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Quality key to upping Chinese chocolate consumption, says analyst

By Oliver Nieburg+

25-Oct-2013
Last updated on 28-Oct-2013 at 12:20 GMT

Canadean believes quality is key to increasing China appetite for chocolate
Canadean believes quality is key to increasing China appetite for chocolate

Premium international brands for China’s increasingly affluent population could be instrumental in raising low domestic chocolate consumption, according to market researchers Canadean.

At 1.2 kg per capita annually, the country’s chocolate consumption is among the lowest in the world and ranks someway behind other developing markets such as Brazil on 2.5 kg and Russia on 5.9 kg. But with a population of some 1.3bn people even a slight rise in chocolate eating could give confectioners a giant sales boost.

Hershey’s Lancaster centered on quality

Hershey's Lancaster brand for China

Ronan Stafford, report analyst for Canadean, told ConfectioneryNews:“Quality is a key issue in the Chinese Confectionery market. You can see this is the way that Hershey has  launched their Lancaster’s brand in China, targeting the increasing demand from middle-income consumers wanting to spend on treats such as chocolate.”

“They’ve done this through the use of the English-language name on the pack and silhouetted farm image, and the emphasis on the product’s creaminess and softness to show quality.”

Hershey launched its Lancaster brand in China in May this year in what it called the fastest growing confectionery segment in China: Premium milk candy.

“International brands are often perceived as being of a better quality than domestic ones, and this also extends to ingredients – as seen with Lancaster’s use of imported milk,” said Stafford.

Localized R&D

However, the analyst added that domestic brands were catching up further putting the pressure on multinationals to ramp up local R&D efforts.

“The development process used to launch the Lancaster’s brand in China shows how manufacturers are reaping the rewards of localized R&D in China.”

Earlier this year, Hershey opened a two-floor, 22,000 square-feet Asia Innovation Center in Shanghai to develop products catering to Chinese and Asian tastes.

Chocolate growth

Chocolate value sales in China amounted to $1.6bn in 2012, accounting for 13.6% of the confectionery market, behind sugar confectionery and gum.

Canadean forecasts chocolate will grow in value at a compound annual growth rate (CAGR) of 10.1% by 2017 and volume by 7.4% - a faster rate than value and volume growth in both sugar confectionery and gum

“In volume terms, Chocolate sales will overtake those of Gum in 2016. In value terms chocolate won’t overtake gum by 2017, when our forecasts end, but the speed at which it’s catching up means it’s only a matter of time until it does,” said Stafford.

Canadean growth forecasts

According to Canadean, convenience stores were the largest distribution channel for confectionery in China between 2009 and 2012, accounting for just under half of the entire market.

However, the channel’s overall share declined as Hypermarkets & Supermarkets, the second largest distribution channel for confectionery gained shares.

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