Lotte Confectionary – Creation of Chocolate based holidays in East Asian Markets

 

Lotte is a huge conglomerate based in Japan/South Korea that has easily dominated the East Asian market for mass produced chocolate (Yonhap news). They are equivalent to Hershey’s in the states and recently solidified their global standing in the chocolate market by partnering with Hershey’s to dominate the chocolate market in China (Reuters). They are not only a company that produces chocolates, but many other chocolate related products in Asia along with being a conglomerate that has ventures in hospitality, technology and e-commerce.

Initially they began their marketing of chocolate in Japan, with what is called Ghana Chocolate.

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The name was derived from the source of their chocolate manufactures, they were marketed with “extra cacao for the extra rich taste” and with an “authentic” twist, as they were sourced directly from Africa. But much like their global competitor Hershey’s, they do not follow the recent model of “fair source” or “fair trade” chocolate. Unlike many of the local chocolatiers, they are anything but transparent in how their chocolate is sourced and conceived. Because they are a huge conglomerate, and because of lack of competition through artisanal and locally sourced chocolate in Asia, they feel no pressure to publicly release their sources and the treatment of the workers of their chocolate sources.

So why is this such a big deal? We’re familiar with the idea of bigger corporations buying out and hiding such information from us. When companies hide information from us in this day and age, more and more, we instead choose to make more educated choices when it comes to our purchasing of chocolate and spreading awareness. However, to understand why Lotte feels no pressure despite the spread of awareness and information to change, we have to go back a bit to understand the backstory of Lotte Corporation and a bit of Asian culture and history.

White Day, Black Day & Pepero Day

November 11 is just another day here in America. So is March 14 and April 14th. The only real “holiday” that America associates with chocolate is Valentine’s Day (February 14th). So why is it that the chocolate markets in Asia see such a huge increase in consumption and sales of chocolate during these seemingly random days?

In East Asia, particularly China, Japan and South Korea, being a “couple” is the trendy state to be. Rather than embrace your independence, many things in East Asia are catered towards couples and pairs. So, why is this important? This is because Lotte Confectionary has monopolized this mindset and effectively marketed various “holidays” and traditions that cater to this.

Aside from Valentines Day, East Asian cultures also celebrate what has been marketed to be “White Day” (March 14th) ,“Black Day” (April 14th) and Pepero Day (November 11th). In their culture, Valentines Day isn’t just a day for couples to exchange chocolate, but it is a day for women to gift different types of chocolate to various men in their life. There are 3 different types of chocolate that are sold and catered just for this day: Friendly Chocolate, Premium Chocolate and Hand-Made Chocolate. Friendly Chocolate is chocolate given to friends of the opposite sex that you are grateful to have in your life. Premium Chocolate are for the people in your life you are very grateful for but do not fit in a Friend or Lover category (ie. family members or best friends). The “Hand-Made” chocolate are the ones you carefully craft on your own after buying all the necessary ingredients and they are to be given to one person only – the person you love or would like to start a relationship with. This is important because on White Day, March 14, the men who have received these chocolates from women are expected to reciprocate and gift them with chocolate of their own. Of course, the same rules apply. And in April 14th, the lonely people who were unable to receive any Hand-Made Chocolate are expected to gather together and eat dark colored food (Smithsonian.com). Lotte has obviously used this to their advantage to market “bitter” dark chocolate and wallow in their sorrows until next year’s Valentines/White Day. Of course, Lotte has different types of chocolate at various price points to market and cater to all these buyers.

Pepero day (November 11) is yet another chocolate related holiday in where people give their significant others and people in their life Pepero. Pepero (or Pocky, as it is more commonly known here in the states) is a thin unsalted pretzel stick dipped in various flavored chocolate and different types of nuts for extra texture and flavor. Lotte Confectionary, a subsidiary of Lotte Corporation, is credited with the creation and marketing of this easy to chocolate dipped stick. Using clever marketing and visual cues, they have successfully branded this day as Pepero Day and the purchases of pepero on these days skyrocket. The day comes from looking like a Pepero Chocolate (11/11) and is also smart marketing on Lotte’s end.

