18.01.2018

In China, chocolate is transforming from a premium product for special occasions into an everyday foodstuff. How can global chocolate brands jump this bandwagon?

Recently, my wife and looked back on 2017 and noticed that we were invited to seven weddings, of friends, family members and colleagues. On each one of these weddings, we received a gift from the newlyweds: a little box of chocolates in an elegant, often red package. This sweet gift has been a tradition on Chinese weddings for a long time and is also called “Happiness Candy” (Xi Tang喜糖). It is an expression of the newlyweds‘ gratitude towards their wedding guests and their wish that everyone attending the wedding will continue enjoying the happiness and “sweetness” of that day for a long time. “Happiness Candy” is also given away on other occasions in China, not only weddings.

How chocolate came to China

“Happiness Candy” is based on a century-old tradition. For a long time, people used hard candy or jelly fruits as Happiness Candy. Yet, in the last two decades, it has become more and more popular to wrap chocolate in the red packages. Nevertheless, it has taken a long time for chocolate to proliferate in China. The first-time chocolate was imported to the country was in 1705. According to the “First Historical Archives of China”, a papal envoy brought the first 50 pieces of chocolate to China to present them to Emperor Kangxi as a gift. Reportedly, this exotic treat was highly appreciated by the Emperor and his court. Yet, this was far from leading to a country-wide proliferation of chocolate. On the contrary: Chocolate remained virtually unknown in all of China almost for another 200 years. Until about 30 years ago, the majority of Chinese had little to no opportunity to try chocolate. Only in the 1990’s, when more and more western products entered the Chinese market, did chocolate become increasingly known to the people.

The “sweet 90’s” open the market to western players

Back then, Mars, Ferrero, Nestlé and Hershey started tapping the promising Chinese market. Now these four players look back on nearly three decades of harsh competition for Chinese market shares. And indeed, they managed to conquer no less than three quarters of the Chinese chocolate market. Mars, known for sub-brands like Dove, M&M and Snickers, is leading the market with a share of nearly 40 percent. Ferrero holds a market share of about 18 percent with Ferrero Rocher and Kinder, followed by Nestlé and Hershey with market shares of approximately 10 and 9 percent, respectively (source). Chocolate consumption in China is recording two-digit annual growth rates (source), although the total sales volume is comparatively low (2016: 18.4 billion RMB, approx. 2.35 billion Euros). The average per-capita consumption of chocolate of just 200 grams per year is still far away from the quantities consumed on average in Europe (5.77 kilos) or by German and Swiss sweet teeth (8.4 and 8.8 kilos, respectively, source).

Chocolate in China: a premium product that makes an excellent gift 

The comparatively small amount of chocolate we consume in no way means that many of us don’t like chocolate. It rather points at the fact that for the Chinese, chocolate is something special, a luxury product which has not yet arrived in the sphere of everyday consumption. The international chocolate brands positioned themselves accordingly when they first came to China. For example, Ferrero was the first representative of the global chocolate industry in China and has conveyed a premium image from the very beginning: The brand chose not to produce in China and has imported every piece of Ferrero chocolate from Italy, packed it in Hongkong and then distributed it in mainland China. Ferrero has always attached great importance to the quality of its chocolate even after its delivery and has applied its own quality standards to transport, storage and exclusive points of sale, apart from taking special action in the field of logistics. With these measures, Ferrero made sure that only fresh products of impeccable quality were sold in China. And we must admit that the brand has succeeded. There have never been any scandals or concerns about the quality of Rocher or Kinder.

Many occasions for chocolate-sweet treats in everyday life

With its strategy of a premium positioning, Ferrero created all the necessary requirements to turn its products quickly into popular gifts. You must know that the Chinese need little gifts for numerous traditional occasions, especially in the context of the calendrical and the Chinese New Year. This is when people exchange New Year’s greetings together with little treats. Little gifts are also presented to teachers, supervisors, parents-in-law, ill people or when you visit people at their homes, and people bring souvenirs from travels abroad. Besides, more and more couples celebrate Valentine’s Day, and chocolate is the ideal gift for this occasion, too. When it comes to giving away presents, it is always important to us that the person receiving them recognizes that they are of high quality, have a certain material value and that they match the occasion in terms of what they symbolize. For us, a very original and individual gift is not so important. We prefer choosing well-known premium brands the receiver of the gift knows, so he or she can adequately appraise our generosity.

