Taiwan Country Profile

Market Overview:

Euromonitor reports that Taiwan’s economy will improve modestly in 2017 as the global economy strengthens. Real Gross Domestic Product (real GDP) is expected to grow by 1.6% in 2017 (up from 1.4% in 2016). The economy is driven by private consumption, tourist receipts and a healthy domestic job market. The performance of exporters will improve but is still relatively lackluster. China’s continued slowdown is a drag on the economy. Outward investment is significantly greater than inward investment and 70% of it goes to China. Growth of real GDP will rise modestly, reaching 2.5% per year by 2020.

The real value of private final consumption grew by 1.8% in 2016 and growth of 2.4% is expected in 2017.  Unemployment was 3.9% in 2016 and it will increase to 4% in 2017. Approximately 17% of the workforce is employed at the minimum wage. Up to one million skilled Taiwanese work abroad – roughly three-quarters of them in China. An improvement in private investment (particularly investment in housing) and growth in manufacturing will provide most of the support. Both domestic and foreign demand is likely to remain weak over the next several years.

The government has launched an eight-year plan to develop key service industries at a cost of more than US$41 billion. The industries include cloud computing, e-commerce, design and digital content, health care, logistics and smart automation. The goal is to ensure that the service sector makes a more significant contribution. Public-private collaboration is expected to boost output in the service sector to US$154 billion by 2020, creating 166,000 new jobs.

In 2016, Taiwan’s population was 23.5 million. The median age had risen to 39.9 years in 2016, 8.3 years greater than the figure for 2000 and well above the regional average. Taiwanese society is clearly ageing and that process will accelerate over the next 15 years. The ageing process is also reflected in the fertility rate, which fell to just 1.1 births per female in 2016. This is the lowest rate of any major Asian country. Fertility will remain at this level at least through 2030.

USDA’s Agricultural Trade Office in Taipei hereinafter referred to as “Post” reports that although it is a small island about the size of Maryland and Delaware combined. Taiwan has developed into one of the world's largest economic and trading entities. Over the past decade, Taiwan has transformed itself from a light industry-manufacturing base to a global center for the production of high technology products. With a GDP of US$1.25 trillion on a purchasing power parity (PPP) basis, Taiwan is the world's 20th largest single state economy, as well as the 6th largest economy in Asia. In 2015, Taiwan had an estimated per capita GDP of US$47,800 when calculated in terms of PPP.  

Although Taiwan is an economic powerhouse, domestic agricultural production is somewhat limited. As a result, Taiwan is increasingly reliant on imports of food and other agricultural products. The United States has long been the major supplier of Taiwan's Agri-food imports, followed by emerging South American supplier Brazil, Australia, New Zealand, Thailand and China. 

Historically the majority of U.S. agricultural exports to Taiwan were bulk commodities, but that has changed. U.S. exports of agricultural products grew 3% to US$3.2 billion in 2016, making it the 7th largest market overall.  U.S. exports of consumer-oriented agricultural products remained steady at over US$1.4 billion, nearly 45% of the agricultural total. Taiwan is the 11th largest U.S. market for processed foods as well, totaling US$636.8 million in 2016, down 6%. Top processed export products imported by Taiwan in 2016 included food preparations, non-alcoholic beverages, processed vegetables and pulses, processed fruit, chocolate and confectionery, snack foods and prepared/preserved seafood.

Taiwan's densely populated consumer market is becoming increasingly attractive to U.S. exporters. Taiwanese consumers are welcoming North American-style foods, such as ready-made products, with various consumer groups adopting eating habits reflective of North American and European markets. Consumer demands are accommodated through Taiwan's growing modern retail food sector and food service industry.

While Taiwan continues to be a strong market for U.S. products, suppliers are also facing increased competition from other countries. WTO trade liberalization and consumer demand for novelty and variety have created a highly competitive environment for U.S. exporters. This puts a strong emphasis on innovative product development, superior marketing skills, and a trend towards high value niche product markets.

