Tag Archives: market

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.

The Uniqueness of Cacao Bean Currency

It is relatively well known that Chocolate and its derivative, cacao beans, were of crucial importance to the Mesoamerican civilizations. Not as well-known though is the role cacao beans played as a form of currency in the Aztec Empire. Cacao was a rarer commodity in Aztec than it had been in the Mayan Empire as its tree did not readily cultivate in the region.

Map of where Cacao is grown in Central and South America
Map of the Aztec (red), Maya (green), and Inca (yellow) Empires

As shown in the above maps, the main areas in which cacao was grown fails to overlap with the Aztec Empire. Accordingly, the cacao bean was rare enough to be used as a currency. However, cacao beans played a different role than a typical currency. Due to several key differences between cacao beans and a more standard currency, the usage of cacao beans encouraged different actions in the market than otherwise would have been expected.

Cacao beans are unique as a currency in their short lifespan. Most currencies used over a long period of time have the ability for a single unit of it to stay in circulation for a decent length of time. However, cacao beans fail to have this quality. Instead cacao beans are both fragile when compared to silver, gold, or paper currency, and also fragile as a currency in that they had a tendency to be consumed rather than saved. Following from this, cacao beans encouraged different behavior than other currencies.1  Specifically, this encouraged the drive for more turn around on transactions. In essence, as cacao beans would be consumed rather than hoarded for later use.1  Coupling this, with cacao beans being the least expensive currency used, as compared to cloth or bullion. For example, an entire turkey was worth about 100 cacao beans.3

The relative prices of each item is shown by the number of cacao beans adjacent.
The relative prices of each item is shown by the number of cacao beans adjacent.

The above image reveals the relative costs of various items in cacao beans. The rabbit is worth about ten beans while the egg about three. This meant that for cacao beans to be acceptable for remitting payment it must have been demanding a greater push for profit and growth in trade.2 This varies from normal currency where, when possible, it is considered proper to save money for a future time of need. Thus, the uniqueness of cacao beans as a currency encouraged a different style market place, especially when focusing on the less expensive options.

Another stark difference between cacao beans as a currency as compared to others at the time was the utter lack of access to them within the Aztec Empire itself. This led to strategies being developed by the Aztecs to garner cacao beans. Two main strategies were used. Firstly, Aztecs demanded that conquered territories pay tribute in the form of cacao beans.4 This allowed for a supply of beans to be added to the coffers already held by the Aztecan elite. Secondly, the Aztecs created a class of “travelling merchants”, pochteca, whose main job was to travel the long distances necessary to trade for cacao beans and then bring their load back to the empire on foot.5 The first strategy encouraged a greater amount of wealth to be distributed solely to the ruler and top class; however, the second further created a more active cacao trade. As a pochteca would only have cacao beans from their lifestyle, it would be entirely necessary to trade for everything they needed in life. Thus, by forcing trades that otherwise would not be necessary, cacao beans as a currency yielded a more active and profit driven market place.

Image of two pochteca in their travels
Image of two pochteca in their travels

Cacao beans were extremely important to the Mesoamerican peoples. For the Aztecs, it was a rare commodity that was hard to come by. Still, or even because of this, it became an integral part of their currency and market. Due to its unique characteristics as a currency of being more fragile and not internally found, the cacao bean encouraged a more active and profit focused market.

Image Sources (in order of appearance):
1. http://www.thestoryofchocolate.com/Where/tropics.cfm?ItemNumber=3300
2. https://www.classzone.com/net_explorations/U4/U4_article1.cfm
3. http://www.mexicolore.co.uk/aztecs/ask-experts/when-did-the-aztecs-stop-using-cacao-beans-for-money
4. http://www.chocolatemonthclub.com/chocolate-history.htm

References Cited:
1. http://www.nbbmuseum.be/2013/03/kakao.htm
2. http://www.mexicolore.co.uk/aztecs/ask-experts/when-did-the-aztecs-stop-using-cacao-beans-for-money
3. http://exhibits.mannlib.cornell.edu/chocolate/moneygrewontrees.php
4. 
http://www.chocolatemonthclub.com/chocolate-history.htm
5. Coe Michael & Coe Sophia, The True History of Chocolate, pgs. 72-75, 3rd Edition.