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This summer, swept by a Morinaga Milk Caramel tidal wave, Taiwan has been infused with the sweet, rich aroma of caramel and milk.

In late June, fast food industry kingpin McDonald’s put a twist on its popular McFlurry ice cream, mixing in milk caramel syrup over the milk ice cream and combining it with crispy crackers. Even the cup it comes in was given the classic Morinaga packaging treatment.

Milk Candy Dominates Taiwan’s Summer Days

At around the same time, the packaging of bread and baked goods, cakes, crepes, and Dorayaki at leading supermarket brand PX Mart took on an entirely new look, emblazoned in gold and brown. Having become a hot topic across cyberspace over the last two years with its super high-value desserts, PX Mart launched nine new offerings costing under NT$100, as part of a cooperative arrangement with none other than Morinaga.

Even the iced milk tea the clerk at a 7-11 City Cafe hands me is packaged in the fresh gold checkered design characteristic of Morinaga. Sipping through a straw festooned with little angel’s wings, that distinctive rich Morinaga candy sweetness is unmistakable.

From fast food restaurants to supermarkets and convenience stores, Morinaga partnerships are all over the place, prompting members of the public to marvel snarkily, “Morinaga Milk Caramel sure has been busy!” Aside from going viral on Instagram, more sales are surely in the cards - even before the limited sales offer expires.

“Morinaga Milk Caramel McFlurry set the sales record for a single day at a single store, averaging 100 servings a day,” exclaims Kou Pi-ju, vice president of integrated marketing at McDonald’s. For its part, PX Mart sold NT$30 million worth of desserts in less than 20 days. (Read: PX Mart Opens 1000th Store - What’s the Scoop on “Brick and Mortar E-commerce?”)

Morinaga Caramel Milk Tea, which has sold over 40 million servings across Taiwan at 7-Eleven outlets, has been relaunched again this year with new packaging, emerging with tremendous potential that cannot be overlooked.

Liu Hung-wei, executive vice president of the PX Mart Welfare Center, observes that previous marketing partnerships have typically been initiated by sales outlets, with brands hopping aboard, but “Morinaga Milk Caramel took the opposite approach, integrating sales channels with the brand, demonstrating considerable ambition.”

“At the time we signed the partnership agreement, we didn’t plan to limit the duration of sales,” explains Tomokazu Tsukamoto [塚本知一], general manager of Morinaga Taiwan, in his first interview.

Tomokazu Tsukamoto, general manager of Morinaga Taiwan, approached sales channel partnerships from the brand’s perspective, gaining fans and making this summer fragrant with the rich aroma of caramel. (Photo by Chien-Tong Wang/CW)

At first, Tsukamoto’s idea was to partner with McDonald’s on the McFlurry during the hot summer months, and then work with PX Mart to develop desserts when the weather cooled in the fall. Normally, consumers can see Morinaga co-branded products during two seasons of the year, “but who would have guessed that selling them simultaneously during the summer would give a huge jolt to consumers,” relates the 54-year-old Tsukamoto, nodding with satisfaction.

He also made sure to make it clear that McDonald’s and PX Mart’s partner is Morinaga Taiwan, while Uni-President’s co-branding partner is Morinaga’s Japanese mother company. Morinaga Taiwan was established with 55 percent funding from Morinaga Japan. The Morinaga Milk Caramel it sells has been slightly reformulated to suit Taiwanese tastes, and is not identical to that which is sold in Japan.

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Reminding Consumers Under New Circumstances

Morinaga Taiwan has operated for 58 years, yet this marks the first occasion upon which it has introduced co-branded products with other partners. Could the company have reached an operational bottleneck?

“No. Last year’s revenue of NT$930 million showed 12 percent growth over the previous year,” stressed Tsukamoto. In fact, sales were not the true objective of cooperative efforts; rather, “We wanted to remind Taiwanese consumers of their love for Morinaga Milk Caramel.”

Sitting in the old-style reception room of the company’s combined office and plant facility in Beitou, the sound of machines working is barely perceivable. Evidently, behind Morinaga Taiwan’s aggressive co-branding maneuvers to join up with two major retailers is an old brand intent on finding new life.