On June 29, 2010, Taiwan and China concluded the Economic Cooperation Framework Agreement (ECFA), a pact designed in part to help Taiwan exporters stay competitive with the Association of Southeast Asian Nations (ASEAN) following the signing of the "ASEAN plus 1" trade agreement with China. ECFA is a preferential trade agreement designed to reduce barriers to trade and investment gradually.  Taiwan also signed a free trade pact with Singapore (ASTEP) and New Zealand (ANZTEC) respectively in 2013.

Other challenges for U.S. exporters of food and agricultural products include the fact that geographically, the U.S. is much farther from Taiwan than many major competitors, and the lack of direct air links by major U.S. airlines reduces the profile of Taiwan to U.S. exporters, who often overlook Taiwan as well, eager to export directly to mainland China. U.S. exporters are also sometimes reluctant to change product specifications to comply with Taiwan requirements and consumer preferences, and also unwilling to provide low volume, consolidated shipments of high-value products to food service companies. Taiwan’s emerging “green” tendencies have a potential to favor domestic foods by discouraging the consumption of imported foods and reducing the “carbon footprint” associated with imported products.

Retail Sector:

According to Euromonitor, retail sales in the packaged food market in Taiwan were estimated to reach over US$7.6 billion in 2016. That represents a growth rate of 11.7% or over US$797 million since 2012. By the year 2021, retail sales in the packaged food market in Taiwan is expected to reach over US$8.7 billion, a growth rate of 12.1%, or US$947.6 million. High growth categories in the forecast include ready meals, savory snacks, baby food, soup, dairy products, sweet biscuits, snack bars and fruit snacks, processed fruit and vegetables, baked goods, confectionery, and breakfast cereal.  

Post reports that Taiwan’s retail food sector is dynamic with major retailers such as Costco, 7-Eleven, PX Mart, Carrefour, and Wellcome, compete for market share. Most food retailers have set aggressive expansion plans to either increase the number of stores or to broaden their production selection. The United States is currently in the leading supplier of many consumer-oriented products including red meats, fresh fruit, and vegetables, poultry, processed foods, and beverages.

According to the Ministry of Economic Affairs, Department of Statistics, retail sales in 2015 were $38.3 billion, a 3.8% increase over 2014. Convenience stores, hypermarkets, and supermarkets all showed positive sales growth from 2012 to 2015. In 2015, convenience stores generated US$9.8 billion sales, followed by hypermarkets’ US$6.1 billion, supermarkets’US$6 billion and others outlets including wet markets, mom-and-pop stores and e-commerce sales amounting to US$5.8 billion. Taiwan’s continued modernization and increased adoption of western food habits make the country an attractive market for U.S. exporters.  

International retailers dominate the market, with few domestic players in direct competition. International retail stores have taken advantage of Taiwan’s geographical location, high population density, and high disposable incomes. In recent years, the traditional mom-and-pop shops and wet markets have suffered and declined in numbers to high-end supermarkets and convenience stores. Carrefour, COSTCO, RT-Mart are key players in the hypermarket sector while Wellcome, Simple Mart, PX Mart, CitySuper, Jason’s Market Place and Taiwan Fresh Supermarket are active in the supermarket sectors. Meanwhile, 7-11, Family Mart, Hi-Life, and OK are the four major convenience store chains in Taiwan.

In 2015, hypermarkets generated a total of US$6.1 billion in sales, an increase of 3.4% from 2014. There are now 154 hypermarket outlets in Taiwan as of July 2016, which includes a mix of foreign owned and locally owned stores. Foreign operators, including Carrefour and Costco, continue to dominate the market, holding more than 50% market share. Overall, consumer behavior has changed. In the past, the price was a major factor, but consumers are now seeking quality and design. Weak purchasing power has deterred consumers from going straight to a department store for their needs.Better value alternatives now exist in the marketplace, and this shopping behavior change has favored hypermarkets and supermarkets and warehouse clubs.

