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Taiwan's frozen food industry: gearing up for future prospects.

Taiwan's frozen food industry has more than 30 years of history behind it. In the early period of development, seafoods for export were the major products offered. Currently, local manufacturers annually turn out over 485, 000 tons of frozen grilled eel, pork, vegetables (particularly green soybeans), fruits and prepared food. Over 70% of the volume is sent to Japan, which is Taiwan's largest frozen food export market. Another 10% goes to Europe and the United States with the rest consumed domestically.

As a result of the ROC's rising national income and its sound environment for building the frozen food industry, the local market has been expanding rapidly. At present, Taiwan's frozen food sales total US$ 1,440 million annually, which amounts to a very promising business in anyone's book. Furthermore, with the Taipei government's liberalization policy in foreign trade, local frozen food manufacturers are putting equal emphasis on home and export markets.

Rapid Growth

In the last five years, the annual growth rate of domestic frozen food consumption has averaged more than 20%. This has been fueled by a lot of factors, including: an increasing number of career women joining the workforce; a proliferation of restaurants and fast food franchises; the mushrooming of supermarkets and convenience stores; a rise in national income. Total consumption for 1992 reached 138,300 tons (excluding imported frozen meat), reflecting a 31% increase over the previous year. Some 85,400 tons (62%) were produced locally, while the other 52,900 tons (38%) were imported.

It should be noted that the products of 25 member manufacturers of the Chinese Frozen Food Institute (CFFI) constitute 90% of Taiwan's total domestic frozen food sales. These companies are approved by the Council of Agriculture and Department of Health (both under the ROC Executive Yuan) to use the respected CAS mark on their product packages. CAS, which stands for Chinese Agricultural Standard, is a system designed to encourage high-quality frozen food production. Presently, about 70% of the frozen products in the local marketplace carry the CAS logo.

Taiwan's population now stands at 20.7 million. Statistics show that each person eats an average of 6.00 kilograms of frozen food per year. That is

equivalent to Japanese per capita consumption in 1980, or about one-half of current intake. Nevertheless, compared with other Asian neighbors, the ROC is still a leading frozen food market. By the end of 1992, per capita annual income in Taiwan had already surpassed the US$ 10,000 mark. Both domestic output and imported volume of QFF grew by 25%, while consumption amounted to 138,000 tons.

Problems and Solutions

Out of the total frozen foods consumed each year, some 85,000 tons are produced locally. Meanwhile, 400,000 tons are packed especially for export. About five years ago there were 200 frozen food manufacturers in the Taiwan area, all of whom targeted overseas customers. But now, there are approximately 50 manufacturers aiming their lines entirely at the domestic sector. They bring to the market a total of 150,000 tons of frozen products per annum. As such volume exceeds local demand, many producers are therefore quite eager to set up export channels of distribution.

In addition, owing to Taiwan's skyrocketing real estate prices since 1988, house rents and personal expenses have risen significantly. The impact is being felt by 1,000 supermarkets and 4,000 convenience stores around the island that are encountering management difficulties. In order to survive, they thus make business contracts unfavorable to the upstream manufacturers.

It should be pointed out that Taiwan's frozen food industry still relies heavily on products such as stuffed dumplings, buns and glutinous rice balls which have been well received by local consumers. Mass production often results in over-supply. Added to the problem is the need for producers to secure shelf facings in the space-limited supermarkets. All these factors have forced local manufacturers to engage in cut-throat price competition. Up to now, for example, most member manufacturers of the CFFI are in deficit. Hence, in addition to introducing new products to win the hearts of consumers, manufacturers should actively exploit institutional market opportunities, set up more sales channels, and ensure reasonable profits -- all within the framework of healthy competition. This is indeed their urgent task.

Due to labor shortages, soaring housing costs, appreciation of the NT dollar, as well as an unstable supply of agricultural, poultry and aquacultural products, the ROC's frozen food manufacturers are gradually losing their competitive edge in the international market. Six years ago, Taiwanese shrimp processing enterprises pioneered investment in Southeast Asian nations endowed with rich natural resources and abundant manpower. However, since they did not have a good grip on the conditions in these countries, results have fallen short of expectations. But there are a few success stories, including that of Song Cheng Enterprise Co. It now occupies a land area of 5,000 acres in Malaysia's eastern state of Pahang, where the world's largest eel raising grounds and eel processing factory are operated. Song Cheng's grilled eel, mouth breeder sashimi and fish steak are exported to customers around the world.

Mainland Opportunities

On the other hand, beginning in 1988, the ROC government permitted indirect business with mainland China. Because there are no cultural or linguistic barriers, many Taiwanese businessmen have gone across the strait to seek investment opportunities. They usually cooperate with the mainland's state-run enterprises -- some even absorb Japanese capital. Among these, local manufacturers of frozen vegetables and fruits generally choose the maritime provinces of Kwangtung, Fukien, Chekiang and Shantung for business investment. Indeed, in 1991, joint venture enterprises exported over 10,000 tons of frozen vegetables and fruits to Japan. Manufacturers of frozen grilled eel from Taiwan prefer to set up operations in Kiangsu, Fukien and Kwangtung provinces. There are now 14 such factories on the mainland, and it is predicted that four more will be established in 1993, bringing total annual production to 10,000 tons.

Statistics show that 60% of the households in 29 cities in the mainland (including Shaohsing, Karamai, Kunshan, Chankiang, Heikow, Shaokuan, Soochow, Chuanchow, Changchou, Chiahsing, and Shen-chun) have refrigerators. Above all, in such major urban areas as Chuhai, Kunshan, Beijing and Shenchun, almost every family has a refrigerator. In light of the great potential of the mainland market, President Enterprises Corp. and Wei-Chuan Foods Corp. -- both CFFI members -- are making plans to franchise supermarkets and convenience stores in those cities. Several other CFFI members are also planning to start frozen prepared food production on the mainland.

Based on a small island, Taiwan's frozen food industry must keep harmonious relations with its neighbors while making more efforts toward business expansion. With the booming development of industry and commerce, the advantageous conditions for agriculture, poultry and aquaculture growth in the past decades are on the wane. Moreover, since Taiwan's population is only a little above 20 million, even if each person eats 12 kilograms of frozen food per year, the creation of a grand consumer market is not in the cards. Therefore, the future for manufacturers with bases of operation in Taiwan lies in their ability to make the best of production technology and management expertise. Looming large in the picture will be further investment on the Chinese mainland, where a 1.2 billion population shares the same cultural values as the people of Taiwan. In addition, it is hoped that nations around the world will strive together to bring about a single global market without national boundaries. To this end, the Chinese Frozen Food Institute is willing to cooperate with frozen food businesses in all countries.
COPYRIGHT 1993 E.W. Williams Publications, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Frozen Foods of Taiwan: 1993
Author:Tung-Kuo, Lin
Publication:Quick Frozen Foods International
Article Type:Industry Overview
Date:Jul 1, 1993
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