Functional Foods: TCI Leading the Trend

Walking into any drug store, one can see a huge array of health functional products on the shelves for skin whitening, slimming, fortifying the stomach and the bowels, and boosting the immune system. But not many customers know that a great deal of this assortment of capsules, lozenges, essences, health drinks and brews are produced by one Taiwanese manufacturer—TCI—who have just won the National Award for Outstanding Small and Medium Enterprises.

TCI chairman William Yang (left), as part of his philosophy of selfless management, has passed operating control over to a team of young professionals, enhancing creative input to the organization.

The name TCI tends to remain relatively unknown—often hidden behind better-known labels—but most consumers from mainland China, Taiwan and Hong Kong or countries in Southeast Asia would have experienced one or other of the ODM products created and manufactured by TCI.

For example, major food manufacturers such as Uni-President, Hey­­Song and VEDAN are clients of TCI. The company has created a number of products that have become very popular, including Hey­Song’s camellia green tea, said to help reduce weight, and Uni-President’s collagen drink containing royal jelly, advertised as being able to rapidly improve skin condition. TCI was involved in developing all these products.

In mainland China, TCI’s niche is its mature collagen product line. A search for “collagen” on Taobao.com, the mainland’s leading Internet trading platform, brings up over 100 pages of brands and products that TCI has been working with.

Even global cosmetics retail giant Sephora has recognized TCI’s capabilities, and commissioned the company to design and produce facial masks for the Sephora label. They were first sold in Sephora’s 140 branches in mainland China.

Their high-end facial masks—priced at RMB200 per box (about NT$970)—were launched on the mainland market less than a year ago, but sales have already exceeded 5 million units. This high demand has surprised everyone at the French headquarters of Sephora’s parent company, luxury goods conglomerate LVMH. They have asked TCI to redesign the packaging, and plan to make the product available in more than 1000 Sephora branches worldwide starting in the first quarter of 2014.

This marketing miracle has occurred simply because of the unique qualities of TCI’s bio-cellulose mask.

Deputy general manager and spokesman for TCI, William Liao, notes that most facial masks are made ​​of non-woven fabric combined with beauty lotion, but TCI’s bio-cellulose masks are made from coconut milk combined with a fibrous material, fermented with a special German culture. Then a special laser cutting technique is used to produce a thin facemask that fits the face perfectly.

This mask feels supple and hydrating. Its pores are far smaller than those of masks made from non-woven fabric, so it has excellent water retention qualities. “Non-woven fabric masks can stay on the face for no more than ten minutes, by which time they gradually dry out and peel off. Our bio-cellulose mask, on the other hand, will last for at least 25 to 30 minutes.” says Liao.

The bio-cellulose mask is an example of TCI’s outstanding R&D capabilities. While the company is respected and trusted today by global industry leaders, it got its start as an international trading company 30-plus years ago.

Everybody wants to achieve better health, to slow down aging and to become more beautiful! The growing demand for dietary supplements has contributed to a biotech boom.

The company was founded by current TCI chairman William Yang, now 70. Yang originally worked in international sales for Shin­kong Textile Corporation, and branched out on his own in 1980.

Catching a ride on Taiwan’s surging economic wave, Yang’s business boomed, selling products ranging from agricultural produce to flowers, building materials to automotive parts. He sold basically whatever his clients needed.

But after 2000, growing Internet use allowed almost unlimited flow of information between countries, gradually weakening the need for international traders to act as intermediaries. Yang had to think of viable business alternatives just to survive.

At that time, the Executive Yuan was launching the “Two Trillion and Twin Star Development Program,” which included the biotechnology industry. This incentive, plus Yang’s many years of observing business opportunities in functional foods in the US, Europe and Japan, inspired him to enter this new, largely unknown field—despite the fact that he had no experience with biotech.

TCI’s range of ODM functional foods is extremely diverse. It ­includes capsules, lozenges, facemasks, bottled drinks, and dietary ­supplement powders. The picture was taken at their ­manufacturing ­facility in the Agricultural Biotechnology Park, Pingtung County.

At the time, biotech was still quite a vague concept for most Taiwanese. “From top-brand drug manufacturers to street vendors selling skin care products, they all claimed to belong to the biotech industry,” says Yang.

In this uncertain market environment, TCI launched its first product: An­ke­liu capsules containing lactobacillus and catechin antioxidants to enhance the immune system.