Costco Wholesale is currently the leading largest hypermarket chain in Taiwan in terms of annual sales. It has 12 stores, and annual sales reached US$2.2 billion in 2015. It is the only wholesale store that issues membership cards in Taiwan. Costco is a popular place for people to spend time, particularly at weekends. The stores offer consumers inexpensive, bulk products which are mostly imported items, while also enticing them with food tastings. The company plans to open at least three more stores over the next five years. Carrefour is a French international supermarket/hypermarket chain with multiple branches throughout Taipei.  It has 84 stores, and their annual sales reached US$1.3 billion in 2015. Carrefour indicated that localization; product differentiation, private labels, and strategically located new stores as the main factors of its success in Taiwan.

RT Mart offers, with food courts, a wide selection of general merchandise including electrical, sports, apparel, fresh market, and groceries. RT-Mart is a branch company of Auchan Group France. It was established in 1997. RT Mart provides food and non-food retail services through 23 hypermarket stores in Taiwan. The stores are located throughout Taiwan, especially in the north. Their annual sales reached US$900 million in 2015.

Supermarkets have generated more than US$6 billion in sales in 2015, a 7.1% increase from 2014. Continued fierce competition from hypermarkets and convenience stores has made it difficult for small supermarkets to survive. Sales posted by supermarkets rose more than 7% in 2015, outperforming the retail sector as a whole, because of the expansion of their retail network. Efforts to promote fresh food in their stores also boosted supermarket sales.

Facing stronger competition, supermarkets have been aggressively developing effective strategies to cater to the needs of city dwellers. Jasons Market Place mainly carries higher-end and imported foods, which accounts for 50% of the products carried. Also, there are high-end supermarkets, such as CitySuper stores, which also fall under this new supermarket format category. This high-end supermarket format is expected to become even more fashionable over the next several years. The idea of “freshness” for supermarkets serves as a tool to attract customers and to generate profits.

Wellcome Supermarket is a grocery chain store with a variety of products, including fresh fruit, fresh vegetables, frozen and packaged foods, and specialty foods. Wellcome in Taiwan is owned and managed by Dairy Farm, which is a leading pan-Asian retailer. Wellcome Supermarket launched its first “Jasons Market Place,” a new store format that mainly carries higher-end and imported foods in November 2003. Jasons Market Place offers imported foods including famous worldwide brands, dishes, imported seasonal fruits and vegetables, meat and other fresh ingredients.

With one store per every 2,300 people, Taiwan has the highest convenience store density in the world. Convenience store chains are now providing oven-prepared, microwavable meals, bakery products, and other processed food products via these retail channels. Convenience stores in Taiwan have become even more convenient than before. With the 24-hour operation, when grocery and other retail stores are closed, consumers can access many types of services during off business hours. Convenience store chains are offering more and more services, such as providing online services, seating areas, and delivery pick-ups, etc., to remain competitive.

In Taiwan, 7-Eleven is owned by President Chain Store Corporation under Uni-President Enterprises Corporation. 7-Eleven is the most popular convenience store in Taiwan, with 5,040 stores as at the end of 2015. Uni-President Enterprises Corporation is an international food conglomerate based in Taiwan. It is the largest food production company in Asia. Uni-President has a significant market share in dairy products, foods and snacks, and the beverages market. It is also responsible for running Starbucks, Mister Donut and Carrefour in Taiwan. Also, Uni-President has operations in Canada, China, Thailand, Vietnam, and the United States. 7-Eleven’s annual sales reached US$4.4 billion in 2015. 7-Eleven first appeared in 1979. Nowadays, 7-Eleven is a major player in the growing market for ready-to-eat food as lunch boxes and fresh fruit (mainly, bananas, apples and yams).

