as beer and liquor are worth roughly NT 20 billion and NT$10 billion respectively. However, TTL has a line of 1,999 products, making them too complex to manage; therefore the number has been reduced to 1,237. In the future, I expect each subsidiary brand to make its star product distinguishable.
From now on, TTL must capitalize on opportunities created through customization; marketing activities can be conducted together with occasions such as Christmas, Universiade and the opening of Taoyuan Airport MRT. For instance, the Taiwan Beer logo does not have to be designed using words, as numbers can be utilized instead. The point is that we must think outside the box.
Q: What are the new strategies for liquors?
A: TTL’s liquor mainly comprises kaoliang and whisky, with whisky brand OMAR being the primary product at the moment.
Besides winning 2 gold medals and a silver medal in international competitions, its straight from the cask flavor is comparable to other domestic and foreign competitive products. Besides TTL’s Jade Supremacy Taiwan Whisky, the OMAR single malt whisky features three different product lines with different price ranges. Previously, TTL took up approximately 4% of Taiwan’s whisky market, and we hope to constantly expand our market share in the future.
Whisky is not as popular as beer, despite TTL’s fine products, the lack of marketing know-how meant the products are slow-selling. In the future, the aim is to become more lively and proactive in marketing, because with open competition in the current alcoholic beverage industry, gone are the days when consumers line up to purchase alcohol from Taiwan Tobacco and Wine Monopoly Bureau in the old distribution system. Therefore in order to remain competitive, TTL cannot afford to stay complacent, we must become more proactive in order to stay competitive and stay in business.
TTL hopes to strengthen communication with the consumers and create core values that consumers can trust.
Q: What are the new strategies for beer?
A: Faced with fierce competition coming from international brewers, TTL’s only competitive product is “18 Days Draft Beer”, which is not pasteurized to retain the absolute fresh flavor. Having sold roughly 8.4 million bottles last year, this year’s goal is set at 12 million bottles.
Refrigeration is required throughout the entire period of 18 days. This, coupled with the extremely short shelf life that stores are concerned about, meant that the entire logistics system had to be redesigned. TTL was inspired by petrochemical mogul Yung-ching Wang’s story of selling rice. He diligently checked on each store’s sales condition and replaced older rice with new shipments himself. The most important lesson to learn is to build up a database and system, because TTL can no longer afford to sit around and wait for customers.
Total beer consumption in Taiwan per year is about 840 million bottles, of which nearly 576 million bottles were sold by TTL, equivalent roughly 65% of the market share. In particular, Gold Medal Taiwan Beer constitutes 60% of the sales figure, with Taiwan Beer taking up the remaining 40%. Only 2% of the beer sold was “18 Days Draft Beer”.
Q: What are the new strategies for tobacco?
A: In light of an increase in tobacco tax, the overall market demand will decline, in turn exerting a tremendous impact on TTL.
An increase of NT$20 will cause TTL’s revenue to drop by NT$2.7 billion due to an 18% reduction in sales. Moreover, the market situation will change, where smuggled cigarettes and “white label” cigarettes (imported or smuggled cigarettes of suspicious origin) will become more favorable.
Currently, comprehensive product line covering the entire price range have been introduced by overseas competitors, whereas TTL’s tobacco products are aimed at only the mid to low price market. Thus in the future, it is imperative to produce products aimed at other price segments in order to maintain competitiveness.
Q: What is TTL’s biggest future challenge?
A: Since undergoing personnel downsizing in 1994, TTL has not hired any new employees for the past 13 years, this the company is faced with the problem of aging talent where over half of our 6,300 employees will be retiring within the next decade, including a major wave of retirement set to hit senior executives in the next 2 years. As a result, a talent gap will emerge in the company.
TTL recruits approximately 200 new employees each year in an effort to bridge the talent gap, hoping to expedite the training of young talents as future successors. If production is unable to cope, efforts by marketing and logistics will be futile since there will be no product to sell. Consequently, it is crucial to consider quality, price and channels as well.
TTL is currently implementing the apprenticeship system, where retired employees can return as consultants to pass on their experience and knowledge to the younger generation. It is hoped that the three-pronged approach of hiring new talents, apprenticeship and consultants can resolve the problem of talent gap.
