China insights report: Chocolate opportunities
China chocolate sales have more than doubled over the past decade, and are lined up to be the country’s fastest-growing confectionary sector through at least 2016.
Between 2006 and 2010, chocolate sales jumped by 50%. But China is unlike other developing countries is the largest, and hungriest evolving nation.
As one Shanghai-based supermarket buyer has observed, “Only 10 years ago, undisputed conventional wisdom was that Chinese did not drink coffee, eat chocolate or cheese. Today, these and most other ‘truisms’ are rapidly becoming obsolete.” The observation neatly captures the sheer pace of change in Chinese consumer preferences, and the market’s growing acceptance of Western flavors.
China’s chocolate market is still largely untapped. The Asia-Pacific region houses more than half of the world’s population, but currently accounts for barely more than 10% of global chocolate consumption. The average person in China still only consumes about 0.2 kilograms (7 ounces) of chocolate per person in 2014, compared with 2.2 kg (4.85 pounds) in the United States or less than 5% of what the average Western European consumers enjoy (data from Euromonitor International). One thing is likely: that huge gap won’t last for long.
Chocolate sales in China should grow to $4.3 billion by 2020, up nearly 60 percent from $2.7 billion in 2014 and driven by demand from the growing urban population.
Cadbury’s and Oreos subtle changes in reducing the sweetness of products, to cater to Chinese taste and palates subsequently meant an increase in overall sales. The notion that Western chocolate is often perceived as being too sweet for Chinese tastes was reinforced by feedback received from Chinese consumers. However, this does not mean that Western chocolate manufacturers must alter the formulation of their product to succeed in China’s premium chocolate market. Indeed, sweet chocolate truffles are now readily available in China’s international supermarkets, including offerings from brands already well-established in the market, with strong levels of market distribution (e.g. Cote D’Or).
The large number of different truffle products suggests that Chinese consumers, particularly the younger generation, are now willing to accept sweeter chocolates than previously. This may be indicative of Chinese consumers’ willingness to try new products, and it suggests that launching new or innovative products (particularly those with a premium association, such as truffles) can be a highly effective means of entering a crowded product category in China, regardless of traditional notions of Chinese taste preferences.
Manufacturers should ensure their country of origin is made clear on their packaging to avoid confusion.
Dark chocolate remains the most popular chocolate sold in the Chinese market, both because it is less sweet and is perceived to be healthier than other types of chocolate. Feedback from white-collar Chinese consumers in the 25-35-year-old bracket pointed to a strong preference for foreign chocolate brands, particularly dark chocolate. Dark chocolate in China often contains a higher proportion of cocoa, as favored by many Chinese.
In-market research conducted shows that when Chinese consumers buy chocolate, taste is the single most important driver. Around 70% of China chocolate market is dominated by European companies. Leading players are all global brands as Chinese tend to trust international brands in their quality and safety assurance and avoid domestic chocolate brands due to mistrust towards national brands.
Western brands in China
- Hersheys, Dove, Ferrero Rocher, Mars, M&Ms, Kinder • Lindt, Cadbury, Cote D’Or, Belgian, Villars, Valor, Hachez, Rausch, Choc Stars, Ritter Sport
- Divine, Chocolate and Love, Especially for You, Vanini, Willie’s Cacao, Jubileu
Opportunities, current information on product selection in China:
|Product||Retailer||Manufacturer||Origin||Serving Size||Price (Rmb)|
|Freeze dry mango chocolate||7-Eleven||Bonz||Singapore||90g||29.90|
|Milk chocolate block latte||BHG||Vanini||Italy||100g||42.90|
|Seashells chocolate||Jenny Wang||Tresore Dore||China||336g||68.80|
|French truffles with seasalt and butterscotch||BLT||Monty Bojangles||UK||200g||88.00|
|Cocoa mint bar||City Shop||Nakd||UK||35g||19.80|
Other aspects of packaging and flavours
Attractive packaging can play an important role in encouraging the overall development of a strong brand in China in a highly competitive product category. One leading distributor of premium chocolates and other imported foods claimed his company selected products ranges based primarily on the attractiveness of the product’s packaging (health benefits, natural ingredients and taste were important, but secondary, concerns).
Distributor has been able to connect with their target demographic by advertising in leading fashion magazines such as Vogue, online and using in-house designers to create promotional images that reinforced the premium positioning of their products.
Snack sized premium chocolates are now available at many Chinese convenience stores, as well as some international supermarkets.
Multinationals with extensive experience in the Chinese market such as Mars, Ferrero, Dove have enjoyed success in China with their premium fruit covered chocolates, which are well suited to Chinese palates. Popular flavours include cranberry, blueberry and pomegranate.
Some niche flavours in the premium chocolates category include butterscotch truffle, chocolate with toffee, sea salt, and coconut to name a few.
Existing promotional marketing
Large multinational chocolate manufacturers promote aggressively in all supermarket retail formats in China – particularly in hypermarkets, where they have large displays presenting a range of packaging formats and flavours.
Most premium supermarkets in China feature some form of in-store promotional display for chocolate brands – both multinational and premium niche manufacturers.
Promotions staff were observed in two hypermarkets who offered customers product samples and provided information on product features. There were also a number of 2-for-1 offers and gift packs featuring different brands (e.g. Toblerone packaged with Cote D’Or chocolates).
Trends and more opportunities
China is now a market with great innovation for flavour, packaging and expenditure model.
Western Europe enjoys very strong regional brand recognition for premium chocolate in China – particularly in the block category – and competing in this category without a clear point of differentiation would be difficult.
As one buyer at a premium international supermarket claimed, “Australian chocolate is in the top tier for price in China, but only the 2nd or 3rd tier for taste”. Regardless of whether this is true or not, it is a common perception in China, and one that Australian chocolate manufacturers may need to overcome. Greater opportunities may lie in premium chocolate bars, and innovative chocolate products that use combinations of premium or healthy ingredients. This may include combinations of chocolate and fruit, macadamia nuts, coconut, rice based chocolate snacks and biscuits, truffles and sugar-free (stevia) options. Manufacturers may also consider innovative packaging and targeting China’s gift giving culture.
European confectionary makers specialising in hand crafted chocolates, have also paved the way for a new form of consumption and innovation for high quality premium fresh chocolates. For example; young Chinese consumers tend to purchase specially delicately packed chocolates which have become a trend to show their love to their girlfriends.
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