Foreign chocolate brands like Dove, Cadbury and Hershey’s have now captured around 70% of the Chinese chocolate market. As Barry Callebaut, the world’s largest chocolate maker with 25% of the global market, recently opened its first chocolate factory in China in the city of Suzhou, 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 suppressed in the value chain.

Second largest chocolate market

As Barry Callebaut, with an annual revenue of CHF 4 billion, has established his first production line in Suzhou, a complete multinational chain of the chocolate industry is also emerging. Industry insiders suggested that this would be a blow to local Chinese chocolate companies in this globalized competition. He further indicated that keeping up with international competition is particularly important, or the Chinese industrial chain will become even more vulnerable.

In recent years, the global chocolate market has slowed down noticeably, growing at only 2-3% per year. This is mainly because per capita chocolate consumption in developed countries is already at a high level, averaging 11kg. 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 US$2.7 billion. . Thus, China has become the second largest chocolate market in the world, only behind the US. The world’s top 20 chocolate companies have entered China and there are more than 70 imported or JV chocolate brands in the current Chinese market.

Barry Callebaut has made it clear that they come to share and participate in China’s economic growth. He plans to make the Suzhou factory the largest among his 38 factories globally, and achieve a six-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 Barry Callebaut’s new plant in Suzhou will become the company’s Asia-Pacific headquarters, as well as a network sales center to serve Chinese and multinational food manufacturers and specialty customers. Major brands such as Cadbury, Hershey’s and Nestlé currently have a large number of outsourced manufacturing contracts with Barry Callebaut, whose OEM production of cocoa liquor and chocolate products amounts to 15-20% of each’s annual production of the three main brands. So the Swiss Barry Callebaut is in fact the Big Brother of the global chocolate industry.

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

Local companies that are not in the local market

Although the rapid growth of the Chinese chocolate market is good news for 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-making history of less than 50 years, so there is an inevitable gap behind foreign brands in terms of production techniques and technologies. Due to inappropriate processing equipment and incomplete production facilities, product quality assurance is difficult for many local chocolate companies. Also, most Chinese chocolate companies are weak in product R&D, resulting in slow product changes and upgrades. Currently, most of the local chocolate companies are trapped in a shameful situation of low 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 entered the Chinese market one by one since the 1990s and now occupy a dominant position in the market. With their considerable financial power, multinationals can play their technological and cultural cards, as well as promote their premium quality and unique flavors, to quickly capture the Chinese market.

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

Keep up with globalization

Statistics show that there are about 63 large-scale local chocolate enterprises 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 pointed out that China’s food and beverage industry is a highly competitive market internationally. The great potential of China’s chocolate market is not only for foreign brands, but also vis-à-vis 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 consumers’ demand for chocolate, but also promote the development of China’s chocolate market.

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

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