Sat, Jul 31, 2004 page11

• Small coffee chains on the rise

  TASTING THE FUTURE As the younger generation trades its tea cups for coffee mugs, small coffee shop franchises have become highly lucrative

  • By Tina Yuan / Contributing Reporter
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  Coffee may be one of the things many Taiwanese people associate Western culture and lifestyle.

  But for Wu Meng-tsung (吳孟聰), a cup of filtered coffee is not just about Western tastes, it is his livelihood.

  "People like my coffee," said Wu, owner of a small coffee shop on Fushing South Road in Taipei.

  

  Small coffee shops in Taiwan have gained popularity over the past two years, as they offer a cheap cup of coffee for the consumer on the move.

  PHOTO: GEORGE TSORNG, TAIPEI TIMES

  Wu quit his civil engineering job last year after his employer delayed paying him for two months.

  After thorough consideration and market research, the 42-year-old Wu decided to become his own boss by embracing the fast-growing coffee franchise business, capitalizing on the trend that increasingly characterizes the younger generation is preference for sipping coffee instead of drinking tea.

  A year and a half ago, Wu joined E-Coffee (壹咖啡), an express-style chain where customers can purchase a cup of coffee on the go. His shop was only the chain's fourth franchise.

  With an initial investment of NT$800,000 in royalties to the company -- a package deal that included training, equipment, materials and furnishing -- Wu appears confident of his down-to-earth skills in making coffee and hopes to see business boom in a market where many of his rivals enjoy hefty profits.

  Indeed, small coffee shop owners like Wu who work six days a week and sell enough coffee can move more than 200 cups a day and rake in roughly NT$360,000 per month after a couple of months in business.

  The nation's imports of raw and roasted coffee beans had increased 547 percent to 6,427 tonnes last year from 1996, according to statistics provided by the non-profit Taiwan Coffee Association (台灣咖啡協會), which promotes coffee in this country.

  On average, people in Taiwan consumed about 80 cups of coffee per person last year -- compared to 300 cups in Japan and 500 cups in the US and Europe, according to the association.

  "The domestic coffee market is far from being saturated," Sam Yen (顏文山), president of E-Coffee, told the Taipei Times in a phone interview earlier this week.

  Last year, E-Coffee reported NT$70 million in sales and the 263-outlet chain is targeting NT$90 million in sales this year, Yen added.

  What keeps the two-year-old chain as successful as it has been is its straight-forward advertising slogan: "Who says 35 bucks can't afford a nice cup of coffee?"

  Although the chain's major appeal is low priced coffee with a delivery service, Yen said a not insignificant number of coffee drinkers prefer a place to go and relax in a comfortable atmosphere.

  "For take-out customers, it makes no difference whether the cup of coffee is from Starbucks," confirmed Wu, "but for people who prefer a better atmosphere -- they would go to Starbucks."

  But the chain is not totally inferior on this front. E-Coffee has five in Taiwan and two in China.

  As the booming success of small coffee chains like E-Coffee arouses more interest in coffee, more choice for the consumer means it may be difficult to develop customer loyalty.

  Further, the nation's express store chains are also facing looming competition from larger firms such as the President Chain Store Corp's (統一超商) 7-Eleven chain, as the latter is considering entering the NT$25 filtered coffee market.

  "We have been testing the waters for two months selling the freshly-brewed coffee at some of our outlets," said Lillian Lin (林立莉), public relations manager for President.

  "We will continue to watch this market closely before making any decision on launching this new service," she said.

  With the possibility of more competition in mind, Yen said he intends to broaden E-Coffee's business scope by opening more spacious cafes and providing meals and a cozy atmosphere for its customers.

  "Our low price is only temporary enticement, and it's natural for consumers to demand higher quality," said Yen.

  "It is time to develop another product line to meet customers' expectations."

  The retailer has done just that, developing a new frappe in various flavors, aiming to carve a slice out of the Starbucks Frappuccino market.

  In the face of aggressive market expansion by local coffee chains and corner cafes, Starbucks acknowledged that these small chains actually play a crucial role in cultivating the overall coffee market.

  "We don't feel threatened by small-scale coffee franchises because customers' needs are different," said Wu Chen-cheng (吳珍政), a public relations official with President Coffee Corp (統一星巴克), the firm in charge of Seattle-based Starbucks operations in Taiwan.

  "Starbucks makes as exquisite coffee at a middle-level price," she said.

  Starbucks is currently the largest coffee chain business in Taiwan with 120 sit-down cafe outlets; followed by Dante's (丹堤) with 87 stores; and Kohikan's (客喜康) with 68, according to Taiwan Coffee Association statistics.

  Even so, small espresso chains take advantage of close interaction between owners and their customers, said another coffee shop owner surnamed Fung.

  "Big brand chains are distant from their customers, but we are the reverse," said Fung, an owner of Black Coffee (黑咖啡) near National Taiwan University. "We memorize our regular customers' preferences so they don't even need to tell me what they want."

  Surrounded by big name competition such as Starbucks and Dante, Wu didn't seem to be worried, saying that as long as his coffee was of a hight quality, customers would remain loyal.

  "If there was really anything burning me out, it would be too many customers at a time asking for take-out or delivery," Wu said.

  "But to look on the bright side, it is also a compliment to my business," he added.
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