East Meets West: Late 20th Century Competition for the Chinese Chocolate Market Among the Big Five

Globalization has created unique challenges for modern marketing, as companies must adapt to the completely different tastes and cultures of other civilizations. This is evident in the “East Meets West” culture clash, as Western companies navigate Eastern culture in order to market their Western products, especially apparent in the history of the global market for chocolate. Although the treat is extremely popular among consumers in the United States and United Kingdom, chocolate has been historically absent from the palate of Chinese peoples. However, after the overhaul of the Chinese economy from communism to market socialism in the mid-20th century, China began to open its economy to Western corporations in the 1980s.[1] This created the potential for one of the “Big Five” chocolate companies to capture the market and dominate Chinese chocolate consumption for generations to come. Despite competition from Cadbury, Hershey, Nestle, and Ferrero Rocher, Mars ultimately emerged as the champion of China’s chocolate market amidst the other companies’ failures due to its superior understanding of and total dedication to the Chinese consumer, demonstrated by Mars’s marketing of chocolate as an exotic delicacy and prized gift.

Chocolate was essentially a novel item in China, so the Big Five began competing for the palates of potential Chinese chocolate consumers in the early 1980s.[2] Because chocolate was essentially a luxury during at this time, a typical Chinese consumer justified their expense by giving chocolate as a gift.[3] Ferrero Rocher capitalized on this cultural perception. By keeping prices high and importing products to China through an independent distribution partner, Ferrero Rocher captured the gift-giving niche of the Chinese chocolate market. The golden, foil-wrapped, and elaborate containers successfully presented Ferrero Rocher’s chocolate as expensive, foreign, and luxurious.

Ferrero Rocher Chinese

Fig. 1. Ferrero Rocher Chocolate – Chinese New Year 2012 (http://www.scratchmarketing.com/ferrero-rocher-campaign-concept/)

Despite Ferrero Rocher’s success, the other four companies attempted to create and capitalize upon a sector of the chocolate market brand-new to China: the individual consumer.[4] By establishing a relationship with a new Chinese generation, one of these four companies could create a bond between Chinese citizens and chocolate lasting for generations.

The other three companies had difficulties with the Chinese chocolate market that Mars successfully navigated to become the winner. Cadbury began with the goal of selling one milk chocolate bar to every Chinese citizen. However, Cadbury failed to consider how hard it would be to get a regular supply of milk in China, as the Chinese are not avid milk drinkers. Unfortunately, Cadbury had to partner with a substandard milk supplier, leading to cheesy chocolate that did not at all appeal to Chinese consumers.[5] Next, although Hershey was initially successful with its bite-sized Hershey’s Kisses, bad management changes led to the 2004 collapse of Hershey’s Chinese organization. Within two years, this effectively eliminated the Chinese supply of Kisses. Hershey never recovered.[6] Finally, although Nestle aimed to use its reputation for producing safe and nutritious products to market their famous Kit Kat bar, their projections for Chinese demand were terribly wrong. In order to compensate for their lost costs, Nestle began using a cheap substitute for cocoa butter, lowering the quality of the chocolate bar. Chinese consumers noticed the change and would not buy the new Kit Kat bar, driving Nestle’s sales significantly behind those of the rest of the Big Five.[7]

Unlike the other companies, Mars succeeded by intensely focusing on both the culture surrounding Chinese chocolate consumption and the appetites of Chinese consumers. Mars became the first of the Big Five to build a chocolate plant in China in 1993 to market Dove Chocolate.[8] Dove was Mars’s high-end brand chocolate that captured both chocolate’s luxury for gift-givers and its superior taste for the individual consumer. By producing high-quality Dove chocolate, marketed as a mysterious and exotic luxury, Mars demonstrated a distinguished knowledge of and dedication to Chinese consumers. Mars spent more on advertising than the rest of the Big Five, and its chocolate has genuinely been consistently higher quality than that of its competitors.[9] The following commercial demonstrates Mars’s understanding of the gift-giving culture surrounding chocolate, as Chinese chocolate consumers rally Mars to support one man’s incredible present to his girlfriend on a lovers’ day. (https://www.youtube.com/watch?v=x9Yq-ASSc78)

By 2004, Mars had control of China’s retail chocolate market, dominating with a 39% share of the whole.[10] Current estimates put Mars’s share of China’s chocolate market at about 43.3%, as of 2013 (http://www.shanghaijungle.com/news/Chinas-Chocolate-Market-Dominated-by-Foreign-Brands). Mars’s continued preeminence in China stems directly from their capture of the Chinese chocolate market at the end of the 20th century. Although the other members of the Big Five continue to compete, Dove comfortably enjoys a place as the high-end and highly desired chocolate of choice among this first generation of Chinese consumers.

 

Works Cited

Allen, Lawrence. Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China’s Consumers.

“The Bitter and the Sweet: How Five Companies Competed to Bring Chocolate to China – Knowledge@Wharton.” KnowledgeWharton The Bitter and the Sweet How Five Companies Competed to Bring Chocolate to China Comments. Accessed March 22, 2015.

“China’s Chocolate Market Dominated by Foreign Brands.” China’s Chocolate Market Dominated by Foreign Brands. http://www.shanghaijungle.com/news/Chinas-Chocolate-Market-Dominated-by-Foreign-Brands. Accessed March 22, 2015.

“Dove Chocolate’s Chinese Valentine’s Day campaign.” YouTube video, 2:50. Posted by “Kestrel Lee,” January 9, 2012. https://www.youtube.com/watch?v=x9Yq-ASSc78. Accessed March 22, 2015.

Fig. 1. Ferrero Rocher – Chinese New Year Campaign Concept. Digital Image. Available from: http://www.scratchmarketing.com/ferrero-rocher-campaign-concept/. Accessed March 22, 2015.

[1] Lawrence L. Allen, Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China’s Consumers, 2.

[2] Allen, 24.

[3] Allen, 24-25.

[4] Wharton, n.p.

[5] Wharton, n.p.

[6] Allen, 202; Wharton, n.p.

[7] Wharton, n.p.

[8] Allen, 202; Wharton, n.p.

[9] Wharton, n.p.

[10] Wharton, n.p.

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