In our last CEO Conversation with Andrew Tseng “CEO Conversations Installment V: Andrew Tseng, Chairman, and CEO, Grape King Bio (1707 TT)”, we discussed how Andrew has led the transformation of the 50-year-old health food manufacturer into a younger, more vibrant company. After taking over the helm of Grape King Bio from his father in 2014, he has led the company’s entry into international markets, helping it to achieve greater global recognition.
In 2020, Uni-President (1216 TT), the largest F&B company in Taiwan, and also a distributor of Grape King’s functional beverage products, recognized the potential for collaboration with Grape King, due to the attractiveness of Grape King’s existing line up of health supplement products and its strong research and development capabilities for such products. In November 2020, Uni-President announced that it would acquire an 8% stake in Grape King via a private placement. The market has described this strategic partnership as a “powerful combo” and a win-win situation. For Uni-President, this will help fill a gap in its product line, while bringing the company one step closer to its vision of establishing a “Great Asian distribution platform” over the next 5-10 years. For Grape King, the partnership enables the company to further expand its presence in the Fast-Moving Consumer Goods (FMCG) category and provides access to Uni-President Group’s strong distribution network and resources.
“Grape King has very strong R&D capabilities, and we have been persistently exploring how to leverage our proprietary raw materials, such as probiotics, mushroom mycelium and others, to expand our product scope and make our products available to more consumers,” says Andrew. “All things considered, Uni-President is a perfect fit for us, and we are all very excited to work with such a reputable F&B giant,” he adds.
Demand for probiotics and fungi-based products are on the rise
“For the past several years, we have devoted a lot of time to market research and have found that probiotics and fungi-related products have seen a rapid growth in popularity in developed markets. This leads us to believe there is huge growth potential for Grape King in this area,” Andrew comments.
The research supports Andrew’s optimism. According to a survey by Innova Market Insights, the global fermented beverage market grew at an eye-popping 40% annual rate from 2015 to 2017. The survey further revealed that of the fermented beverages launched globally in 2018, 75% carried claims that they improved digestive health and 68% contained probiotics. The COVID-19 pandemic has caused an increase in demand for products that provide an immunity boost, driving demand for functional beverages. According to Innova Market Insights’ 2020 consumer survey, 1/3 of consumers worldwide say that they paid more attention to immune system health in 2020, and 60% of consumers say they are actively looking for immunity boost-related foods and beverage products, a 20-percentage point jump from 2019’s survey results.
Mushrooms are having their moment, due to their numerous health benefits. According to Grand View Market Research, the US market for fungi-based products reached US$5 billion in 2017 and is estimated to have reached US$7.4 billion in 2020. They are expected to be one of the top trending F&B products in 2021. If one searches for “instant coffee” on Amazon, a mushroom-based instant coffee produced by Four Sigmatics, an upstart functional products retailer, appears on the best-selling list, beating Starbucks, Folgers, Nestle, and other well-established global brands. Mushroom-based additives can be found in just about anything these days, including health supplements, coffee, teas, jerky, and even beauty products – providing further confirmation that this is a hot new area of consumer demand.
“The collaboration with Uni-President will enable us to speed up our FMCG product development efforts. As early as the second quarter of this year, we plan to launch to new products that we co-developed with Uni-President,” says Andrew with excitement.
We asked if the cooperation with Uni-President will further extend to cold-chain products such as yogurt and dairy, where Uni-President has a strong presence, and Andrew says, “I don’t rule out any possibilities. There are many opportunities to explore, whether it’s own brands, co-brands, or even ODM. I often shared Uni-President Chairman Lo’s marketing philosophy with my colleagues. It is – ‘Where there are people, there is lifestyle. People pursue different things in life to complement their own personal needs and aspirations. This diversity in lifestyle makes for a market full of endless opportunities’.”
A more diversified retail distribution
Andrew adds thoughtfully, “A great product still needs effective distribution. Many people describe the past decade as the era of “distribution”. This is what makes Uni-President such an ideal partner for us. Founder Kao Ching-yuan decided to build his distribution empire in Taiwan after making a trip to Europe in the 1970s, and seeing the advantages that come along with being the king of the distribution channels. Today, Uni-President is the most powerful channel player in Taiwan, serving consumers 15 million times per day through its retail and services channels!”
Andrew continues, “In the past, we sold our beverages through local distributors and were not always successful in penetrating the retail channels. This changed when we began working with Uni-President in September 2019. During our first full year of collaboration, sales of our functional beverages grew 42% YoY. And retail channel penetration reached 80%, up from 60% prior to working with Uni-President. We will continue to work with Uni-President to make sure that our products will be seen in more places.”
In recent years, the retail market has undergone many drastic changes. According to Deloitte’s “2020 Retail Power and Trend Outlook” report, the pandemic accelerated consumer use and reliance on online shopping. Consequently, developing e-commerce and “omnichannel” capabilities has become a must for all retailers.
Four Sigmatic, a U.S.-based mushroom-related functional products retailer, is a prime example of the effective use of online outreach. Launched in 2012, Four Sigmatic primarily sells mushroom-related functional products, including instant coffee, whey protein, and beauty care products. Through successfully leveraging social media and celebrity influencers with a highly targeted marketing strategy, the company successfully promoted “drinking mushrooms” and now generates revenues of US$60mn annually, mostly through online channels.
“Currently, we are handling Grape King’s virtual channel by ourselves. Over the past year, we devoted more resources to our online shop, mainly optimizing the user experience. We have consistently achieved double-digit growth in online sales, albeit from a lower base,” says Andrew. “We’ve also made an effort to be creative in our marketing. We’ve produced music videos with a famous local rap star and have advertised on leading podcast channels. This has raised brand awareness among the younger generation, helping to bring Grape King products to a whole new generation.”
E-commerce is also an important topic at Uni-President, as the company is in the midst of a digital and omni-channel transformation. As the largest retail chain operator in Taiwan, the Uni-President Group is working towards redefining convenience by building the consumer experiences of the future. “There is so much we can learn from Uni-President on this front,” says Andrew, “Their products and services are an indispensable part of consumers’ daily lives.”
Wellness is also a lifestyle
Having seen the private placement to Uni-President receive a warm welcome by Grape King’s shareholders at the company’s January shareholder meeting, Andrew is enthusiastic about Grape King’s future prospects and his expectations are high. “We are already collaborating with Uni-President on many projects, but I expect that the process will accelerate even further now that our strategic partnership has been formalized,” says Andrew.
Uni-President has begun shifting its Group’s focus from F&B towards the lifestyle industry; and wellness may soon become a vital segment. Says Andrew, “Grape King’s mission remains clear: ‘Cultivate and manufacture health-food supplements of the highest quality that are affordable to everyone’. We believe that with the help of Uni-President, we’ll touch more lives and will be better able to promote health and wellness.”
If you would like to arrange a meeting with Grape King’s CEO and Chairman, Andrew Tseng, please contact yvonnehuang@qtumic.com.