The company said it sees “enormous potential” for the growth of the chocolate category in China, where consumption is low even by emerging market standards.
Chocolate consumption in China remains at 100 g per capita, compared to 7.8 Kg in the UK, 5.1 kg in Russia, 4.4 kg in the US and 1.6 kg in Brazil, according to Euromonitor International.
Chief growth officer of Mondelēz, Tim Cofer, said launching into an emerging market could accelerate the growth of Mondelēz’s core categories and power brands.
The Milka brand will be available in Mondelēz’s regular distribution networks, including modern trade and e-commerce, with a “slightly-above-the-average” price in China, according to the company.
Customized Milka recipe for Chinese consumers
Stephen Maher, president of Mondelēz China, said, “We've been operating in China for over 30 years so we know this market and what it takes to launch a business here. In 2012, we entered the gum category in China for the first time and have now built this into a $200 million business.”
Maher added that the strength of Milka brand, combined with a customized recipe for Chinese consumers gives Mondelēz confidence that it will be successful with chocolate in China.
In a Mondelēz market survey, local Chinese consumers said that they were looking for “a quick-melting, long-lasting chocolate with the rich taste of cocoa and milk,” according the company’s spokesperson, Valerie Moens.
“So we’ve developed a Milka recipe that perfectly fits Chinese preference. Milka will keep its signature flavor and tender texture well known in Europe adjusted to fit the preferences of Chinese consumers.”
Along with Milka brand, Mondelēz’s over a dozen core products, and special editions designed for seasonal occasions will be available around the same time as well.
The decision of launching Milka in China came shortly before Mondelēz announcing its Q2 results. The company reported a 1.5% increase in organic net revenue during the quarter.
White space expansion
China’s chocolate market is worth $2.8bn with good growth potential, according to Euromonitor. Historically, the category growth has been double digits, even though it has softened over the past year or so due to macro environmental factors, including slower GDP growth.
Mondelēz decided not to share any forward-looking targets of the Chinese market for competitive reasons, said Moens.
“White space expansion remains an important part of our growth playbook and, as the world’s second-largest economy, China is an attractive long-term opportunity,” she said.
Mondelēz’s brought its belVita biscuit to the country in October last year. It also recently partnered with China’s Alibaba to target a $1bn global e-commerce goal, as well as devoting 65% of its total digital budget to mobile by working with top domestic apps, such as Wechat and Weibo.
Ahead of Chinese New year
Mondelēz CEO Irene Rosenfeld said of the Milka launch: "While chocolate in China has recently been challenged, we believe we're well positioned to succeed.
"Our plans have been presented to customers and we'll enter the market in the next few weeks, well before the critical Chinese New Year season."
The brand will be produced at a Mondelēz factory in Suzhou, China.
"...Obviously, e-commerce is an important channel for us in China, and our partnership with Alibaba is a critical piece of our launch plan," said Rosenfeld.