In Roald Dahl’s Charlie and the Chocolate Factory an Indian prince orders that a palace be built from Willy Wonka’s wondrous confectionary. An updated version of the children’s classic – rather than the 1960s original – might instead cast a Chinese tycoon as the buyer.
In 2010 a World Chocolate Wonderland opened in Beijing, for instance, exhibiting artworks and artefacts – including 500 life-size Terracotta warriors – made from 80 tonnes of chocolate. China’s chocolate market was in the middle of a decade-long run of double digit growth (see WiC55). But it has since cooled off.
According to Beijing Business News, chocolate sales have fallen for the last two years. Hershey’s, the largest chocolate producer in the United States, saw its China sales decline 4% last year, and 2016 was similarly unpalatable for two other leading brands: Dove (owned by Mars) and Ferrero (from Italy).
Spending by consumers “is not where we thought it would be. As a result, many categories were sluggish, including chocolate,” admitted Michele Buck, Hershey’s chief operating officer, of its most recent results.
Caijing magazine says some of the loss of China’s sweet tooth is a result of the rise in health consciousness among consumers: “In the eyes of many Chinese people, chocolate is essentially a byword for ‘high-calorie’, ‘high-sugar’ and ‘unhealthy’. The fear is if you eat a lot you could become fat.”
But Caijing also links the slowdown in sales to another problem in China: fake or poor quality products. It argues that real chocolate – with cocoa content 20% and above – can actually be healthy in small amounts, but says that the Chinese market is littered with low-grade items that substitute palm and vegetable oil for cocoa, making them cheaper but less wholesome.
Research conducted by Mintel suggests that Chinese consumers “do not understand the health benefits of dark chocolate” and so they are failing to differentiate between healthier and unhealthy options.
Instead consumers concentrate more on price as a determiner of quality, and the market focus has switched to high-end chocolatiers, especially those with their own retail presence such as Godiva.
“In the modern chocolate market, superior and high-end chocolate products are the new engine. Without the rapid acceleration of these two categories, it would definitely be hard to find vitality in the chocolate industry,” an unnamed insider told Caijing.
As a result the front runners in China’s chocolate economy – brands like Dove – are beginning to focus on the premium market, the newspaper says. This focus on more expensive chocolate recognises the decline in sales from supermarkets (14% fewer customers last year, according to Caijing magazine). Online sales – another feature of the Chinese market – have been more robust. “In mainland China close to 20% of chocolate is bought online, whereas in America, England, France and other areas, this figure is less than 5%,” says Hanna Makarenkova, head of Mondelez China’s chocolate division.
(Last year’s study from Mintel suggested that two-thirds of consumers prefer to buy online from established brands, and almost half are prepared to pay a premium for brands from countries like Switzerland and Belgium.)
Another dynamic in the foreign brands favour, as Tim Cofer, Mondelez’s chief growth officer, told the Financial Times, is the longer term potential of the Chinese market. “The notion of indulgence and pleasure, such as chocolate, ice cream, cookies, is underdeveloped in broader snacking in China, but is one that is poised for significant growth… Chinese consumers continue to seek out chocolate as a way to treat themselves and also as an expression of thanks and gifts.”
Mondelez made its move into China last September, launching its Milka brand as a higher-end product at “slightly above” local prices.
Meanwhile with Euromonitor reporting Chinese per capita consumption of chocolate of just 200g a year – very low compared to the hefty 7kg scoffed in Europe – there is certainly room for the market to grow.
As for Milka, maybe its use of pure Alpine milk – the milk is imported from Europe, but the bars are made locally – will appeal to more health-conscious consumers.
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