Family Mart Company Limited opened its first store in Taiwan in 1988. It has 2,998 stores, and annual sales reached US$1.9 billion in 2015. Family Mart is the second largest convenience store chain stores in Taiwan. Family Mart has an outlet on the 35th floor of the Taipei 101 building, earning it the distinction of the highest convenience store in the world. Hi-Life is a local convenience store chain, owned by Hi-Life International Co., Ltd. It has more than 1,281 stores as of the end of 2015. In a similar trend with Family & OK, Hi Life commenced operations in 1988. Their annual sales reached US$690 million in 2015.

In response to consumers demand for quick meal solutions, big name retailers such as 7-Eleven, have added fresh-cooked food menus to their convenience stores. Strong sales found in the convenience store sector are a result of the consumers’ need for fast transactions and one-stop shopping. More and more supermarkets are adding new products of ready-to-eat/ready-to-cook prepared foods. Restaurants’ take-out orders and home meal replacements have grown steadily as more and more full-time housewives and time-constrained consumers demand quick meals.

Post reports that major 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.

Generally, the same importers, distributors, and wholesalers that supply the supermarkets, hypermarkets, and convenience stores, supply traditional markets, including wet markets and mom & pop grocery stores. Unlike supermarkets, hypermarkets, and convenience stores, the wholesalers and regional wholesale markets play the most important role in the distribution of products for traditional markets. Modern warehouse stores, such as Costco, also provide products to traditional markets. Grocery products are usually supplied by local wholesalers, although agricultural products are often purchased at regional wholesale markets. 

Best Product Prospects:

Post advises that products present in the market that have good sales potential include fresh fruits including berries, fresh vegetables, snack foods, food ingredient preparations and fish and seafood products.   

Food Service Sector:

Post reports that the food service (excluding institutional) industry continued to expand with an economic contribution of NT$424 billion (US$13.8 billion) in 2015. Strong sales trends were also seen in the first three-quarters in 2016, despite a decline in tourism from mainland China. The increase in other tourist arrivals helped drive food service revenue growth. Other factors such as the rise in consumer income, smaller family size, a growing number of working women, development of e-commerce, drive the food service sector.

The government’s tourism policy was a savior for the food service sector facing a declining population. According to government statistics, the number of foreign arrivals increased significantly since 2005, more than threefold to over 10.4 million in 2015, including 7.5 million tourists. In 2015, cross-Strait air passenger traffic grew by 4.7 % to 11.8 million people year on year, reflecting larger numbers of visitors from China. The explosive growth of direct charter flights across the strait generated major profits for Taiwan's airline companies and airline catering businesses. In 2015, Taiwan’s foreign exchange earnings from tourism reached US$13.9 billion, up 3.4% from 2014. 

According to Post estimates, based on a 2014 Tourism Bureau survey, food and beverage expenditures accounted for approximately 20% of foreign tourists' (non-business visitors) total spending, generating roughly US$2.8 billion in income for the local food industry.

Socializing in hotel restaurants is common in Taiwan. As a result, hotel restaurants have become a significant dollar earner for Taiwan’s international hotels, accounting for 44.5% of total operating income (Source: Tourism Bureau 2014 data). People often entertain their business counterparts, friends, and relatives in restaurants, especially on special occasions such as weddings/engagements, birthdays, Mother’s Day, “Honorary Banquets in Praise of Teachers,” Lunar year-end parties hosted by company management, and Chinese New Year Eve Dinner. Food served at these occasions tends to be either Western-style buffets or Chinese-style food banquets.

Also, holiday celebrations are becoming more and more commercialized, especially Western holidays such as Christmas, Thanksgiving, Independence Day (American Week Food Promotions), Oktoberfest and Valentine's Day. Taiwan’s hotel restaurants use these occasions to aggressively promote set menus, offering excellent opportunities to promote American foods and beverages. U.S. companies with products used principally in the hotel restaurant institutional (HRI) sector should consider how to take advantage of these promotional opportunities by developing recipes, special menus or merchandise to help draw in the different group.