Last year, more than 6,600 people applied for job positions in TTL, with new employees usually earning a monthly salary of just over NT$30,000 and seasoned officers with 8-9 years of experience can earn as much as NT$60,000 a month or more. Salary for plant managers and managers range between NT$120,000 and 130,000, thus TTL offers excellent remuneration and fringe benefits.
Q: TTL Bio-Tech Company is also a renowned company, what innovative ideas do you have?
A: TTL Bio-Tech Company produces a wide variety of products ranging from health food, dishwashing liquid, biscuits, Chinese New Year’s dishes and cosmetics. We sell every imaginable type of biotechnology product but we tend to lose focus in terms of our marketing efforts.
Although TTL’s face masks and Vinata advanced treatment essence complex II are hot sellers online, they were previously sold mainly in independent convenience stores or extension centers. Currently TTL has established the E-Commerce Division focusing on online marketing.
Q: What organizational restructuring will be implemented?
A: After assuming office, I have restructured the company’s organization into a golden triangle formed by Marketing Division, Logistics Department and various Production Department, each serving its independent functions.
Before, TTL’s brand was in the hands of Production Division and no one paid much attention to the brand’s problems. Now, Production Division focuses on making high quality products and brand marketing is Marketing Division’s responsibility, while Logistics Department is in charge of channels. In addition, the E-Commerce Division was also established, thus problems can be reviewed based on various aspects such as quality, brand and channel.
Q: Any new progress in relation to asset revitalization?
A: Taipei Brewery located at the intersection of Jianguo N. Rd. and Bade Rd. will be transformed into a beer cultural park, where NT$10.6 billion will be invested to build the corporate headquarters via the creation of superficies. Construction is scheduled to commence in 2019, and the project is slated for completion in 2021. Besides creating a cultural park, we also hope to fulfill our corporate social responsibilities by preserving the historic monument.
TTL is also evaluating the possibility of developing the Hualien Distillery into a hotel via the creation of superficies, pending recovery of the tourism industry.
Progress for Miaoli bottle production plant will not be as quick, because TTL recently spent NT$60 million in conducting annual maintenance, which means that the plant still has lifespan of at least 5 or more years.
Q: Why does TTL want to invest in small production volume craft beer?
A: Craft beer production facility at the beer cultural park is expected to be completed by the end of this year, where pipelines will connect directly to the nearby restaurant. Registered under the name of “BABY”, the craft beer will be available in cans.
Craft beer is all about craftsmanship, small quantities and customization.
TTL must be able to think outside the box and differentiate its products from that of the competitors. Otherwise, by only focusing on general commercial beers, TTL will be competing with everyone else in the Red Ocean. Therefore, it is imperative to find the Blue Ocean through asset revitalization, differentiation and rejuvenation of the company.
Q: How will TTL make the breakthrough in Taiwan’s saturated beer market?
A: Due to a falling birth rate, consumption habit and transformations in the population structure, market in Taiwan is approaching saturation, and we are faced with a redistributed market that has only limited growth potentials, thus we have to expand to the international markets.
Such as China and Southeast Asia, these are our next object. For instance, Vietnamese beer is currently the number one in Southeast Asia and number three in Asia. There is plenty of potential there, but TTL has still yet to make our presence felt in the local market.
TTL’s exports to Vietnam is subject to a 35% import duty, therefore it is necessary to find a local OEM factory. Aside from domestic sales, beer products can also be exported to neighboring countries. In the early stages, a product differentiation strategy will be adopted to produce fruit beers, this is something that other brands are lacking in, and therefore we intend to tap into the market first before promoting conventional beers.
In order to tap into the overseas market, TTL must be extremely competitive in terms of channel and price; hence we have to start building relationships with distributors and forge our own channels. Consequently, production and brand of TTL have to keep up with the current developments.
Q: What strategies will TTL adopt to reinforce communication with consumers?
A: In the past, the biggest predicament confronting TTL was that we did not know how to introduce great products to consumers. In the future, we strive to engage in consumer communication proactively in order to garner their recognition.
