THL’s Spirits Business Strides Forward

Joint ventures can have a lot of flexibility. In large companies, it takes two months for a plan to go from discussion to execution, but in THL we can start a new project in three days.

GM Allen once served as the head of Diageo’s Taiwan operations. Diageo is the world’s largest spirits company. During his 7-year tenure at Diageo, he led a team that was able to increase the branch’s revenues to NT$5bn from NT$3bn.

Allen retired in mid-2021. He was then recruited by THL GM Terence (Chen) and Spiritus Chairman Director Derek (Chen) to head up THL’s new wine and spirits business, which will all be integrated under the new Spiritus JV.

The JV represents an important step in the THL Group’s transformation from purely an agency business to being a brand owner. "Agents have identity limitations, and THL hopes to evolve the role of agents and break free from some of the restrictions," said Derek. The Spiritus JV with Campari allows THL to take an important step closer to the original factory.

Agents have their own identity limitations. THL hopes to evolve the role of agents and break away from agency restrictions. Spiritus, a JV with the Campari Group, is an important step closer to the original factory. ~ Spiritus Chairman Derek Chen

The process of persuading foreign investors to agree to a JV is not easy, and this agreement took two years to negotiate. The JV proposal required the approval of top Campari management in Italy. Discussions did not go very smoothly until Terence and Derek were able to build a relationship with top Campari management and present them with a convincing and ultimately successful business proposal.

The average consumer in Taiwan is often not very familiar with Campari. Its main spirit in the past was mainly used as a base liquor, rather than being consumed directly. Therefore, many consumers aren’t familiar with the brand name. "How can we help raise the profile of the brand and the blending possibilities? How can we create new consumption trends? These are the challenges ahead,” said Allen.

Although the new company has just started, Allen, who has more than 20 years of experience in the spirits industry, is quite confident about the new JV’s prospects. "As long as you have a good product line and good connections with consumers, success can be achieved with the leverage available from large partners. Our overall plan took two months from discussion to execution. At THL, a new plan can be launched in three days." Allen added that Spiritus has unique advantages in the form of THL’s agile, flexible and efficient team, and its strong resources on the retail channel side.

Derek said that THL has been thinking extensively on how it can expand the range of its value-added services, including moving beyond the role of agents. This includes a trademark authorization cooperation with Ovaltine, Savlon and other brands. In this way, THL has transitioned from agency services to brand management activities. This is an important part of their Group strategy. "In the field of spirits, we don't want to just represent brands," Derek said. As a result, the operating returns of the JV will be higher than that of simply acting as an agent. The newly established Spiritus JV has a revenue target of several million NT. dollars in its first year.

"From the perspective of staged challenges, the target is an important milestone. It would represent that organizational effectiveness and efficiency had reached a certain level," said Allen. He added that compared to agency operations, under the JV model THL will be in closer communication with production facilities. "The Group will make a break from the model of being purely an agent, and will focus more on brand building. As a result, the capabilities of THL’s team will evolve and expand."

Derek said the Group foresees higher profits from its strategy of moving beyond a pure agency approach to JVs with overseas companies. "JVs will generate higher profits, and this will also open the door to greater promotion opportunities and employee compensation. Thus, this case is very important. The big task is to raise the potential of the entire Group."

Industry prospects for the spirits industry in Taiwan are promising. According to Allen’s analysis, although Taiwan’s population has plateaued and demographic dividends have disappeared, the spirits industry is still enjoying robust demand. Taiwan is an aging market, but the turnover of high-unit-price spirits has continued to increase.” This provides Spiritus with substantial room for development.

The establishment of Spiritus is an important step for the THL Group in the field of spirits. All eyes are now on new GM Allen. It’s very exciting as he prepares his outstanding team to meet the challenges ahead and achieve great success in the spirits industry!