From Crisis to Strength THL Keeps the FMCG Industry Moving Amid the COVID Pandemic

Taiwan’s consumer market was jolted in May of this year by a COVID-19 outbreak, with the government soon raising alert levels. However, this crisis also created a turning point. The THL Group, Taiwan’s largest distributor of consumer goods, responded quickly to these unprecedented challenges. THL marshalled all of its assets, including its talented teams and strong capabilities in logistics, distribution, operations and marketing. The company acted quickly to solve problems. In this way, THL was able to transition from crisis, and learn from experience to become an even stronger company.

The COVID pandemic has impacted the FMCG industry’s entire supply chain since the disease began its global spread in early 2020. The industry has had to adapt to changes in areas such as consumer price levels, logistics patterns, e-commerce, and work habits. THL President Terence Chen commented on the challenges that have arisen in the FMCG industry, including serious shortages of international containers, rising producer prices, and consumer inflation. He noted that, from the import side, many products such as instant noodles, canned food, batteries and bottled water have all been experiencing very strong demand. However, the logistics of moving products into Taiwan and then to stores and consumers has proven to be a major challenge. One element of this is that shipping container availability has become very tight.

THL’s FMCG business is divided into two groups: retailing and food service. The retail business group can observe first-hand the actual status of Taiwan’s consumer market. Since Taiwan’s local COVID outbreak in mid- May of this year, the retail team has noted a strong growth in sales by mass-market (big-box) retailers. Conversely, sales at convenience stores and small stores that focus on personal care products have declined significantly. Although the mass-market stores have enjoyed explosive growth in demand, they have faced challenges in other areas. These include a difficulty in finding sufficient labor, as well as shortages of products being delivered by suppliers.

Generally speaking, mass-market stores rely on their suppliers for goods as well as merchandise display elements. The COVID outbreak resulted in labor supply not being able to keep up with a surge in consumer demand. THL faced these challenges head on, and devoted its energies and capabilities to ensuring rapid responses to any problems that arose in order to keep products moving through their distribution channels. The result was a very good operational performance.

When the Taiwan government raised its COVID alert status to Level 3, the response by many distributors was to constrict their use of manpower. However, THL knew that the FMCG industry is essential to supplying daily necessities to the people and supplying goods that are critical to pandemic prevention. THL realized that if consumers began seeing empty shelves, their natural reaction would be to panic – and this is the last emotion society needs during a pandemic. Therefore, on one level the company encouraged its office staff to work from home. However, THL also encouraged its operational staff to heighten their efforts to visit stores and ensure that shelves remained well stocked. THL placed particular emphasis on ensuring that supplies of key safety-related products, such as disposable gloves, disinfectants, cleaning products, and goggles, reached stores and could be purchased by consumers. THL channeled more manpower to key roles and worked tirelessly to coordinate the efforts of colleagues such as drivers, warehouse employees and store exhibitors to ensure that shelves remained full and customers remained calm and confident of supply.

THL’s leaders did more than just coordinate, they also provided leadership by example, rolling up their sleeves and joining with their colleagues to keep distribution moving. President Terence Chen and Vice President of Sales & Marketing, Allen Lee went to the front lines to provide their own muscle and effort to keep shelves stocked. They were on the ground replenishing display sites to make sure that product was available for consumers. In terms of systems, the use of new mobile phone technologies was introduced to assist in tracking and logistics at the store level. As THL staff went from store to store, they immediately entered updates via their mobile phones. This enabled remote management technologies to monitor conditions and more efficiently manage distribution efforts.

VP Lee said that FMCG is now more important than ever to people’s quality of life and their ability to adjust to the pressures of the pandemic. Sufficient supplies of key daily necessities can give people peace of mind and promote social stability. He noted, "I encourage our colleagues by helping them see how important and noble our work truly is. We play a key role in ensuring the stability of our society. Today’s challenges have also resulted in us concentrating our efforts, becoming more efficient, and improving our performance. These results have confirmed the appropriateness of our approach, which in turn has inspired our team even more."

One of the regulations under Taiwan’s Level 3 alert was that restaurants could not offer in-house dining, which hurt their sales dramatically. As a major distributor to restaurants, THL quickly came up with new responses and strategies.

Special packaging for take-out food service:Under Level 3, many high-end food service outlets, such as top hotels and restaurants, made a shift toward food delivery. Tangning Tea products, for which THL is a distributor, created new packaging for its cold-brewed tea beverages that could be delivered easily. Also, mineral water company San Pellegrino shifted to plastic bottles from glass bottles to make it easier for their products to be included in meal deliveries to consumers.

Helping communities in stress by easing credit terms:Another challenge amid the Level 3 measures was related to customer cash flow. THL eased payment terms to assist customers who were experiencing cash shortfalls due to the ban on in-house dining and other elements of the new regulations. By working together with its customers, THL helped ensure their long-term survival.

Helping restaurants work with supermarkets to develop ready-to-eat productss:Due to government restrictions under the Level 3 alert, the number of people dining in at restaurants dropped sharply. On the other hand, demand for ready-to-eat products surged. In this new environment, THL’s Food Service group expanded its activities extensively. This included helping partners with menu development, marketing and even the use of co- branding. In early June, a new line of gourmet-type dishes was jointly launched by Taiwan 7-Eleven and the Sheraton Grand Taipei Hotel’s“Guest House” restaurant. THL Food Service was a driving force behind this innovative effort.

Strengthen cooperation with the “cloud kitchen food service" industrys: In light of changes in the food service market, THL strengthened its cooperation with the virtual kitchen food service segment. This included not only supplying them with ingredients, but also helping them create new menus. THL’s Food Service Sales Director, First Jan, noted that THL suppliers are all major international brands, and that these companies have been very innovative in the area of food safety. Jan said “We cooperate with ‘cloud kitchens’ such as Just Kitchen. We supply them with products from dozens of leading companies, such as Lee Kum Kee, Campbell’s, Kraft Heinz, and McCormick. Jan added that, in the future, THL plans to invest actively in the expansion of its frozen fresh food offerings and cooperate in supplying new menu items to pave the way for further growth.