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All of the chocolate that is produced my Lotte plays up on this cultural aspect of Asia where being single is considered “lonely” and “unsatisfying. As you can see in this Commercial for Ghana Chocolate, they prey on the couple aspect and the happiness that one would receive from being gifted these chocolates. Of course, it is no secret that they have their hands on non-chocolate related couple items as well.

Sex Sells – Celebrities

Now, this still doesn’t full explain why Lotte is one of the the biggest producer of chocolate related products in Asia. Yes, they’ve used their marketing tools to play up the couple oriented culture in Asia and used words like “Real Cacao” to get the unsuspecting consumer to believe that the product they are purchasing are of the highest quality.

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(It may also help that Asian Countries aren’t as stringent like the US FDA to release all their ingredient info)

But it is their usage of sexualization and celebrity endorsements when it comes to these Chocolate related products. As you have seen in the above commercial, almost all chocolate advertisements in Asia are like that. While this is also a common tactic in the US, the celebrities in Asia are idolized (they are actually called Idols) and children from the age of 8 to adults well over 25, follow and almost worship these celebrities. By using them and showing that this is their preferred brand of chocolate, the consumers do not ask questions of the source of these products, but instead buy them in bulk hoping to be more like them.

However, through clever marketing platforms and excessive usage of monetary funds (They are the 5th biggest conglomerate in Asia), they have made it that being the face of a Lotte Chocolate brand is the biggest achievement a celebrity can receive. This is why the previous faces of their brand have been celebrities like Mao Asada, Lee Hye-ri and Park Bo-gum. To understand the power of these celebrities, all three of them have been featured on Korea/Japan’s Top 100 power celebrity lists year after year.

Purchase of Guylian – Belgian Chocolatiers

Now, with all these pseudo-holidays that pop up consecutively over the months, along with the traditional holidays of Valentines Day, Christmas, Anniversaries and Birthdays, Lotte has created a market where they can offer anything from cheap go-to chocolate bars to high end European designer chocolate. Their chocolate markets continue to boom through the usage of celebrity endorsements, and ongoing advertisements for the necessity of their chocolate.

And now, with the purchase of Guylian, a high end designer chocolate maker based in Belgium, Lotte has been able to set a landmark and a path into Europe to even further their holding in the chocolate industry (Justfood.com, forbes.com). The most interesting part of this acquisition is that Guylian, on their website, claim that all their chocolate is humanely sourced from West Africa with their manufacturer guaranteeing the safety of the food (Guylian.com). Their website goes on to display their numerous awards and their guarantee of authentic and 100% cacao bean usage in all their chocolates.

Guylian is a company with origins in the art of haute-couture chocolate, with renowned chocolatiers within their starting ranks that have received certifications from famed confectionary and chocolatier schools. Through this purchase, Lotte has also been able to rebrand themselves into an even more sought after and cultured variation of chocolate. Rather than being just a consumer friendly chocolate company with “higher end” products, they have been able to include a Belgian based chocolatier that is famed and well known around Europe with their Guiness Record (Guiness) in chocolate making and patented praline chocolates.

Now, why is it that their parent company, Lotte Confectionary/Corporation, is not held to the same standard? Nowhere on Lotte’s website is there a link to the source or the location of their chocolate, nor how it is manufactured. The closest we can get to is that their chocolate is in majority sourced from West Africa (Ghana) and that they use “real cacao beans” to make their chocolates.

Why Should We Care?

Fair trade law, one that we are so familiar with in America and thanks to our class, is something that is still in its infancy in Asia (koreanherald.com). Despite Lotte being such a huge conglomerate that holds stake in almost everything you can think of (Technology, Hospitality, Food, Wine, etc.), because the Fair Trade Act isn’t a widespread knowledge and notion in Asia, ultimately the consumers do not care.

They do not check the sources of their products, they only care to purchase the “prettiest packaged products” to give to their significant others. The Fair Trade Certifications we discussed in class do not apply to the Asian Market, despite the chocolate being consumed in these areas have consistently risen (Financial Times). With Asia looking to be the next big market in chocolate that these conglomerates can get their hands on, shouldn’t Fair Trade be a priority?

