Tesco turns to in-house branding

UK-based retail giant Tesco Stores Co Taiwan (特易購) decided to boost its in-house branded products, saying consumers have demonstrated a high degree of interest in their quality and price.

"Although [current] sales of our own-branded items only account for some 3 percent of [Tesco Taiwan's] total turnover, we expect that figure to reach 5 percent by year's end and 10 percent in next three years," said David Orchard-Smith, CEO of Tesco Taiwan.

He added that, in the UK, Tesco offers thousands of in-house branded items and about half of the company's total turnover comes from the sale of these items.

Entering Taiwan in 2000, Tesco currently has outlets in Taoyuan and Tainan, with a 100 percent share in and management control over its Taiwanese subsidiary.

Banking on in-house branded products to create profits, Tesco has initiated partnerships with several local manufacturers to develop a new product line, dubbed "Made in Taiwan" items. It entered one such arrangement with Uni-President Enterprises Corp (統一企業) on July 12.

So far, about 30 products -- mostly groceries and toiletries -- such as dumplings, rice, bottled water and tissue paper, are now in the "Made in Taiwan" category, with prices about 40 percent lower than other brands on the market.

"By year's end, we plan to add another 30 Made-in Taiwan items," Orchard-Smith added.

Currently, Tesco sell more than 600 imported Tesco brand groceries and toiletries, said Sophia Chung, (鍾舜華), commercial department buying manager at Tesco Taiwan. In addition to coffee, tea, spaghetti, sauce, toothpaste and shampoo and other items, the company will add newly-imported beer, such as value lager, wheat beer and bitter beer to its shelves next week, Chung added.

Meanwhile, a market professional said Tesco is on the right track, as in-house branded products always have higher profit margins.

"By linking up with local manufacturers for production, in-house branded products have a lower cost and, therefore, higher margins," said Fiona Wang (王彤芳), marketing manager at RT-Mart (大潤發), a Taiwanese-French hypermarket venture.

Establishing its first outlet in 1997 through the Taiwan-based Ruentex Group (潤泰集團), RT-Mart current operates 20 hypermarts. Last February, France's third-largest hypermart, Auchan SA, bought 67 percent of RT-Mart.

Currently, merely 2 to 3 percent of items displayed in RT-Mart are in-house branded, and the company aims to gradually increase the number to 10 percent by cooperating with local manufacturers as well as importing Auchan brand groceries.

Another French retailer, Carrefour Corp Taiwan (家樂福), said in-house brands have increased sales significantly.

"We are the first hypermart in Taiwan producing in-house branded items ... as early as 1997," said Lily Lee (李莉莉), public relations manager at Carrefour Taiwan, adding that Carrefour's over 900 in-house branded items generated about 15 percent of the firm's total sales last year.

In addition to groceries and toiletries, Carrefour Taiwan also offers in-house branded clothing, sporting equipment and small home appliances.

Promoting in-house branded products is a method commonly employed in bad economic times.

"For the first half of this year, sales at our Tainan outlet declined between 5 to 10 percent over the same period last year," said Raymond Tsui (崔彥家), store operation manager at Tesco Taiwan.