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China's taste for chocolate
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Life is sweet for people who work in the confectionery industry.

Now it can be even sweeter in China, where market potential and a better understanding of confectionery culture is leading to a new bonanza of sweets and chocolates.

"Chinese people in the past only considered chocolate as something with a sweet taste and brown color," said Elvin Ho, Asian Pacific regional sales and marketing director of Barry Callebaut, the world's biggest chocolate maker.

"Now they are beginning to realize that chocolate can represent more than just snacks and fashionable assortments."

Lured by growing market demand, Barry Callebaut opened its first Chinese plant in Suzhou, Jiangshu Province in east China and moved its Asian headquarters from Singapore to China in January to focus its development on the world's fastest growing consumer market.

High-end market

Sales of China's chocolate and confectionery boomed over the past five years after a handful of western brands began entering the country in the 1980s. Major brands such as Mars, Hershey's and Cadbury have snapped up the high-end market in China.

"The maturing chocolate culture has prompted Chinese consumers to begin asking for a greater variety of premier products," said Jason Foo, business development director of Aslst Chocolate, a Singapore-based manufacturer.

"The coming five to 10 years will see steady growth of chocolate consumption in China. High-end chocolates are expected to see the fastest growth in the next few years, which is also in line with the global trend," Foo added.

The chocolate supplier entered the Chinese market three years ago, and Foo said China sales had grown to account for 10 percent of its total. He is confident market demand can increase four times within two years.

China's chocolate consumption is increasing 10 to 15 percent a year as living standards rise and there's a growing acceptance of Western styles, compared with 1 to 2 percent in Europe, according to Sinomonitor International.

Low consumption

A report from Euromonitor showed the value of sales of chocolate confectionery grew 11 percent to reach 6,456 million yuan (US$944) last year.

But China's current per capita chocolate consumption is very low at about 100 grams a person, compared with more than 10 kilograms in Europe. Even in Japan and South Korea, the figure is close to 2kg.

Although this low consumption figure leaves plenty of room for business growth in China, most manufacturers say it takes time for local companies and consumers to catch up with the global trend.

Milk chocolate is still the favorite flavor with Chinese consumers, accounting for 38 percent of value sales of chocolates in 2007, a survey from Euromonitor International said. The study also found that in some developed regions of China, such as in the east, sophisticated customers were more likely to choose dark chocolate as it had an image of being healthier.

Chocolates are also becoming more popular among Chinese consumers, accounting for 24 percent of total value sales in 2007. Of all the chocolate fillings, nuts are the most popular.

Domestic players find themselves struggling against intensified competition from foreign rivals.

Four players, Mars, Cadbury, Nestle and Ferrero, controlled 41.3 percent of the China market in 2006, according to Euromonitor International.

Local competitors such as Golden Monkey and Leconte were still finding it hard to set up a premier brand recognition among Chinese consumers and adopted cheaper compounds to secure price competitiveness.

"Local chocolate makers could not compete with their foreign counterparts in terms of advanced technology, research and development and high-quality raw materials. They are reluctant to make investment due to the lack of sufficient knowledge," Foo said,

Higher prices of global players also scare away Chinese customers, who do not have the purchasing power of their Western counterparts.

There is still room for growth in second-tier cities dominated by these lower-end products.

Ho said all segments would see steady growth in the coming years and local companies should be stronger in marketing and brand-building.

"They must create different products such as the traditional green tea flavor to attract customers and compete with international rivals."

Major potential

It's the same situation for sweet makers. One of those companies trying to encourage China to find its sweet tooth is America's Jelly Belly Candy Co.

The company's international business Vice President Sharon Duncan said Jelly Belly plans to use its new Thailand operation to supply the Asian market.

The factory, set to have beans rolling off its production line before the end of the year, is expected to produce 2.27 million kilos of beans a year, with China targeted as a major source of potential growth.

Duncan said the company has focused on grassroots distribution, holding a number of tastings for distributors and members of the public and have positioned the product in high visibility retail in premium retailers.

They distribute to 600 different locations, mainly in and around the cities of Shanghai, Beijing and Guangzhou.

The tastings have proven a vital source of information, according to Duncan.

Jelly Belly is developing new flavors for the Chinese market with a green tea and red bean flavored jelly bean testing well.

"In the United States each American eats 37 of our beans a person each year, in China this is less than one but it is early days and we aim to change that," he said.

(Shanghai Daily September 16, 2008)

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