Brewers Association Export Development Program Taiwan Market Opportunities Friday, 17 Sept. 2010 About Bao Brothers Trading * Bao Brothers Trading is a Taipei-based importer, distributor and marketer of US craft beers of distinction. * Mission: Our mission is to provide exceptional US craft beers to the discerning Taiwanese beer drinker who seeks greater variety, higher quality, and more flavor in their favorite beverage. * Current Portfolio: Anchor Steam, Liberty Ale, AhAnchor PtPorter, OldFhOld Foghorn, Rogue DdGAlDead Guy Ale, Rogue American Amber Ale, Santa’s Private Reserve * Founded in 2007. 1 Bao Brothers Operations • Two Full-Time Employees – GM & Sales Manager Æ focus on sales, marketing & promotions . • All functions are outsourced, including CPA, warehousing, distribution. • Taipei- 2 main warehouses, 3 distributors, each w/ sales and delivery functions, accept the A/R risk. • TihTaichung & &K Kaoh hisiung – 1di1 distr ibutor eac h. • Island-wide delivery service through T-Cat “tsai pei”. Largely COD, business & home delivery. Distribution & POS Breakdown by City Taipei – 3 distributors, 8 sales, approx 50 accounts Taichung – 1 distributor, 3 sales, approx 15 accounts Tainan – 1 sales, approx 12-15 accounts Kaohsiung – 1 distributor, 3 sales, approx 15 accounts 2 Regulatory Issues • Shelf life: No legal requirement. Nat’l Treasury: 1 year seems to be standard operating procedure , w/ 6 months & 2 years as outliers. 7%+ needs no shelf life. • Health Testing: Established by the Tobacco & Alcohol Administration Act of 2006. Results from US labs are good for 1 year. + - 0.3 variation in ABV is acceptable. 1. Met hy l Alcoh ol < 1000 mg /L 2. Lead < 0.3mg/L 3. Sulfur Dioxide < 0.03g/L Regulatory Issues • Certificate of Origin required with all shipments. • Alcohol tax: NT$26/Liter ($0 .81L) • VAT 5% - on product + shipping cost combined • EPA Recycling Fees – based on bottle size, volumes • Labeling: Description, name, country of origin, ingredients, alcohol %, bottle size, supplier address, importer, contact number, production date, shelf life, recycling symbol, health warning. 3 Labeling Examples Successes to Date • Increasing Volumes • Hig h En d Placemen ts – ttkt&target market & consumer • Channel Variety - hotels, supermarkets, pubs, restaurants (except hyper marts & CVS) • Regional expansion • Promotions – blues festivals, cooperate w/ FAS, in-store promotions, PR • Portfolio of products 4 Market Trends • Summer seasonal growth substantial, + 30% from previous year (China Times, 5 Sept 2010) • Market size is estimated at NT$30-45 billion at retail (US$1-1.5 billion) • Taiwan beer is 72% of market (Jan-Jul 2010) • Heineken 13%, Kirin 5%, Asahi 4%, Tsing Tao 3%, Others 3% ((gCarlsberg, Corona, Bud, Guinness, et al) • Non-lagers probably < 1% of market • Recent growth in variety of offerings, including more expensive beers, more unique beers Current Premium Imports US IMPORTS UK IMPORTS • Anchor (4) • Fuller’s(6) s (6) • Rogue (3) • Abbott Ale • North Coast (4) • Twisted Thistle IPA •Elysian • Bellhaven (6) • Fish Tale • Hen’s Tooth • Scuttlebutt • Old Speckled Hen • Saranac (2) Belgian Ales • Sam Adams Lager Local Brewers: Jolly, • Kona Lager Le Ble D’or, North Taiwan, GB, Deluxe 5 American Club in China G&G Delicatessen 6 Jason’s Supermarket City Super/ Sogo (Far Eastern Group) 7 Carrefour Pricing Example: 2 Pallets West Coast Port City Departure 1. 2 Pallets: 65 cases each = 130 cases @ $20= $2, 600 2. Shipping all-in (includes dox, inland trucking, ocean freight, import dox, Taiwan delivery to warehouse) $1,400 = $4,000 3. VAT 5% product + shipping = $200 = total $4,200 4. Alcohol Tax NT$26/liter = 3,120 bottles x .355L = $900 ($0.29/bottle) * All VAT & Tax must be paid before customs clearance. 8 Pricing Example: 2 Pallets 5. $4,200 + tax $900 = $5,100 landed value 6. $5, 100 landed value = US$39. 23 case or US$1 . 63 per bottle 7. Labels: printing and labor = US$0.15 each = $3.60 case = US$42.83 or US$1.78 per bottle 8. Importer Margin 60-80% = US$68.53-77.10 case or US$2.86 – US$3.21 bottle 9. Distributor Margin 15% = US$78.81 -88. 66 10. Retail Margin 15-30% = US$3.28-3.69/bottle 11. On-Premise Margin 70%-250% = US$5.58 –9.23 Future Focus Product • More Branded Products • Private Label Program: small brewhouse dedicated run, or use ofitilbhf excess capacity in a larger brewhouse. - perhaps an IPA, hefeweizen, hi-end distribution - pilsner or lager, canned, lower-end distribution Place • More Geographic Coverage, More Regional Distributors & More Sales Staff • More Product Througggh Existing Accounts Promotion • Larger Promotions: Possible US Craft Beer Festival w/ Other US Brands • Web-based Marketing • Continue In-stores with up-market retailers Price – mid to high 9 Web Sites for Taiwan Breweries • http://www.lebledor.com.tw/ • http://www.deluxebeer.com.tw/eng/default.asp • http://ntwbeer.com/ • http://www.gordonbiersch.com.tw/index_en.php National Treasury web site http://tameser. nta. gov. tw/TAME/do/newEnglishVer sion Working With Your Importer & Distributors • Largest marketing expense is beer for sales ttitasting and dtii training • Marketing material support: coasters, banners, t-shirts, glasses, etc • If you can’t provide the marketing materials, try to provide the art work • Incremental business will add up! 10 James Boyle GM Bao Brothers Trading Cell: 886-9350-150015 Fax: 886-2-2877-1182 E-mail: [email protected] [email protected] 11.