Firstly, TTL will conduct the revitalization of unused assets and production plants. Wurih Brewery near the THSR station is already a tourist factory. In the future, the Experience Pavilion and Beer Cultural Hall will be created to enhance interactive experience and appeal.
Secondly, Nantou Brewery will be transformed into a professional factory for OMAR whisky. The magnificent cellars in Nantou Brewery will be expanded to merge TTL’s brand image with the factory.
Another project involves a marriage of liquor and cultural customs, where coming-of-age ceremony is combined with wedding anniversary, enabling the public to purchase the liquor and take it home, or store it at the liquor bank and share it with their loved ones during special occasions such as their children’s coming-of-age or wedding anniversary.
Falling off the wagon to promote draft beer after 20 years of sobriety - Jung-hui Wu became the company’s top salesperson
“Come on, take at look at our secret weapon,” says TTL Chairman Jung-hui Wu with a mysterious smile on his face as he instructs his secretary to take out 2 bottles of 355 ml 18 Days Draft beer from the fridge. “This is TTL’s star product for taking on the big guns on the international stage, it only just came out.”
Used to TTL’s 600 ml bottle, the smaller bottle featuring smaller dimensions and label appear to be quite a novelty. “Who says TTL can’t get into night clubs?”
Since 18 Days Draft Beer does not undergo final pasteurization, it has a very short lifespan and its flavor is gradually lost once leaving the factory, therefore only TTL has the ability to deliver such “fresh” flavor, making it the prime choice of Jung-hui Wu for differentiating TTL from other major beer brewers.
Having stayed sober for over 2 decades, the very beer Jung-hui Wu drank at the TTL Chairman handing over ceremony was 18 Days Draft Beer. “Goodness it was simply delicious,” and it instilled him with even more confidence about his work in the future.
After assuming office, TTL also demonstrates a different style of management with an increasing number of dynamic promotional activities. The limited edition beer launched during Christmas also started a collection trend online.
He appointed himself as the chief salesperson of TTL, sending nearly 100 LINE messages every morning he wakes up to greet people. “Now, even advertising short films must be shared on social media,” says Jung-hui Wu, because if each of TTL’s 3,000 employees sends the video to 5 friends and family, a tremendous amount of people can be reached. This exercise not only does not cost a penny, colleagues can also discuss amongst themselves their opinions about the video, and these suggestions can be used as reference for future advertising commercials.
From government organizations to state-run businesses, Jung-hui Wu believes that same management philosophies can be applied. He hopes that the younger generation at TTL can become more involved, because “as long as the mind stays youthful, you will always be young”.
While introducing new concepts, Jung-hui Wu has not forgotten to “revitalize” TTL’s historic monuments. “Historic monuments are living things, not dead, as long as their histories are narrated via guided tours,” Jung-hui Wu’s eyes sparkle with radiance as he talks about the blueprint of the beer cultural park.
Jung-hui Wu interview key points
l Nearly half of TTL’s employees will retire within the next decade, creating a talent gap.
l In order to bridge the talent gap, three-pronged approach of hiring new employees, apprenticeship and consultants is adopted.
l Search for star products; strengthen promotion of 18 Days Draft Beer and OMAR whisky in order to challenge international competitors.
l Establish Marketing Division to coordinate external communication strategies of various production departments.
l Transform Taipei Brewery into beer cultural park by investing NT$10.6 billion, slated for completion in 2021.
l TTL is evaluating the possibility of developing the Hualien Distillery into a hotel superficie
Revenue over the last 5 years
TTL business unit new strategy
Liquor: Focusing on whisky brand OMAR, Nantou Brewery will be transformed into a professional whisky distillery.
Biotechnology: E-Commerce Division is established to address the lack of marketing focus and emphasis will be placed on online marketing.
Tobacco: Tobacco tax causes a decline in market demand, thus it is important to create a complete value chain and improve competitiveness.
l Take on international brands with 18 Days Draft Beer.
l Engage in craft beer market by launching the “Taiwan Beer Brewery BABY” brand, targeting urban marketing trends.
l Taiwanese market is saturated; the next goal is entering the Chinese and Southeast Asian market.