The pandemic and Taiwan’s Level 3 alert measures have had a profound effect on consumer buying patterns, including spikes in demand for daily necessities. THL’s dexterity and rapid response capabilities have allowed it to ensure stable distribution of its products, which in turn has resulted in stronger sales. THL supplies a broad range of products, including antiseptic products from Savlon and food-related products such as McCormick spices, Campbell’s soups, Heinz ketchup, Tabasco chili sauce, and several top brands of instant noodles. Sales for all of these products have increased significantly.

The pandemic has also driven stronger demand for bottled water. Taiyuan Ocean Alkaline Ion Water, for which THL is a distributor, is a leader in the market. THL cooperated with the product’s producer, Taiyen Biotech, during the pandemic. Adjustments were made to production and capacity. As a result, supplies were maintained and store shelves remained well-stocked.

Another impact of the pandemic is that it has changed the way in which Taiwanese companies interact with foreign manufacturers. In the past, it was thought that trips abroad were essential to winning the trust of foreign companies. How can we negotiate distribution agreements with foreign companies if we can’t travel abroad? President Chen said that, under new business models, remote video conferencing has become the new normal. Lockdowns came earlier to countries in many parts of the world than to Taiwan, so overseas firms were already well-accustomed to communicating through this channel by the time lockdowns began in Taiwan.

"We’ve had many teleconferences with suppliers of products in foreign countries over the past year. We’ve found that online meetings are quite efficient. Perhaps business travel will be reduced in the future. Some in- person meetings will be replaced by online meetings. This appears to be one likely change in the post-pandemic era,” Chen said.

Video conferencing has also improved the efficiency of remote work. Overseas trips have declined during the pandemic, but the negotiating of new agency agreements with international brands hasn’t stopped. In January of this year, THL successfully reached agency agreements with one of the world’s top three coffee brands, Lavazza. The entire negotiation process was conducted via online channels.

Another agency contract that was negotiated completely over the internet was with Proximo Spirits, which produces the world’s best-selling tequila, Jose Cuervo. The new agency agreement took effect on July 1st.

E-commerce has soared during the pandemic, and THL has been a leader in advanced deployment. Several years ago, THL joined with HCT Logistics to create Hsin Hsin Galaxy (HHG), a web-based company. HHG is now a certified marketing partner of Google and Facebook. Big data is used to quickly adjust advertising strategies,including events and promotions. Aided by a warehouse built by HCT Logistics, which carries more than 15,000 products, logistics and distribution problems that emerged during the pandemic were overcome with amazing results.

The pandemic has changed consumer buying behavior. Brand recognition and trust have become important drivers behind purchases. VP Lee observed that, amid the pandemic, consumers don’t want to linger in stores. Therefore, more purchases are of a pre-planned nature, and impulse buying has declined. People are now focusing more on value than price. The relationship between virtual and on- site consumption has also changed. Sales at brick-and-mortar stores and online stores have undergone tremendous changes. "How to integrate virtual and physical stores in a way that quickly responds to consumer needs is a key area for the future, and an area to which we are devoting significant attention,” Lee said.

"During the Level 3 alert in Taiwan, many distributors cut back on manpower. However, THL realized that the FMCG industry is a critical part of the supply chain for pandemic prevention and people’s daily necessities. Therefore, THL ramped up its manpower in terms of servicing retail stores, as well as within its warehousing and logistics operations. One key effort was to keep store shelves well stocked in order to reduce the risk of panic buying.”
~ Terence Chen, THL Group President

"Our THL team is very strong, and they don’t shy away from difficulties. Facing the pressures of the pandemic, our staff came through with flying colors. We know that more challenges lie ahead. We our dedicated to maintaining our fighting spirit and sense of responsibility, and we will become better and better as we work together!"
~ Allen Lee, THL Vice President of Sales & Marketing

"At the beginning of the pandemic, mass sales channels faced great pressure, and some manufacturers were even reluctant to open their doors. But we treated the pandemic as an enemy to be fought head on. We united our spirit and resources to become a big family. The company also played a major support role by providing items such as anti- pandemic supplies, food and bonuses to front-line colleagues. If our team members were having a difficult time, we let them know that they were not alone, and that they had the strong support of their brothers and sisters."
~ Nicole Zhou, THL Field Team Manager

"The pandemic has taught us how to keep our heads up and maintain a positive attitude despite the challenges of this new environment. In terms of the food service industry, we have learned how to become more flexible in response to change. My colleagues have worked very hard to learn from these experiences and develop new ideas. This will help us to become an even stronger company as we move forward!"
~ First Jan, THL Food Service Sales Director

"THL Food Service is working on many fronts to enhance our profile and communication capabilities, including a YouTube channel, Facebook platform and new social communities. We are devoting a lot of resources to education and training, including promoting new recipes, and offering classes. For example, we recently held an online seminar and competition related to blending Tangning Tea products. Just before the pandemic, we had begun working on a new online food service platform. The pandemic has demonstrated that we were on the right path, but that our efforts needed to be accelerated! In the past, we weren’t quite sure how to conduct online video-based activities, such as tea education and training. But with the pandemic, we are now moving forward very quickly in this area. Now we see the great potential in this area. Nothing is impossible, and online classes and other activities face much fewer restrictions in terms of venues, manpower and funding. Also, it’s much easier to have communication and sharing between different departments, which is a great way to generate new ideas."
~~ Zoe Liu, THL Food Service Trade Marketing Manager