As he became more and more involved in the decision-making of his family business in the late 90s, Terence Chen could see the writing on the wall. He realized the business model that had made Taiwan Hsin Lin Enterprise (THL) so successful was ultimately not sustainable.
"I didn’t think a company that only buys and sells would have a lot of value going forward," he recalls. He explained his line of thinking to his father, Founder and Group Chairman David Chen.
"I said, ‘We have to think about different ways of adding value’."
We take care of our people in a number of ways. It is so important for our ongoing success amid the labor shortage.
The younger Chen understood that THL needed to be more than a distributor. He’s proud to say that over the past two decades, he has orchestrated a transformation of the company.
"We’ve gone from a trading company to a full-service omnichannel, omnibrand and value-added distributor," he explains.
"This means that we’re not simply buy and sell. For instance, we represent a lot of brands in a way that is more than simply distribution.
"With brands like McCormick, Ovaltine or Tabasco, we actually manufacture the product in Taiwan under licensing. So that’s one way you increase your value in the value chain."
A strategic overhaul
To reach this milestone, Chen knew the company needed to offer other services that would entice brands entering the local market to enlist the services of a distributor, rather than doing it themselves.
"We identified services such as merchandising, account management and logistics," he says. "We needed to be able to cut down the cost for our clients and deliver efficiencies in the value chain."
The second part of Chen’s strategy was to invest heavily in joint ventures and subsidiaries. His view was that he would be able to retain and motivate his workforce by offering them ownership in the enterprise through shares in the subsidiaries.
"When we talk about the commercial side of the business, the most valuable part is the people," he stresses.
"A lot of companies talk about that, but do they structure themselves in a way that allows their people to participate in the ownership and the profit and loss management of the company? I think that is fundamental.
"If you say your people are the most important part of your business but they have no participation, they have no ownership, then it’s just a slogan.
"So since I took over, I rapidly increased our employee ownership, and I would say maybe 80 percent of our staff now have shares in our subsidiaries."
This has also been key to attracting top global talent, coupled with the allure of partnering with high-profile companies.
"We started a joint venture with Campari called Spiritus about one-and-a-half years ago. I’m currently the Chairman of the company, and from THL’s side, we gave about 20 percent of our shares to team members," Chen says.
If you say your people are the most important part of your business but they have no participation, they have no ownership, then it’s just a slogan.
Through this joint venture, THL was also able to recruit former Diageo Taiwan General Manager Allen Wang, whose business was worth about US$500 million at the time.
"We convinced him to join a startup maybe one-twentieth the size of Diageo," he says. "It was only possible because of the heavy ownership proposal we put forward."
THL’s omnichannel portfolio now spans groceries, pet food, personal care, liquor and much more.
It boasts internationally recognized brands like Twinings and Ovaltine, Campbell’s, Barilla, Haribo, Nature Valley and Energizer, while also partnering strongly with McCormick China.
When Chen joined the company in 2000, the revenue of THL was about US$15 million for the year. Last year, the Group closed at about US$550 million, he says proudly.
"We are currently the number one FMCG [fast-moving consumer goods] distributor in terms of brand, in terms of revenue and in terms of reputation," he claims.
A positive company culture is key to this stability and growth, he explains. Particularly when one of the major challenges he has identified is a worsening labor-shortage in an aging Taiwan.
"We have between 500 and 600 employees, and of that, myself, my father and brother are the only family members. Not my wife, none of my cousins, no aunties or uncles, just the three family members," he says.
"Why? I don’t want people to come into the company feeling entitled, like they are princes and princesses. In fact, I stopped some of my cousins from joining. My father was not happy."
Despite all this growth, Chen believes it’s important to take a balanced approach. He is speaking with The CEO Magazine from the United States; having lived there previously for 14 years, he spends a few months every year vacationing there with his family.
He encourages his team to take time away from the office, too. The only thing he asks is that they are reachable at any time of the day, as of course he is.
"We take care of our people in a number of ways. It is so important for our ongoing success amid the labor shortage," he says.
Along with the talent shortage, the other impact Chen sees is the current move toward AI. "I think AI is a big challenge. I think it’s a really disruptive force in our industry," he reflects.
"When I go back to Taiwan later this month, I have asked some of my general managers and HR team to let me know what their views on AI are, and how we can leverage it to further cut costs and become more efficient.
We want to take on more brands and increase the business of our current brands.
"While we are ahead of our competitors right now, if we don’t leverage AI, then we’re going to lose out."
In the immediate future though, THL will continue to add value to everything it currently offers. "We want to take on more brands and increase the business of our current brands," he replies.
"We want to continue to make our current partners happy through rapid growth, and then by bringing in new brands we can then leverage our infrastructure costs, and lower the costs of our logistics, IT and overheads."
Expanding its omnichannel approach is another area of focus, as is building deeper and more meaningful connections with its brand partners.
"It’s not a flashy business," Chen says. "As with anything we do, it’s about creating value."