Premium appeal caters to cultural background

With the opening of the country towards the west, the interest in products from Europe and America has increased enormously in recent years. This is why when it comes to gifts, giving away imported products almost automatically became en vogue. The golden Ferrero Rocher balls ideally met the requirements of a good gift: high quality, well-known brand and an exquisite packaging which, on top of all that, is considered to promise good luck in our culture thanks to its round shape and golden color. From any point of view, Ferrero Rocher is a product which represents perfection and wealth and is thus the perfect New Year’s gift. Of course, Lindor balls are also very popular for this purpose. They, too, meet all of the Chinese gift givers’ desires in terms of appearance and taste. Since 2010, another premium chocolate brand has established itself on the Chinese market: Godiva. According to China Daily, Godiva has opened more than 55 exclusive brand stores in 16 Chinese cities in only five years. All stores are designed in a luxurious style reminiscent of a jeweler’s shop and turn Godiva chocolate into a symbol of premium chocolate culture for many Chinese. Andy Farrow, managing director of Godiva Asia Pacific, confirmed that the customers buy Godiva mainly as gifts, not only at home in China, but also when they travel. Many of my compatriots buy Godiva souvenirs at the airport when they come back to China from Europe, the USA or Japan.

The slow way to everyday chocolate consumption 

Apart from the culture of giving away chocolate as a gift, we can increasingly observe a culture of eating chocolate. In this regard, chocolate is similar to coffee or wine. Until 20 years ago, these two products were hardly known in China and only entered the country when it opened towards the west in the 1990’s. As is the case with chocolate, the great attractiveness of wine and coffee was that they had to be imported and were something special. This has changed a bit in the meantime and we can observe that these products are becoming more everyday items in a certain way. It is especially coffee which is hardly seen as a gift anymore, but as an ordinary beverage (even though we still drink significantly more tea than coffee). Wine is still a luxury product, but it is not only given away as a gift anymore, but also consumed at home as a little indulgence. This is the direction chocolate is now gradually heading in as well: Besides the typical gift chocolates Ferrero and Godiva, more and more global chocolate brands are aiming at convincing Chinese consumers to eat chocolate as an everyday and leisure snack.

Prices and marketing: the key to mainstream success

Mars has fared well in this area. Lawrence L. Allen, former CEO of Nestlé and Hershey, has dedicated seven years of his work to the introduction of chocolate in China and described this in his book “Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China's Consumers”. According to his descriptions, an important step towards making chocolate consumption a part of everyday life was to lower the prices and change the marketing strategy. In contrast to Ferrero, Mars and Hershey opened their own production plants in China, which allowed them to offer prices which are still high, but definitely acceptable according to Chinese standards (source). Meanwhile, the brand Dove has become one of the most popular chocolate snack labels among the Chinese. Not only because it is affordable, but also because advertising and taste match perfectly.  As far as the latter is concerned, it is important to us that the chocolate is not too bitter and we don’t feel any bits of cacao in our mouths. Other ingredients like nuts are not as popular here either. We prefer creamy milk chocolate. Chocolate is supposed to feel “silky” and “smooth” (Chinese: 丝滑) in the mouth. Yes, we really call it like that: chocolate like silk. This is where the large silk cloth in the Dove ad comes from. With this imagery and the slogan “Outright Enjoyment of Smoothness”, Dove has finally managed to evoke a feeling of indulgence and a certain elegance among Chinese consumers when they allow themselves a piece of Dove chocolate in their everyday lives.

Trends and future perspectives: less sugar, wider distribution

As in other countries, consumers in China are becoming more and more health-conscious, especially segments of society with a western orientation and high purchasing power. In their perception, chocolate means “high sugar content” and “unhealthy”. According to Fortune Magazine (https://fortune.com/2015/05/21/the-war-on-big-food/), Mars has invested 200 million USD in the development of sugar substitutes. The result is a reduction of calories of M&M / Malteser by 200 and of Snickers / Twix by 100. It remains to be seen how successful these offers will be in China. Yet, the great issue regarding the Chinese chocolate market is a wider distribution. In this respect, chocolate is similar to other Chinese snacks like nuts or roasted seeds. It is worthwhile to take a look at innovative sales channels of some local Chinese snack manufacturers: For example, Three Squirrels (a pure online supplier, founded only five years ago) has achieved annual sales of 5.5 billion RMB (about 700 million EUR) in 2016. On Singles Day (11/11) alone, the most important shopping day in the Chinese year, the company generated 500 million RMB (source).

In order to surf this wave of success, global chocolate brands must use the digital world in China. It is not only necessary to develop a strategy for offline distribution, but also an integrated offline-online strategy. His implies online stores on the leading Chinese e-commerce platforms Tmall.com or Jindong.com, without which a successful marketing of everyday products in China in the years to come is not imaginable anymore.