Lee Linthicum, head of food research at Euromonitor, told ConfectioneryNews.com that the spread of consumer wealth in China had stimulated growth in the chocolate market which led the segment to outstrip sugar confectionery growth in 2011.
According to Euromonitor data, chocolate retail value sales for 2011 were up 9% last year to €1.1bn. Meanwhile, the larger and long-established sugar confectionery category had grown just 5% to €4.6bn.
Linthicum’s comments came off the back of a Euromonitor’s International's Chocolate Confectionery in China report which gives detailed forecasts on how the Chinese confectionery market is set to change over the next five years.
Shift to chocolate
Euromonitor value the Chinese confectionery market in 2011 at €7.6bn. The market has grown €6m on last year and a staggering €1.5bn since 2008, a growth of around 20%.
Linthicum said: “A lot of this is volume led growth as consumer incomes improve. The exciting thing is that as consumers get more money they are making the move to chocolate. ”
He said that the shift from sugar confectionery to chocolate was common of emerging markets but added that: “China by sheer size is going to be the most important and significant example of this.”
He said that there had not been a strong tradition of eating chocolate in China, but as a result of globalisation and exposure to Western influences, chocolate had become more attractive in the Chinese market.
The biggest players in the Chinese chocolate market are large multinationals and there is little room for domestic competition.
Mars has the edge over its rivals with the largest market share at 40%, up 7% since 2006. The second biggest player is Nestle with a 11% stake, followed by Ferrero on 9%.
The only significant domestic competition comes from COFCO who have a 5% market share which has fallen in recent years as foreign companies have stepped up investment in the emerging market.
Linthicum also said that few people want domestic chocolate and prefer ‘trendier’ Western brands.
Deficient intellectual property laws
However, Linthicum explained that confectioners had erred on the side of caution when it came establishing production plants in China due to a culture of protectionism.
“There is a lot of red tape to opening facilities in China and also a lack of intellectual property laws.”
He said that Danone had felt the brunt of the absence of legal discourse following a failed partnership with Chinese beverage firm Wahaha, which fell apart after Danone accused Wahaha of illegally setting up parallel businesses outside their ventures.
He said he would not be surprised if recently established production sites in India from Kraft and Ferrero were chosen strategically to tap into the Chinese market without building facilities on its soil.