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Grocery Retail Trends in Taiwan © Her Majesty the Queen in Right of Canada, Represented by the Minister of Agriculture and Agri-Food (2013)

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Grocery Retail Trends in Taiwan © Her Majesty the Queen in Right of Canada, Represented by the Minister of Agriculture and Agri-Food (2013) MARKET ACCESS SECRETARIAT Global Analysis Report Grocery Retail Trends in Taiwan November 2013 EXECUTIVE SUMMARY CONTENTS Taiwan has almost 24 million inhabitants and is considered to be Executive Summary ....................... 1 one of the largest economies in the world. Over the past 50 years, the country’s economy has transitioned from one that was Socioeconomic Overview ............... 2 agriculture-based into that of an industrial nation. Planet Retail is predicting continued, strong gross domestic product (GDP) growth Demographics ................................ 3 in the future. Grocery Retail Trends .................... 4 In comparison with the rest of the Asia-Pacific region, the Top Grocery Retailers and Taiwanese enjoy a high average gross annual income totalling Their Environment .......................... 5 US$18,070 in 2011, and a total consumer spending per capita of US$12,504 in that same year. In 2017, predicted total consumer Retailer Characteristics spending per capita may reach US $16,481. Total grocery spending by Channel ..................................... 7 in Taiwan, has gone from 28% of total consumer spending in 2009 to nearly 30% in 2012. Consumer Trends ........................... 9 Grocery retail sales growth in Taiwan has seen slower growth than Definitions ..................................... 12 overall retail sales, due in part to the maturation of the retail market. According to Planet Retail, food accounted for 47% of all retail sales Resources .................................... 13 in 1995, compared to 52% in 2011. Food price inflation was more than 4% in 2012. Increases in the price of fuel and electricity are likely to blame. Taiwan’s Ministry of Economic Affairs has stated that a 22% increase in vegetable prices has been another reason for the high inflation of food prices. Source: Planet Retail, 2012 EXECUTIVE SUMMARY (continued) There are significant differences in terms of how international and domestic grocery retail have progressed in Taiwan. Taiwan has benefitted from the expansion of major international retailers that began in the late 1980s. In 1986, the Taiwanese government liberalized foreign investment, which brought many foreign operators into the market quickly and led to this grocery sector being one of the most developed and modernized in Asia. Foreign grocery retailers dominate in Taiwan, with few domestic players in direct competition with the big multinationals. These international retailers have taken advantage of Taiwan’s geographical location, high population density and high number of wealthy inhabitants. Prior to the liberalization, mom-and-pop shops were the dominant retailers. Initially, these shops managed to survive the influx and growth of modern supermarkets and hypermarkets by focusing on shopping convenience and ongoing consumer relationships. However, with their emphasis on fresh produce, both traditional mom-and-pop shops and wet markets will suffer and decline in numbers, as they are squeezed by the growing popularity and numbers of convenience stores. Overall, the grocery sector is fragmented, with the top five players accounting for less than 20% of total market share. As competition increases, and foreign operators expand, consolidation will also increase. SOCIOECONOMIC OVERVIEW Taiwan is home to almost 24 million inhabitants (based on 2012 Planet Retail statistics), which gives the country one of the highest population densities in Asia, with over 600 persons per square kilometre. Taipei is Taiwan’s capital and is located in the north of the island. It is the most populated urban centre in the country. Other densely populated areas include Keelung City, Hsinchu City, Taichung City, Chiayi City and Tainan City. Taiwan was one the original Asian tigers and, over the past fifty years, the economy has been transformed from one reliant on agriculture to one with an industrial and services orientation. More recently, the Taiwanese economy has been boosted by domestic demand, with services an increasingly important component of the economy. Taiwan is heavily reliant on exports and is therefore very exposed to any international economic crisis. In January 2001, Taiwan became a member of the World Trade Organization (WTO), forcing it to reduce tariffs on a range of imports. Taiwan’s per capita GDP is among the highest Asia and Oceania, ranking it only behind Japan, Hong Kong, Singapore, Australia and New Zealand. What is more, Taiwan is one of the more promising countries in terms of GDP growth projections for the future. Taiwan has one of the largest economies in the world and has witnessed strong economic