However, through the usage of fancy terminology like “Real 100% Cacao” and “Chocolatiers”, Lotte manages to bypass all the Fair Trade knowledge that we have learned through class. The most important thing we should demand from this corporation is what we demand from every company these days – transparency.  Yet, because the economic and trade laws that encompass Asia are mostly focused towards fair trade within their borders, how their products are received in Asia do not really matter, it only matters how we treat our workers and crops within the continent of Asia itself.

As of right now, Lotte chocolates aren’t a major player in the United States. Other than a handful of Asian Markets that carry their brands, their reach to the United States is limited by global competitors like Hershey’s. However, with their recent joint-venture with Hershey’s in China and their merger with Guylian chocolates in Belgium, it is only a matter of time before they take over the global market, just like how they did in Asia. Because the idea of fair trade is still in its infancy in Asia, this can be a major issue to the chocolate markets and cacao farms across the world.

Because they are headquartered in South Korea and Japan, they do not feel the pressure that a lot of US companies do when it comes to Fair Trade in Chocolates. The labor laws directed at South Korean citizens state that the minimum wage to work a full time job (40 hours a week) in South Korea as of now is 15 and they may work a part time job (20 hours a week) at the age of 13 (DOL). If this is the law that they have on their own citizens, why should they really consider the dangers of child labor laws when it comes to foreign countries?

This isn’t to cast a bad light in Asian working culture, but to show the vast difference in culture and the importance of a global policy when it comes to these matters. When Lotte tries to break their way into the US market, we should be more aware of what they are offering and put the same amount of pressure on them as we are to Hershey’s and other global chocolate corporations. Because ultimately, fair trade chocolate is the best tasting chocolate we can have.

Works Cited:

“Chaebol Rankings Seesaw over 2 Decades.” Yonhap News Agency, english.yonhapnews.co.kr/news/2017/11/01/0200000000AEN20171101003000320.html.

Department of Labor. “Laws Governing Exploitative Child Labor.” http://www.dol.gov/sites/default/files/research/southkorea_CL.pdf.

“History.” Guylian Belgian Chocolates, http://www.guylian.com/us/history/#history.

Just-food.com. “SOUTH KOREA: Lotte to Buy Chocolate Firm Guylian.(Reprint).” Just-
Food.com, 2008, pp. just-food.com, June 25, 2008.

Kim, So-Hyun. “Fair Trade Finds Feet in Korea.” Korean Herald, 10 May 2013, http://www.koreaherald.com/view.php?ud=20130510000757.

Kwok, Vivian Wai-yin. “Korean Confectioner Takes A Bite Of Europe.” Forbes, Forbes Magazine, 19 June 2013, http://www.forbes.com/2008/06/23/guylian-lotte-confectionery-markets-equity-cx_vk_0623markets03.html#47c47be64320.

Martin, Carla.“Alternative trade and virtuous localization/globalization”, Harvard University, (2018).

Martin, Carla.“Haute patisserie, artisan chocolate, and food justice: the future?”, Harvard University, (2018).

Smith, K. Annabelle. “Korea’s Black Day: When Sad, Single People Get Together And Eat Black Food.” Smithsonian.com, Smithsonian Institution, 13 Feb. 2013, http://www.smithsonianmag.com/arts-culture/koreas-black-day-when-sad-single-people-get-together-and-eat-black-food-16537918/?no-ist.

Soyoung, Kim. “Lotte, Hershey Launch China Candy Venture.” Reuters, Thomson Reuters, 29 Jan. 2007, http://www.reuters.com/article/us-lotte-hershey-china-idUSSEO22724620070129.

Terazono, Emiko. “Asian Chocolate Demand Set to Outstrip Global Growth.” Financial Times, Financial Times, 4 Oct. 2017, http://www.ft.com/content/3cb2e488-a8f8-11e7-ab55-27219df83c97.

“Valentine’s Day.(Chocolate Purchases)(Brief Article).” Journal of Property Management, vol. 71, no. 1, 2006, p. 9.

 

*thank you again for the extension on my paper regarding personal matters. I really really appreciated the extra time. Thank you!

 

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