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Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China's Consumers ReviewThe Doves of Mars in China
While teaching at a university in China, I was occasionally surprised by differences between American and Chinese societies. For example, few of my students knew how to swim; almost none used deodorant. Lawrence Allen's book makes me aware that in 1978 almost no one in China ate chocolate. More, he explains how Chinese were first exposed to chocolate after the horrors of Mao's economic experiments left millions starved, and tens of millions more uprooted. In 1978 Deng Xiaoping sought to rebuild China's economy in a one-party state by encouraging trade with the West and allowing some Chinese to engage in individual enterprise.
After decades of Mao's government-inspired chaos and corruption, - disrupting agriculture to the point that millions starved, crippling older industries, closing schools, humiliating any who showed initiative, - Deng pointed China in a new direction. Not only would there be opportunity for Chinese entrepreneurs (if they could make appropriate deals with government/party bureaucrats), but the new policy would also permit greater trade with capitalist nations (again, they might have to make deals with Chinese officials).
For the West, the hope to sell to a billion new customers various products was tempered by the realization that there would be many problems in winning that market. To a people more familiar with Red Guards than Right Guard, how do you sell them deodorants? Allen's book asks that very question about chocolate. Chocolate was not part of the traditional Chinese diet. It was as alien to them as underarm protection.
However, the hope of selling chocolate to a billion more customers stirred some of the world's largest candy makers to enter the race to become the favorite confection of the Middle Kingdom.
As a spoilt American I had never considered the problems of attempting to sell candy bars to China in 1978. The problems were not merely bureaucratic. The law regarding private property was beginning to evolve. The infrastructure of the nation was inadequate, even when the dream of most was to acquire not an automobile but a bicycle. In such a nation, air-conditioning and refrigeration were rare. In hot weather, and without air-conditioned facilities, chocolate melts and it is unappetizing for consumer. Supermarkets did not exist in China, and in many stores, the customer would tell the clerk what he wanted to purchase, and the clerk would go in the back, find the item(s) and sell it to the purchaser who would then depart without seeing the full inventory of the store. There was no browsing through the aisles for an item - like chocolate - to be bought on impulse.
With the relaxed atmosphere under Deng, it was easier for those who had fled Communist China and who had settled in Hong Kong to visit relatives on the mainland. Many would visit during the traditional Chinese holidays, Chinese New Year's (January or February) and the Moon Festival holidays in September or October. This was a time for gift giving. An Italian company had recently expanded into the chocolate business, and its Ferrero Rocher chocolate boxes were expensive, with the chocolates wrapped in individual gold foil. These had already made headway in Honk Kong, and now individuals took them as gifts to relatives in nearby provinces. Ferraro Rocher, began to follow along, trying to place its expensive, exotic treats in high-end stores as they emerged, first in the South, and then in Shanghai, Beijing, and other large cities as markets and malls began to open. Ferrero Rocher aimed to be an expensive gift sold mainly during the holidays (when the weather might be cooler). With its modest aim, Ferrero Rocher succeeded and expanded with the growth of malls and the Chinese middle class who could afford a luxury chocolate. The Italian chocolatier won its modest niche in the Chinese market.
Most Chinese were not high-end consumers, however. Other corporations sought to entice the Chinese to buy and consume their candies, not as gifts for others but for individual enjoyment. Britain's Cadbury built a factory in Beijing determined to expand its Milk Chocolate bar from the Hong Kong colony to the opened Chinese mainland. Unfortunately, the milk used in its chocolate bars, bought from Chinese dairymen, was inferior, and the Cadbury candy emerged as a chocolate that tasted like cheese. The bar was rather large, and too expensive for many Chinese to experiment with. Some who did were disappointed with the taste. Cadbury's growth was stunted and the brand name tainted.
America's Hershey also entered the fray for the Chinese market. Like Ferrero Rocher, it built no factory and instead imported its products. Within a few years Hershey's Kisses caught on with the public. The unusual shape and the silver foil individually wrapped chocolates were appealing. Furthermore, sold in packs of four, Kisses were cheaper than the competitors larger bar candies. Just as Hershey was achieving momentum in the expanding Chinese market, decisions made in America altered the race. Pennsylvania changed the staff in China. There was suddenly chaos, bills were not paid, candies were not distributed, and Kisses disappeared from the shelves of the supermarkets and malls. Hershey kissed the China market goodbye.
Nestle, the Swiss giant, invaded the Chinese market on several fronts - baby formula, Nescafe (most Chinese had never drunk coffee), and food items. Nestle's chocolates arrived too, in the form of Kit Kat and a Nestle wafer candy. It too built a chocolate factory in China. However, to increase profits, there was little advertising for the candy products, and worse, the chocolate formula was altered, cheapened, so it differed from that in the West. Unfortunately, Nestles cheaper product tasted cheaper, and failed to maintain sales with competitors.
According to Allen, the American company, Mars, was victorious in the struggle to win the taste buds of the Chinese. Mars had traditionally manufactured chocolate covered nougat bars or peanut candies - Snickers, Three Musketeers, M&Ms. Only in the 1980s did it acquire the Dove ice cream company, and not until 1991 did it launch a chocolate bar of similar rich chocolate called the Dove bar. Dove was to provide its main thrust into China. Advertised as having a "silky smooth taste," the product lived up to its claims. Buyers preferred Dove to the cheesy Cadbury, or the cheapened Nestles. Mars' M&Ms, Snickers, but especially Dove began to dominate. Allen explicates how this was done; he even describes the uniforms of the cyclists who delivered the candies to the many kiosks and small stores.
I worked in a provincial capital a few hours by train from Beijing. (Shijiazhuang was a city about the size of Chicago, and I had never heard of it until I began teaching there.) Dove, Snickers, M&Ms, and occasionally Kit Kat were some of the candies I bought. But there was another that I thought was a French brand, Le Conte. It was similar to Dove, but cost about a third less, and it was not nearly as rich and sweet as the Dove. I preferred Le Conte. Only upon reading Allen's work did I discover that Le Conte is actually a Chinese firm. The foreign name is to give it cachet (after Mao's chaos, most Chinese assumed anything made in the West would be of higher quality than a domestic item. Another example was Haier, the maker of air conditioners, TVs, appliances, etc., from Qingdao. Because of the name, many assume it is a German rather than a Chinese corporation, which aids its sales in the West and in China).). Le Conte is not part of the big 5 chocolatiers discussed by Allen. But he does note that the battle for Chinese consumers is ongoing, and in the long run, a native company may well have an advantage over a foreign one. Might the next book have to count upwards to include a big sixth?
I am not an economist. Allen's book is an easy read that raises important questions about how to enter any market. He himself was an employee of Hershey and Nestle, and his account seems filled with insider knowledge. More, this book can be used to raise important questions of how to get any new product into any new market. In this book, warrior Mars used the peaceful Dove to win the Chinese confection affections. Simply, Allen has written a very good book.
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