Sadly, sales weren’t good and the company suffered a significant loss. From this painful experience, Yang recognized his lack of marketing skills, so he decided to focus on R&D.

“At the time, neither big pharmaceuticals makers nor the food industry were focusing research on dietary supplements. Many Taiwanese electronics companies operate as original design manufacturers [ODMs], but the concept was unknown in the biotech industry. This was our chance!” says Yang.

TCI’s functional food philosophy is to extract from natural ingredients nutrients and other components whose value has been verified by scientific research. Then the active ingredients are formed into capsules, lozenges, canned drinks, and soluble powders.

“This is a product aiming to provide nutritional intake that people don’t get from a regular diet.” TCI’s spokesman William Liao says that while medical science has been able to extend human life expectancy, many people suffer modern lifestyle diseases such as eating disorders and stress that often lead to obesity, insomnia, and hypertension. And the demand for dietary supplements is rising.

In the USA, Japan and Europe, where consumers have long been aware of the importance of preventive medicine and self-care, the markets for dietary supplements are well-developed. But in mainland China, Taiwan, Hong Kong and Southeast Asia, awareness of such matters came rather late. Waiting for the market to mature, TCI has spent six years investing in biotech R&D.

In 2008, when much of global industry was being hit by the financial tsunami, industries that stressed physical and spiritual healing were bucking the trend, and dietary supplements were one area to benefit. The market for dietary supplements in Taiwan for the first time reached NT$46 billion in that year, and soared to NT$76.2 billion in 2009. TCI as a pioneer of the dietary supplement industry saw its revenue double.

In recent years, demand for dietary supplements in East Asia has remained strong. In 2012, Taiwan’s market reached NT$100 billion and mainland China exceeded US$13.3 billion (about NT$393.5 billion). TCI also enjoyed revenue growth of 20–30% from the previous year.

Having been active in developing markets of the Greater China region and Southeast Asia, TCI’s stock has been listed on the Taiwan OTC exchange with estimates that its 2013 revenue will reach NT$1.5 billion.

TCI is proud of its strong emphasis on R&D. The company developed a health-boosting substance from peanut skins, winning a gold medal at the Geneva ­International Exhibition of Inventions.

The prospect for the functional food market is optimistic, but competition is becoming intense. The reason why TCI has been able to maintain its place in the lead lies in its R&D focus.

TCI currently runs four laboratories, seven product display centers, and manufacturing facilities in Wugu District, New Tai­pei City, Agricultural Biotechnology Park in Ping­tung County, and Shanghai in China. The company is capable of providing one-stop service from R&D to production, and in recent years, TCI has actively promoted its integrated bio­science design model to strengthen raw materials R&D, patent applications, and product efficacy validation.

Liao explains that the ingredients for most dietary supplements and skin care products on the market come largely from foreign companies, like collagens purchased from France and catechins from Japan. Only if a company can control its own raw material supply and processing will they be able to create products with significant added value.

In order to develop new materials which can win a dominant market position, for the past two years TCI has been working closely with National ­Chung ­Hsing University and ­Chang Gung University. Researchers are developing ingredients with specific efficacy from Taiwan-produced agricultural products and having them made ​​into dietary supplements.

Banana peels, for example, have yielded serotonin, which assists in promoting sleep and relieving stress; from peanut skins, they derived a substance that can serve as an inhibitor of carbo­hydrate metabolism; from young green jujubes, they extracted an ingredient that can help to repair liver cells. These research results have won awards from the Geneva International Exhibition of Inventions in Switzerland, and the Invention & New Product Exposition in Pittsburgh, USA.

As for issues of food safety and product efficacy, both major concerns for consumers, TCI has set up an ISO 17025 laboratory to test all their products. Products must pass 100-odd tests before leaving the factory, including analysis for microorganisms, preservatives, heavy metals and pesticide residue. In addition, TCI has recently commissioned a number of hospitals to recruit volunteers for product trials, thus providing customers with credible reference data.

It is worth mentioning that TCI is one of a small number of Taiwanese enterprises that don’t adhere to family succession. William Yang, an active Christian, believes in the philosophy of “selfless management,” and has generously granted operational control to a young team composed of biotech, agricultural and biomedical professionals. Currently, the average age of employees is about 31 to 32 years; even key senior management positions are filled by people under 40.

TCI has always been generous enough to provide opportunities for young talent, and is willing to invest deeply in R&D for the benefit of all. Perhaps it is these key factors that allow TCI to keep pace with this rapidly expanding market!