Foreign chocolate brands such as Dove, Cadbury, and Hershey’s have now captured around 70% of the Chinese chocolate market. As Barry Callebaut, the world’s largest chocolate manufacturer with 25% of the global market, recently opened its first Chinese chocolate factory in Suzhou city, the world’s top 20 chocolate companies have now entered the Chinese market. But in the face of global competition, China’s local chocolate companies have been further repressed in the value chain.

Second largest chocolate market

As Barry Callebaut, with annual revenue of 4 billion Swiss francs, established his first production line in Suzhou, a complete multinational chocolate industry chain is also emerging. Industry experts suggested that this would be a blow to local Chinese chocolate companies in this globalized competition. Furthermore, he noted that keeping up with international competition is particularly important, or the Chinese industry chain will become even more vulnerable.

In recent years, the world chocolate market has slowed down noticeably, with only 2-3% annual growth. This is mainly due to the fact that per capita chocolate consumption in developed countries is already at a high level, averaging 11 kg. On the other hand, China’s per capita chocolate consumption is only 0.1 kg, and its domestic chocolate market has been growing at a staggering 10-15% per year, with an estimated market potential of $ 2.7 billion. Americans. Thus, China has become the second largest chocolate market in the world behind only the United States. The world’s top 20 chocolate companies have entered China, and there are more than 70 imported or JV chocolate brands in today’s Chinese market.

Barry Callebaut has made it clear that they will share and participate in China’s economic growth. It plans to make the Suzhou factory the largest among its 38 factories globally and achieve a 6-fold increase in sales in the next five years through the high capacity of the Suzhou factory. “We look forward to fully utilizing the capacity of this factory to rapidly increase production from 25,000 tons to 75,000 tons, making it the largest chocolate factory in the world,” said Patrick De Maeseneire, CEO of Barry Callebaut.

Multinational ambitions

It is understood that the new Barry Callebaut plant in Suzhou will become the company’s Asia-Pacific headquarters as well as a sales network hub to serve China and multinational food manufacturers and specialty customers. Major brands such as Cadbury, Hershey’s and Nestle currently have a large number of manufacturing outsourcing contracts with Barry Callebaut, whose OEM production of cocoa liquor and chocolate products equates to 15-20% of each other’s annual production. of the three main brands. So, the Swiss Barry Callebaut is in fact the Big Brother of the world chocolate industry.

In fact, even before the arrival of Barry Callebaut, China’s local chocolate companies had already been losing market shares to multinational competitors. The American Hershey’s has decided to plow the Chinese market, planning to reach a 23% share of the local market by 2010 and the second position in China. Meanwhile, Korean and Japanese chocolate producers are also accelerating their entry into the Chinese market.

Local companies that are not in the local market.

Although the rapidly growing Chinese chocolate market is good news for its local chocolate companies, today’s Chinese consumers frequently refer to foreign brands such as Dove, Cadbury, Hershey’s and Ferrero, but rarely mention local brands.

As a foreign product, China only has a chocolate manufacturing history of less than 50 years, so there is an inevitable gap behind foreign brands in terms of production techniques and technologies. Due to inadequate processing equipment and incomplete production facilities, product quality assurance is difficult for many local chocolate companies. Also, most of the Chinese chocolate companies are weak in product R&D, leading to slow product changes and updates. Today most local chocolate companies find themselves caught in an embarrassing situation of poor product quality.

The aforementioned industry problems have cost local companies opportunities to participate in the competition for the Chinese chocolate market. Multinational chocolate brands have come to the Chinese market one by one since the 1990s and are now in a dominant position in the market. With their considerable financial power, multinationals can play their technological and cultural cards, as well as promote their superior quality and unique tastes, to quickly capture the Chinese market.

When Barry Callebaut finally entered the Chinese market, his Suzhou factory will make chocolate production even cheaper for multinational brands. For local Chinese companies that are primarily in the low-end market, they may no longer hold this market segment strong.

Keep up with globalization

Statistics showed that there are about 63 large-scale local chocolate companies in China, with an annual output of 150,000 tons. Statistics from industry associations also revealed that China currently has around 250 chocolate companies in total.

Industry experts noted that the Chinese food and beverage industry is a highly competitive market internationally. The vast potential of China’s chocolate market is not only for foreign brands, but it is also presented in front of local chocolate producers. The local chocolate industry is now in a stage of structural change and survival of the fittest, and the entry of foreign brands will undoubtedly present challenges for the local industry. But if local chocolate companies can participate in this international competition, it could not only boost Chinese consumer demand for chocolate, but also promote the development of China’s chocolate market.

Local Chinese chocolate companies need to constantly improve the quality of their products, select finer raw materials, improve production facilities, adopt international technologies, improve product innovation and brand management. Only then will they be able to compete with multinational companies on a level playing field and make a breakthrough in this foreign-dominated Chinese chocolate market.

For more information on Chinese companies, visit www.chinabizintel.com