Morinaga Taiwan discovered through market survey statistics that consumer ratings had become increasingly negative in recent years, such as flavors being too sweet, or that younger women’s purchasing zeal had waned.

The 58-year-old brand put its hope for revitalization in partnering with different sales channels to introduce frozen foods and desserts to make Morinaga visible to young consumers in all sorts of situations to experience anew the delightful flavor of milk caramel.

“Morinaga wants to get escape the fate of being placed on the candy and cookie shelves,” notes Tsukamoto. Morinaga’s milk caramel candy had already been available on PX Mart’s shelves in cartons, but now it can also be seen in the frozen and baked goods sections. Adds Tsukamoto, “One’s mood and thinking change under different purchasing scenarios.”

Photo by Chien-Tong Wang/CW

In that case, instead of developing new items on one’s own, why not find someone to partner with? Tsukamoto’s reasoning is simple: Ally with formidable partners and borrow some of their momentum.

He readily admits that Morinaga Taiwan’s facilities are not equipped to produce a diverse assortment of desserts unless they use a contract manufacturer. That way, however, they would be unable to set Morinaga’s products apart from other new products. So instead of going that route, they opted to look for the right vendors to bring each side’s strengths into play, achieving synergy with their brand assets.

Tsukamoto is most focused on quality over the course of co-branding efforts. “It has to be tasty,” he stresses repeatedly.

Unlike recent co-branding efforts by snack and beverage makers, under which the manufacturer attempted to guess the tastes of their target audience, Tsukamoto insists on providing the company’s own caramel raw materials. He also demands that any products developed by cooperative partners be handed over to Morinaga for taste tests.

“If the quality of co-branded goods slips, if the standards go down, it will damage Morinaga’s brand image,” relates an uncompromising Tsukamoto, displaying the seemingly innate circumspection of the Japanese, as well as careful nurturing derived from a lifetime of faith in brands.

This cross-channel co-branding plan also thrust unprecedented challenges upon Morinaga Taiwan just as it is undergoing a changing of the guard.

The idea to join forces with other brands was first proposed by a team of young staff members led by company vice president Pan Hsin-yen, whose father is none other than current company president Pan Ming-che. The younger Pan was a practicing medical doctor until last year, when he joined Morinaga Taiwan and prepared for the succession. Having gotten to know McDonald’s executives while studying in National Taiwan University’s EMBA program, the relationship helped expedite the co-branding arrangement.

The largest force of resistance to co-branding initiatives came from skeptical senior staff members, who voiced concerns such as “Co-branding is just for the time being; it’s uncertain that it can continue for very long. So is it really necessary to purchase raw material packaging machines?”

Tsukamoto ultimately decided to make the purchase. “Previously, Morinaga Taiwan was used to following the path paved by the older generation, but the younger generations must dare to try new things and be equipped to resolve issues when they arise, as that’s how skills are accumulated and honed.” The more he reveals, the more Tsukamoto’s intent to use co-branding to cultivate the new generation’s growth becomes evident.

New Business Providing Raw Materials

The co-branding initiatives’ initial success attracted numerous other businesses eager to discuss cooperation. This inadvertently spurred Morinaga Taiwan, which had always faced consumers directly, to forge new business opportunities supplying raw materials.

“In the future, maybe we can provide raw materials to bakeries on a regular basis to produce milk caramel flavored bread,” relates an expectant Tsukamoto.

In the effort to capitalize on the success of the McDonald’s McFlurry co-branding, Tsukamoto, who led frozen goods at Morinaga Japan for 27 years, formulated a milk candy-flavored popsicle to sell for under NT$50. Currently it is being offered for sale exclusively at convenient stores, with plans next year to roll it out at supermarkets and hypermarts.

Although efforts to win new customers have not yet achieved unmistakeable results, Tsukamoto could never even have dreamed that new initiatives to partner with two major established sales channels would serve as a turning point for the old brand. This lesson has caused Tsukamoto to conclude, “Don’t wait until performance starts going downhill to start thinking about changing.”

Translated by David Toman

Edited by TC Lin, Sharon Tseng