In addition to the general food service business, hotels have also focused in recent years on specific gift food packages for various festivals, such as moon cake gift packs for the Moon Festival, chocolate gift packs for Valentines’ Day and turkey hampers for Thanksgiving and Christmas. The development of domestic courier services is also credited for the rapid growth of the gift-pack market. Resorts in Taiwan, classified by areas of focus, fall primarily into the categories of hot spring towns, scenic areas, cultural sites, and amusements parks. With the completion of the freeway system connecting metropolitan Taipei and Taiwan’s east coast, many real estate developers have built or are building high-end resorts in major hot spring towns and scenic spots in this area.  Most of the resorts manage the food venues themselves and purchase primarily through importers and distributors.

The 2015 total restaurant count was 124,124 units, up 5.8% from 2014, with restaurant chain stores holding steady. Gourmet Master (85°C Bakery Café), WowPrime (restaurant chains) and Uni-President Starbucks Coffee Company continue dominating the food service sector.  The majority of restaurants in Taiwan are casual dining places. As most of the restaurants in this category are small businesses, they purchase materials mainly from wholesalers and wet market. Only larger chains/franchises tend to buy products from importers or import directly.

There are over 12,000 breakfast shops in Taiwan. Most of them provide western foods such as hamburgers, sandwiches, milk tea, and coffee. These breakfast chains and franchises are more like miniatures of western fast food restaurants, but they sell foods at lower prices and with more offerings. As they provide fast service and cheaper foods, they are the first choice for the majority of consumers buying breakfast on a limited budget. In recent years, the breakfast shops have faced strong competition over 10,000 24-hour convenience stores, most of which feature healthier and fresher food selections. While the convenience stores also offer freshly-brewed coffee, many local breakfast stores also intend to offer freshly made tea and coffee to provide more options for consumers.

McDonald's, which opened its first outlet in 1984, remains the largest fast food chain in Taiwan with 414 stores (as of April 2015) island-wide. Competition among fast-food restaurants is becoming more intense since Japan-based MOS Burger started its more aggressive expansion in foreign markets. MOS became the second largest fast food chain with over 250 outlets, as of May 2015. Facing growing competition, McDonald’s announced in June 2015 that the company was aiming to franchise all its Taiwan stores. Franchisees are more familiar with the local market trends and consumer preferences, franchising all the stores may help McDonald’s in expanding its sales according to food service observers.

Typically, major department stores in Taiwan have several sit-down restaurants, as well as a full or at least part of a floor devoted to a food court. Revenues from restaurants and food courts represent around 30% of the total department store revenue. Shin Kong Mitsukoshi, Far Eastern Department Store, and Sogo Department Store (merged and managed by Far Eastern Group) are the major players. These food courts are favored by small restaurant operations which intend to get fast and efficient exposures.

Most coffee shops also provide sandwiches, salads, cakes and pastries prepared by catering companies or other food processors. Some domestic and Japanese style coffee shops also offer freshly made sandwiches and hot meals, which are shipped frozen from their food processors for reheating at the outlets. Many coffee chains import coffee beans directly but purchase other food materials from importers, wholesalers, and distributors. The significant growth of the coffee shop segment in recent years has created a niche market for imported candy/chocolate and cookie products. Many coffee shops not only sell coffee and light meals but also sell candy/chocolate/cookie products with small and attractive packaging.

With air traffic between Taiwan and mainland China increasing significantly, the air catering sector's future is promising. School and military catering is stable but might face more challenges in the future due to decreasing student numbers resulting from low birth rates and Taiwan's policy of drawing down its military force. On the other hand, healthcare services are powering the growth of the hospital restaurants and the cafeterias business by offering more varieties and more individualized, nutritious, and healthier meals.

Currently, Evergreen Sky Catering Corporation, China Pacific Catering Service, and the Kaohsiung Airport Catering Services dominate the local air catering market. Because of strong competition within this sector, these companies are aggressively expanding their catering business to include local convenience stores, restaurants, coffee shops, schools, and hospitals. These airline flight kitchens purchase food ingredients mostly from local importers, manufacturers, and wholesalers, but also import meat and poultry directly.  The industry is widely expected to record continued growth over the next few years. 

