Hershey and Mars lose China market share to Nestlé and Ferrero

By Douglas Yu contact

- Last updated on GMT

Mondelēz, Nestlé and Ferrero are gaining share in China's challenged confectionery market.  Photo: ©iStock/celafon
Mondelēz, Nestlé and Ferrero are gaining share in China's challenged confectionery market. Photo: ©iStock/celafon
Hershey and Mars have lost market share in China's declining confectionery category to Nestlé and Ferrero, according to Euromonitor Shanghai.

Overall confectionery sales in China plunged from RMB 109,030m ($15.8bn) in 2014 to RMB 105,443m ($15.3bn) in 2015, and continued to decline by the end of 2016, it said.

Macroeconomic challenges and changing shopper behavior are to blame

Market shares for Hershey, Mars and domestic candy firm Want Want Holdings, declined 0.08, 0.64 and 0.06 percentage points respectively during the 2015-to-2016 period in China. Mars’ several key brands, including Wrigley’s, Galaxy Dove, and M&M’s, have also experienced share shrinkage.

Euromonitor suggested Mondelēz, Nestlé and Ferrero outperformed Hershey and Mars with market share increasing by around 2%, 4.5% and 4.7% respectively during the same period. However, the data showed Mondelēz’s Stride gum brand saw a 0.01% market share decline.

Some global confectioners have blamed macroeconomic challenges and changing consumer shopping behavior in China for challenged sales in the market according to our previous reports. 

In Q4 2016, China chocolate category retail sales declined about 4% year-on-year, the same rate as the second and third quarter declines, according to Hershey’s most recent Q4 and full-year 2016 results.

In response to slower economic growth, Mondelēz previously suggested​ multinational companies should reposition themselves in China last year to maintain lower-city consumer base and focus on the upper middle class as main business strategies.

Chinese sugar market

The challenged Chinese confectionery market coincided with higher domestic sugar prices - which are now starting to fall.

Market intelligence firm CCM said, in 2016, China’s sugar market experienced a rebound from the sluggish trend in 2015, with almost “seamless”​ growth until December.

“During the last year, the planting area of sugarcane did decrease. This causes a higher purchase cost for the sugar producers, due to shorter supply.”

“Additionally, some heavy rain during that time also reduced the quality of sugarcane, increasing the cost of sugar manufacturing once more. This led to rising sugar prices throughout the year,” ​CCM said.

Hershey declined to comment whether its products sold in China are made with sugar purchased from the country, nor about the correlation between sugar price and its sales performance.

But the company did acknowledge during the Q4 results conference that it expected a “slow start to the year”​ in the Chinese market, as international macroeconomic challenges persist.

Will confectionery sales be saved as sugar price falls?

Chinese trade body, China Candy, told ConfectioneryNews it did not believe the sugar price fluctuation has a significant impact on those candy firms’ sales value.

In the beginning of 2017, CCM reported, China’s sugar price has started falling mainly due to an enlarging planting area for sugar production in the most important provinces and a beneficial climate.

CCM also estimated the nationwide sugar output in the country will rise about 800,000 metric tons, yet it warned China’s domestic policies, including a likely tariff increase on imported sugar, might only make the current price fall temporary.

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