Chocolate is seen around the world as a delicious and affordable luxury as well as a great gift for special occasions. But in China it is also seen as a quintessentially exotic European indulgence that has established itself as a mainstream product in the minds of Chinese consumers.
The chocolate market is dominated by international brands that entered the market during the initial reform and opening up period of the 1980s, most notably Mars (34% market share in 2019), Ferrero (22%) and Nestle (8%). Back then chocolate sales were negligible in China and it was many years before these companies started to make a profit from China. These brands have worked hard to build the market and preserve chocolate’s premium image.
Per capita annual chocolate consumption is estimated to only be 100g, compared to 1.2Kg in Japan and well over 6Kg in most Western European markets. It is unlikely that Chinese consumers will ever get close to European levels of chocolate consumption, but the large growth in the chocolate market to RMB22 billion ($3.4 billion) in 2019 (Euromonitor), means there is still room for this category to grow more.
Pandemic Effect
The pandemic has hit China’s chocolate market much harder than other categories, with sales expected to decline 9% in 2020 (Euromonitor). This is because the anti-COVID lockdowns in February and March affected the Chinese New Year gifting market. Without anywhere to go or anyone to meet, consumers didn’t buy any chocolate to gift.
Nevertheless, the impact of the lockdown measures is expected to be temporary and it is reasonable to expect that China will not need any further lockdown measures going forward. The chocolate market looks set to return to stable growth in 2021, which should persist over the coming years.
Digitalisation
Another effect of the pandemic has been to force more consumers online for grocery shopping and, like for many other categories, online sales look set to be a key area of growth for chocolate sales going forward, providing opportunities to sell to consumers outside of China’s major cities. Online sales now account for approximately 25% of chocolate sales.
With China’s e-commerce markets having been already firmly established years prior to the pandemic, most major chocolate producers had an existing online presence. It will be necessary for new entrants to develop both online sales channels and a strong digital marketing presence as part of their market entry strategy.
Health Consciousness
Alongside ever growing online sales, increased health consciousness among consumers has been a major trend in China in recent years, amplified in 2020 by the pandmic.
Chocolate is not an obvious category to benefit from this change in consumer behaviour. However, rather than a decrease in sales, it is more likely that we will simply see an increase in demand for the types of chocolate looked upon as healthy, such those with a high cocoa content. We can see this trend in play as shown by the growth in sales for plain dark tablets, taking market share from milk and white.
Enon is a local brand tapping into this trend, marketing its high cocoa chocolate as the perfect gift for a health conscious girlfriend. Alongside its health-related messaging, it is one of the few Chinese chocolate brands positioned as a high quality, premium product and not a low costs imitation of a foreign brand.
Conclusion
The Chocolate market will recover swiftly from the pandemic in 2021 and beyond. Consumers are still interested in buying chocolates, with higher cocoa and lower sugar content becoming popular. Having an online presence and specifically targeting the key gifting seasons in China will be key for new to market brands’ success.