In 2015, Taiwan imported US$11.5 billion of food (including fish and seafood) products from many different sources, of which US$3.4 billion (29.6%) was imported from the United States. The U.S. was the number one food supplier to Taiwan, followed by Brazil, New Zealand, Australia, and Thailand. Brazil is the United States largest competitor in terms of bulk products. New Zealand ranked is the top supplier of dairy products, beef, mutton, and kiwi. Australia is the second largest supplier of beef and largest supplier of lamb. Thailand was Taiwan's largest supplier of starches and sugar/sucrose products.

Best Product Prospects:

Post reports that best prospect products for U.S. exporters in the food service sector include beef and beef offal, pork and pork variety meat, poultry, fish and seafood products, dairy products, fresh fruit, tree nuts, wine and coffee.   

Food-Processing Sector:

Post reports that opportunities exist to expand U.S. food product sales to Taiwan’s food processing and ingredient sector. Taiwan’s food processing and ingredients industry is comprised of the following sectors: beverage, coffee/cocoa, condiments/seasonings, dairy products, fats/oils, flour/ bakery products, fruits/vegetables, meat/poultry products, snack foods, and sugar and confectionery. Taiwan’s continued modernization and increased acceptance of western food make it an extremely attractive market for U.S. exporters. It also serves as an excellent test market for companies interested in exporting food products to China.                                                          

According to the Department of Statistics of the Ministry of Economic Affairs, Taiwan’s total output value of the domestic food processing and ingredients in 2015 was US$21.3 billion. This makes food processing the eighth largest manufacturing sector, behind only electronic/electrical machinery industry, chemicals, and machinery, petrochemical and metal industries. The food processing industry comprises of approximately 6,000 manufacturing enterprises employing more than 125,000 people.

Taiwan is also a major import market for international food processing and ingredient suppliers. In 2015, Taiwan imported approximately US$7.9 billion of food processing and ingredients from more than 150 countries or regions, of which US$1.58 billion was imported from the United States, representing 20% of the total import market share. The United States was the number one food processing and ingredients supplier to Taiwan, followed by Japan (US$711 million, 9%), New Zealand (US$553 million, 7%), Australia (US$553 million, 7%), and Thailand (US$474 million, 6%). The top five supplying countries comprised approximately 50% of the import market.

The United States is seen as a provider of high-quality safe products, and is the largest supplier of many consumer food products. Australia and New Zealand are major suppliers of beef, cheese, and dairy products. Meanwhile, Japan dominates the snack foods, sauces, and preparations and biscuit market. Japan is also very competitive in other consumer-ready food products. Key market drivers include an increasing interest in healthy and functional foods, an aging population, and health conscious consumers that have forced food processors to put more effort into product innovation, personalization, and convenience.

Many American food ingredients and products have a competitive edge over goods from other countries, mainly due to the well acceptance and trust in U.S. raw materials and ingredients. Consumers’ favorable preference over U.S. ingredients and food materials is a tremendous advantage for U.S. exporters seeking to develop a market.

Food manufacturers purchase from local importers, distributors, and wholesalers. However, the current tendency is to increase the volume of direct imports. A majority of the large food processors and manufacturers import full container loads of raw agricultural materials and ingredients directly, while smaller companies including small-to-medium sized firms and specialty processors purchase from importers and distributors. Most of the importers are based in the metropolitan Taipei area and manage their distribution, while others appoint independent distributors to cover other cities.

With over 6,000 food processors, Taiwan’s food processing and ingredient industry is anticipated to grow steadily. Progress in food technology, marketing innovations and exports of finished food products are attributable to increasing demand for quality imported food ingredients.

Best Product Prospects:

Post advises that best prospects for U.S. exporters in this sector include ingredients for frozen dough, ingredients for frozen prepared foods, ingredients for functional and health foods, 100% fruit juice concentrates, and wheat flour/bakery pre-mixes.

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