As China’s economy transformed and developed it was evident that there was a new wave of consumers to take hold of by the chocolate giants, Hershey’s, Cadbury, Nestle, Mars, and Ferrero. This battle for market share was a new challenge for these companies because “There is no single path to business success there, however, the country is too big, too complex, and evolving too quickly for simple, ‘one size fits all’ business formulas”.[1]
China’s economic development has gone through three phases, experimental, critical-mass, and the break-away, each giving providing challenges and victories for the chocolate titans and business as whole. The experimental phase was marked by the curiosity of consumers who began having access to new goods and services. Moving into the critical-mass phase infrastructure was more effective and efficient, and more qualified employees were available. Break-away is where we saw “a tectonic shift in the mind-set of the Chinese people and how they view themselves and their nation’s place in the world”.[2]
“For the Big Five chocolate companies, the lack of brand awareness and established taste preferences in China was a golden opportunity to establish millions of potential customers,”.[3] In order to be the winner of this battle the companies had to understand a wide variety of traditions. “While China’s ethnic composition is fairly homogeneous, its culinary traditions are not”.[4] One key-factor tradition was the belief in Yin and Yang. As balance is the central idea of the tradition Chinese people tended to mainly eat chocolate in the summer months.[5]
Another tradition to make note of is the original Chinese perception that chocolate is a luxury item and therefore consumption was more justified when given as a gift. “Gift giving, therefore, because the cultural gateway for chocolate’ initial entry into China, and chocolate gifts from abroad had a decisive influence on how the Chinese established their initial impression of it”.[6] By the 1990s over half of the chocolate sales in China were for gift giving, compared to less than ten percent in other parts of the world.[7]
Though other factors should not be ignored, it was the geographical accessibility of chocolate that seemed to really make a difference. “When sizing up the opportunity in China, the key for the Big Five was identifying ‘geographically accessible’ consumers – those to whom the product could be marketed and sold with relative ease”.7 Even in large cities chocolate was still not accessible to most because of income and lack of air-conditioned retail spaces. In order to better focus their efforts company divided locations into three economic tiers based on location, income, and consumers familiarity to foreign goods.[8] Tier-one was the focus for companies as these were the most developed economically. Second-tier cities did not provide the same level of accessibility as first-tier cities, making it more difficult for the Big Five to sell their goods. The third-tier had even less accessibility, making the chocolate business very seasonal.
The battle for Chinese market share is currently led by Mars and Ferrero. Both companies made initial lasting impressions on the people of China. Mars was the company in which the “first generation of chocolate consumers” preferred in terms of taste.[9] Companies still have a lot of potential in the Chinese market, however since much of the population still does not have quick access to the delicious treat. China’s economic state is still rapidly changing and evolving, leaving the opportunity for growth and development seemingly endless as more people move up the economic ladder.
[1] Allen, Lawrence, Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China’s Consumers, (Saranac Lake: AMACOM, 2009),18
[2] Allen, Lawrence, Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China’s Consumers, (Saranac Lake: AMACOM, 2009),19
[3] Allen, Lawrence, Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China’s Consumers, (Saranac Lake: AMACOM, 2009),22
[4]Allen, Lawrence, Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China’s Consumers, (Saranac Lake: AMACOM, 2009),23
[5] Allen, Lawrence, Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China’s Consumers, (Saranac Lake: AMACOM, 2009),24
[6] Allen, Lawrence, Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China’s Consumers, (Saranac Lake: AMACOM, 2009),25
[7] Allen, Lawrence, Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China’s Consumers, (Saranac Lake: AMACOM, 2009),26
[8] Allen, Lawrence, Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China’s Consumers, (Saranac Lake: AMACOM, 2009),35
[9] Allen, Lawrence, Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China’s Consumers, (Saranac Lake: AMACOM, 2009),202
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