THL America Finds a Home in Seattle

"Costco's channel strategy is unique in the US and the world. The three major requirements for Costco are certification, volume and price. All three are indispensable." ~ Benny Tsai, US Business Director of THL America.

In 2019, THL USA entered Costco’s US channel by supplying Crispy Fries from Lian Hwa Foods and Puffs from I-Mei Foods. Its performance has grown year after year. On May 20, 2022, it was renamed THL America and was registered in the US with a headquarters in Seattle, Washington adjacent to Costco’s headquarters. This proximity helps THL obtain timely information on Costco’s channels, allowing for quick adjustments to market strategy.

As THL America was born, Benny Tsai joined the team in Seattle as the new US Business Director. This allows him to work with the Seattle team without worrying about different time zones. It also allows him to work closely with Costco and stay on top of market changes.

Prior to joining THL America, Benny worked with various CPG companies as Costco Account Manager for more than ten years, engaging business with Costco US and its global regions. He joined the THL America team to work with Costco on supplying Taiwanese brands, such as those of Lian Hwa and I-Mei. "These are foods that I’ve had since I was a child," Benny said, adding that he’s a big fan of these products.

Benny was born in Taiwan, and then moved to the US and completed his college education in the US. He’s fluent in both Chinese and English. This allows him to communicate easily with the team at Costco, as well as his colleagues in Taiwan. In addition, he has a deep understanding of both the American and Taiwanese cultures. This type of knowledge and background fits right in with THL America’s plans to expand its US presence.

Costco's channel strategy is unique in the US and in the world. Benny, who worked at Costco for many years, noted three key elements of selling through Costco: certification, capacity and pricing. All three are indispensable. Costco needs capable and qualified partners that can provide solid marketing strategies for their brands.

Before a product can go on a Costco shelf, it has to meet their sales volume requirements and receive third-party certification. "Costco has been operating for more than 40 years, and they’ve never had a major food safety issue. The company has very stringent controls that go beyond the market requirements,” noted Benny.

Certification not only relates to safety and hygiene in production, but also includes employee welfare issues, such as reasonable working hours and the appropriate age of employees. Both for the US and Taiwan, Costco’s requirements are higher than minimum levels set by government regulators.

After passing certification, the next steps are capacity and pricing. Costco focuses on large packaging, member discounts and product selection. Its model is one of thin margins and large volumes. Although its gross profit margins are often lower than its competitors, high volumes drive its strong profitability. Therefore, if a product’s capacity can’t meet Costco’s targets, it won’t be carried.

The Lian Hwa brand is very well known in Taiwan. The firm began with snacks, but have now expanded beyond this. THL America is the agent responsible for selling Lian Hwa’s Crispy Fries and through the Costco channel. The Crispy Fries line is enjoying stable growth. Michael Jiang, General Manager for Lian Hwa’s Snack Food Business Unit, was invited by Costco to the US to attend the annual Suppliers’Day event on September 21, 2022.

Costco's Suppliers’Day event is held once a year. Suppliers from around the world are invited, and annual reports and future prospects are presented. However, due to space limitations, not all suppliers can participate. Lian Hwa has grown in importance as a supplier, and as a result was one of the companies invited to participate in this year’s conference.

Benny joined with Lian Hwa on the trip, and led their delegation. He introduced Lian Hwa’s products, operations, and product placement strategies. This included evaluations of consumer taste trends and packaging design. He explained each area in detail, expanding the potential for new Taiwanese products to enter the US.

In recent years, the US market has increasingly focused on providing environmentally-friendly packaging that is less bulky. Benny noted that this not only helps the environment, but lighter packaging also helps reduce transportation costs, thus creating a win-win approach. The Taiwanese delegates to the conference also were able to learn a great deal about the US market.

THL America is now expanding beyond serving as an agent for other Taiwanese brands, and is developing its own brand called “Bao Buddy,” which is consistent with the spirit of THL. Wendy Yen, Managing Director at THL America, said that Bao Buddy focuses on Asian-style frozen buns. They are cooperating with the Chi Mei Frozen Food Company to produce vegetarian buns and sweet buns for the US market.

In recent years, Costco has been introducing increasing numbers of authentic foods from around the world. At the same time, American consumers are becoming more open to different tastes from different regions of the world. One example is General Tso's chicken. It appears that the current offerings from Asia aren’t keeping up with this growing appetite for international foods, and Bao Buddy is focused on meeting this area of rising demand with flavorings that include oyster mushroom, Sichuan pepper and black sesame.

At present, Bao Buddy has developed three types of plant- based meat buns and two types of sweet buns. These are undergoing market testing and are expected to be launched in the near future. Wendy noted that she hopes Bao Buddy's five new products will not only break new ground in the US market relative to classic Asian foods, such as dumplings, but will also serve to open up new opportunities in the area of frozen foods.

"Our goal is for frozen foods to account for 50% of our 2023 sales goal," Wendy said. Beyond steamed buns and frozen foods, they are looking to expand into seafood products in the US through Costco. Based on Benny’s previous experience with Costco, he sees considerable potential for seafood and frozen food products.

THL America, in addition to selling other brands into the US via Costco, is following in the THL spirit by beginning to develop its own brand called Bao Buddy." ~ Wendy Yen, Managing Director, THL America

THL America has business teams in the US and Taiwan. Despite a 15-hour time difference, they hold regular meetings every week. They focus on efficiency, but another issue is one of "more business than staff." Wendy said that THL is looking to further expand its US team. The new hires should have an understanding of Taiwanese culture while also being able to communicate well with Costco and have some background in Costco’s business.

Benny added that staff at the US team are in action as Costco’s consultants for Taiwanese brands. They not only have to anticipate US consumption trends, they also have to assist suppliers in meeting Costco’s requirements in the areas of certification, capacity and pricing.

THL America continues working to expand its US presence via Costco. In the future, it plans to cooperate with more Asian brands, benefitting from Costco’s unique channel advantages in the US. THL America’s vision is to introduce many new brands into the US market as it builds its presence there.