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CoCo Fresh Drinks 800 Outlets Worldwide in Three Years
2013.05.03
The orange and white CoCo Fresh Drinks sign has gone up in a thousand locations worldwide. The strength of its brand and personnel management is even enticing entrepreneurs in Singapore, South Korea and Russia.


Jonathan Lin saw that Taiwan's tea drinks had the potential to cross international barriers.
Three years ago, he left his old job with a foreign firm and joined CoCo.

 

"Give me a hundred people, and I'll put them to work right away," Jonathan Lin, the refined-looking 40 year-old president of CoCo International Co., says grandiosely.

It can be tough to catch up with Lin at CoCo International's Hougang St. offices in Taipei's Shilin District, given that he only spends about one week of every month in Taiwan.

In early November he had just returned from attending an exhibition in Singapore. While there, he gave presentations, accepted interviews and dealt with representatives of Singaporean, South Korean and Russian companies eager to meet with him to discuss bringing the CoCo brand to their home countries. Prior to that, he was in Macau at the invitation of the government there.

Starting with one store in Danshui 15 years ago, CoCo Fresh Drinks expanded rapidly. The hardest part has been finding staff to keep pace with the growing number of outlets, Lin says.

CoCo now ranks as the biggest tea-based beverage carryout chain brand in the Greater China area. The chain has grown to 800 outlets in China, with other locations scattered across the United States, Thailand, Hong Kong, Malaysia and Indonesia.

The orange and white CoCo Fresh Drinks sign has now gone up in a thousand locations worldwide.

Auf Wiedersehen Banking, Hello Pearl Milk Tea

A graduate of the Wharton School of Business in the United States, Lin speaks at a rapid cadence in clearly logical terms. He was once a regional vice president for Asia at Deutsche Bank, assisting in the initial public offerings for companies like alibaba.com and Little Sheep Mongolian Hot Pot. He soon found, however, that working for a foreign company, he would always bump up against a promotional ceiling.

Lin observed that Taiwan's hand-shaken tea beverage trade possessed key technologies and innovative capacity, as well as potential for high-speed growth with cross-cultural, international appeal.

So three years ago, Lin walked away from investment banking and joined CoCo International. At the time, CoCo had only been in the China market for a little over a year and had a global presence of just over 200 shops. Today, the number of CoCo shops is five times what it was then.

CoCo insists on world-class management operations for its seemingly simple hand-shaken tea beverage business.

To ensure strict quality control, the company has not opened franchising operations. That's because many franchisees may seek to cut costs by cutting corners on quality ingredients and employee benefits.

"They're really looking to operate a brand, not just reap a short-term windfall on franchising royalties," observes Dante Coffee vice president Roger Hsu.

In some markets, like Malaysia and Thailand, CoCo has entered into joint ventures with local entrepreneurs.

Even so, they still insist on either a majority shareholding or veto power on the board of directors. Additionally, company headquarters in Taiwan will dispatch personnel to serve in the subsidiary's middle management to ensure quality control.

 

In fact, CoCo not only shuns franchising, they also insist on keeping decision-making powers highly centralized.

Corporate headquarters in Taiwan handles the ingredients procurement for all 1,000 stores worldwide. Lin will personally fly to Japan, for example, for meetings with the head of the North American Blueberry Council to negotiate the prices on bulk orders of blueberries for the coming season.

The company has also built a solid supporting cast to assist those on the front lines. CoCo has set up R&D centers in Taiwan and China to handle adjustments to existing product lines and develop new products.

To make a decent cup of pearl milk tea, at CoCo's R&D centers a cadre of researchers with advanced graduate and post-graduate degrees in food science analyze the sunlight, rainfall, average temperature, average humidity and other factors across the various tea-growing regions during the previous growing season to determine whether tea from East Africa, Sri Lanka or elsewhere would be the most ideal crop to procure for the coming season.

Once the tea has been sourced, there remains the question of how it should be packaged and stored. Once it is received, how should it be reconstituted? At what temperature should it be steeped? These and other variables must all be addressed.

"If making tea drinks is such a simple thing, why do we need food science?" Lin asks with a flourish of the hands, implicitly deriding the commonly held belief among those not in the business that barriers to entry are low and that key characteristics of competitors can be easily replicated.

CoCo has a systematic process for developing new products and localizing them. Each season, a fixed 30 percent of CoCo's menu will be newly introduced products, and between 10 and 20 percent will be localized products.

In Taiwan, CoCo is offering three varieties of citrus-flavored beverages named after a popular soap opera character. In eastern China, popular flavors involve sweet fermented rice.

"They're unlike many Taiwanese food and beverage chains that are merely standardized, rather than systematized," says Lee Pei-fen, secretary-general of the Association of Service Industries Taiwan, who has recently toured CoCo's China regional headquarters. "CoCo presents a brand power one seldom sees."

CoCo also handles the human resources aspects of its business up to the standards of a global brand, overturning the perception of the service industry as a low-skilled, low-wage, no-future career choice.

Lin employs large numbers of graduates of leading universities. More than half of the executives at corporate headquarters are graduates of National Taiwan University or National Chiao Tung University. The rest are graduates of National Tsing Hua University and National Chengchi University. Many of them have previously studied abroad or worked for multinational corporations.

Educated Personnel a Managerial Asset

In China, CoCo employs a full-time five-member team of lawyers to help them combat trademark infringement.

"What we're gaining is managerial wealth," Lin says without hesitation. "These folks help me manage more efficiently."

Each quarter they conduct surveys of various food and beverage businesses to ensure that CoCo employee salaries are maintained at within the top 25 percent of the service industry.

Lin also personally writes the company's employee manuals and other learning materials and conducts classes. Employees take a written examination for promotion every six months in conjunction with a performance evaluation to compel advancement.

CoCo is not just exporting Taiwanese flavor and innovation, but a high potential international Taiwanese brand.

Translated from the Chinese by Brian Kennedy