growth over the past fifty years. With over two decades of continued economic growth, Taiwan saw its first negative real GDP growth since 1947 in 2001. The global economic downturn, combined with poor policy co-ordination by the new administration and increasing bad debts in the banking system, were to blame. Unemployment also reached close to 5%—a level not seen since the 1970’s oil crisis. Taiwan’s economy rebounded moderately in 2002, slightly in 2003, and strongly in 2004. Growth slipped in 2005, albeit to still relatively respectable levels, with similar figures also recorded in 2006. The Taiwanese economy benefited from an upswing in the export of electronics, combined with a weaker Taiwanese dollar, and low unemployment which helped drive domestic demand. Between 2003 and 2007 Taiwan's GDP rose by almost a fifth (in local currency). However, as with most other markets, Taiwan was affected by the impact of the credit crunch and the global economic slowdown in 2008. As a result of slowing exports, tourism and consumer spending, real GDP growth slumped in 2008 and 2009, but has seen some improvement in 2010 onwards. Page | 2 For 2011-12 Euromonitor reports that year-on-year growth of total GDP in Taiwan was 2.4%, higher than Japan’s at 1.3%, lower than China’s at 9.4% and lower than the Asia-Pacific number of 5.9%. Euromonitor is predicting Taiwan will see strong, continuously rising year-on-year total GDP growth rates of 4.1% in 2013-14 and 5.8% in 2016-17. Comparatively, Japan will see 0.7% in 2012-14 and 1.3% in 2015-17, and China will see 11.3% in 2013-14 and 10.5% in 2016-17. The predicted year-on-year total GDP growth for the Asia-Pacific region is forecast to be 7.5% in 2013-14 and 8.0% in 2016-17. Inflation in Taiwan has grown slowly since 2007, with the exception of 2008, when the country could not completely escape the global financial crisis that affected many of its trading partners. Taiwan’s inflation, in 2012 reached 2.2%, slightly higher than the 1.4% recorded in 2011. Globally, Euromonitor listed 4.0% inflation in 2012. In terms of regional comparison, the average inflation rate for the Asia-Pacific region for 2012 was 3.8%. By comparison, China’s inflation rate was 2.7%. Neighbouring Japan had 0.0% inflation for 2012. The average gross annual income in Taiwan, in 2011, was US$18,070, much higher than the Asia-Pacific average of US$5,118. Euromonitor is also forecasting that the average income will rise to US$22,184 by 2017. Some 51% of households in Taiwan have an annual disposable income of over US$35,000, and 23.8% of the population enjoy an annual disposable income of over US$55,000. DEMOGRAPHICS In 2012, Taiwan’s Vice Minister of the Interior announced that a total of 234,599 babies were delivered in Taiwan that year, the highest number since 2002, when there were more than 240,000 births. He also predicted that the fertility rate will stay at 1.2 for 2013 and that the number of newborns will remain at over 200,000. From 2007 to 2012, the greatest growth was seen in the 65+ age group at 10.5%, followed by the population aged 15-64, with a 4.6% growth rate. The urban population grew by 4.2% from 2007 to 2012, while the rural population fell by more than 11%. Demographics in Taiwan — Historic/Forecast — in Thousands of People Category 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0-14 years of age 4,145 4,030 3,905 3,778 3,624 3,501 3,383 3,309 3,215 3,098 15-64 years of age 16,443 16,584 16,729 16,884 17,049 17,194 17,329 17,370 17,392 17,419 65+ years of age 2,287 2,343 2,402 2,457 2,487 2,528 2,605 2,701 2,820 2,952 Source: Euromonitor, 2012 Page | 3 GROCERY RETAIL TRENDS In a Euromonitor lifestyle report from April 2012, Taiwan was noted to have the highest per capita density of convenience stores, including notable players 7-Eleven, Hi-Life, and Family Mart. Many of these convenience stores offer value-added services by taking advantage of the latest digital technologies and sending their customers promotions via mobile handsets, laptops and home computers. The Taiwanese consumer shops for food at least twice a week and, sometimes, daily. However, those who favour shopping at supermarkets and hypermarkets tend to do one big grocery shop per week. Top-up food shopping occurs on a daily basis in Taiwan and is carried out mostly in convenience stores. Demographics are playing a major role in determining shopping preferences, with many older Taiwanese buying their meat, fish, fruit and vegetables at specialist markets. In response, some supermarkets are trying to attract this consumer group by recreating the look of a more traditional market within their stores, and they have achieved some success, particularly in urban areas. Store loyalty cards are rather new to the Taiwanese market, being offered mostly by supermarkets. Carrefour and ParknShop were the pioneers in terms of loyalty programs in Taiwan, although many convenience stores are now coming out with their own cards.
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