Uni-President Enterprises(2?@) and Japan's Kikkoman, the world's largest soy sauce manufacturer, yesterday unveiled plans for an US$11 million soy sauce factory in China, but industry watchers said the venture faces a harsh battle ahead.
Uni-President and Kikkoman will each own a 50 percent stake in the new enterprise. The two firms set up President Kikkoman in Taiwan a decade ago to make and sell soy sauce to local consumers. Today, the joint company has the third largest share of the domestic market after Kimlan Food (
"Kikkoman has very advanced soy sauce brewing technology, while Uni-President's knowledge of the China market can help Kikkoman expand markets overseas," a Uni-President executive said.
The companies' new venture will be based on the same relationship the two have pursued together in Taiwan.
As soy sauce demand in Japan has been drying up, Kikkoman -- which holds a 30 percent share of its home country's US$2 billion market -- has been expanding overseas, hoping to turn things around. The company now has factories in the US, Singapore, and Holland.
"The overseas operation could be the key to the company's future," a Kikkoman officer told foreign media.
The Uni-President executive said that the two firms have been talking about a joint venture over the past three years. "We are carefully making an assessment of the China market," he said.
When asked how the new venture will compete with other manufacturers based in China, the executive responded, "We are still talking with our partner about our strategy."
The new factory will begin selling soy sauce in 2001. According to Kikkoman, it will generate annual sales of ?200 million in the first year and ?1 billion within a decade.
According to Uni-President, China's soy sauce market is around 10 billion yuan.
However, industry insiders are not optimistic about the new venture's short-term prospects.
"Taiwan manufacturers are having a difficult time running soy sauce businesses there. All of them are losing money in China," said an officer from a local food manufacturer, which also owns a soy sauce factory in China.
According to local manufacturers who operate China-based factories, soy sauce there is "chemically made," extremely low in quality and cheap, while Taiwan manufacturers produce a soy sauce that is high quality and "naturally brewed."
"I do not think most China consumers can afford to buy high-quality soy sauce yet. It will probably take another five to 10 years for them to accept it," an official from Kimlan Food said, adding that his company already has a soy sauce factory in China.
An officer from another local soy sauce company expressed similar skepticism about the China market.
"I am not sure it is a good time to enter the market because the demand for high-quality soy sauce is really very small in China now," he said.
"Well-known multinational companies such as Uni-President and Kikkoman are very unlikely to produce very low-quality products because it will affect their images."
He further noted that it is difficult for Taiwan manufacturers who are accustomed to producing high-quality soy sauce to switch to low-quality sauce.
"It is hard for us to move down to the low-end market after producing high-end products for years," he said.
However, Uni-President is determined to push ahead with its plans, even though it has has lost NT$1 billion from its other investments in China already.
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