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A closer look at Chinese chocolate

January 18th, 2013

chocolate-3According to Euromonitor International, chocolate confectionery is set to grow by 13 per cent in current value terms in 2012. Although chocolate confectionery continued to perform strongly, per capita consumption was still far below the rates in developed markets. Consumption volume rates in coastal cities were much higher than in inland cities. Besides, seasonal consumption is a very significant factor in chocolate in China. Thus, gift packages were welcomed by consumers during some key holiday periods.

Overall retail volume growth in 2012 was slightly slower than the previous five years. Chocolate confectionery in developed cities is close to mature, while in lower-tier cities and rural areas it is hard for manufacturers to penetrate all retail channels and improve consumer acceptance.

Euromonitor International reports that countlines registered the highest current value growth in chocolate confectionery in the last five years. Leading brands, such as Nestlé Wafer, Kinder Country, and Oreo Wafer were welcomed by young consumers. Chocolate confectionery players positioned their products not only as an indulgence snack, but also as an option when consumers feel hungry. Many parents bought countlines for children instead of biscuits, because children tend to prefer their taste to that of traditional biscuits. According to trade sources, manufacturers produce countlines as they generate higher profit margins than other types of chocolate confectionery.

Chocolate faces competition

Chocolate confectionery faces competition from various packaged food types, including snack bars and biscuits. Some chocolate coated biscuits threatened sales of chocolate confectionery in 2012. For example, Kraft Oreo Wafer Rolls was a main competitor to countlines; as it has a similar taste and targets the same consumer groups. Snack bars also continued to compete with chocolate confectionery, especially countlines. Consumers who were concerned about health and nutrition often preferred snack bars, which have a healthier image than countlines.

Who dominates the market?

International manufacturers continued to dominate chocolate confectionery in China, with the top three companies projected to account for a 67 per cent share of retail value sales in 2012. The high entry barriers to chocolate confectionery made it difficult for small regional manufacturers to survive. At the same time, leading multinationals plan to penetrate lower-tier cities, which resulted in fierce competition between international and domestic brands.

Leading chocolate confectionery manufacturers always launch special packaging to coincide with certain holidays and occasions. Many Chinese consumers regard chocolate as a gift that conveys their love. Thus, Valentine’s Day provides a good occasion for manufacturers to launch new gift packaging. For example, in 2012 Godiva launched a gift box, with a toy bear inside. The toy bear holds a heart shaped box, with six chocolates. Godiva’s gift box retailed at €46, which is expensive for most Chinese consumers.

The future

Chocolate confectionery in China is predicted to grow by a six per cent constant value CAGR between 2012 and 2017. Although self consumption will remain the main growth driver, peak seasons will continue to coincide with holidays and festivals. Thus manufacturers will combine chocolate confectionery with add-on products in gift boxes to obtain higher profit margins during such periods.

As chocolate confectionery is close to saturation in developed cities, penetration in rural areas remains difficult. Thus, slower retail volume and value growth rates are expected by 2017, compared to the last five years. Besides, many parents do not encourage their children to eat chocolate in order to help prevent obesity. However, some chocolate confectionery companies are starting to educate consumers on the potential health benefits of consuming chocolate; for example, dark chocolate is perceived to improve the body’s antioxidant levels, which reduces the risk of heart disease.

More foreign super premium chocolate confectionery brands will open stores in China, encouraging consumers to enjoy their high-end services and upmarket shopping experience.

Source: Sweets and snacks europe

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