Candy & confectionery market in China

06Nov2014

China has been experiencing big and rapid change for the past 20 years both economically and ideologically, and so has its tastes. As China gradually evolves into a consumer society, new products, including candy & confectionery, are appearing with increasing regularity. Rising average annual incomes, increased exposure to Western and international cuisines and a greater array of confectionery goods in supermarkets are all working together to increase sales of this industry’s products in China.

Candy & confectionery market is booming in China

Revenue for candy & confectionery industry in China has been growing rapidly at 20.1% annually during the five years through 2013 and is estimated to achieve total amount of $18.0 billion. In 2009, the worst-performing year of the period, there was still a 19.0% revenue increase. The strong growth indicates increasing demand from both domestic and global markets.

According to market research in China, candy & confectionery consumption per capita globally is about 3kg while it is only 0.7kg in China; therefore there is great increase potential in China’s candy & confectionery market. There are 437 China candy corporations in 2010, around 42 corporations with a year-on-year growth rate of 10.63%. The scale of China candy & confectionery industry expends fast in 2010 that the year-round gross output value is 49.764 billion Yuan with a year-on-year growth rate of 20.45%; total sales revenue is 51.896 billion Yuan with a year-on-year growth rate of 22.56%; total capital is 37.268 billion Yuan with a year-on-year growth rate of 15.92%. View from profitable condition, both the sales revenue and profit amount of candy industry in 2010 increase, and the growth rates are 8.13% and 17.18%. While there are 2 more industry corporations which with a loss comparing with that in the same time of last year, and the year-on-year growth rate of loss amount is 101.63%.

Competition between Imported and domestic market in China

The domestic candy & confectionery industry is expanding, and various international candies, such as health-care-oriented, low-sugar-oriented, fun-oriented and ecotype are speeding up to enter China’s candy market. In December, 2011, MOFCOM (Ministry of Commerce) approved Nestle to purchase 60% stock ownership of Hsu Fu Chi, the biggest candy brand in China. With the accelerating entry of foreign candy corporations, the most profitable high-end market is taken by brands like Guylian, Shihua, D’Orlan, etc. Among the four brands–Dove, Cadbury, Hershey’s and Jindi–which take up over 70% of the whole China chocolate market share, only Jindi is local brand. Look at the top 10 rankings in 2012, only 4 domestic brands stand out ranking respectively as the 1^st , 5^th, 7^th, 8^th. The ranking from 1^st to 10^th is as follows: 1. Da Bai Tu; 2. Alpenliebe; 3. Hsu Fu Chi; 4.Dove; 5. Jin Si Hou; 6. Arrow; 7. Jin Guan; 8. Yake; 9. Want Want; 10. UHA.

When we look into foreign candy & confectionery corporations to understand the reason for success, the competition of domestic candy corporations mainly focuses on price level and is weak in the new field development comparing with foreign corporations. The product homogenization seriously interferes with the competitiveness between domestic candy corporations and foreign brands and leads to the result that profit for domestic corporations are far less than that of foreign brands. Moreover, major markets for domestic brands are second and third grade markets. Stressed by foreign corporations and domestic corporations, it is hard for domestic corporations to develop products in China candy & confectionery industry.

Possible strategy to be taken

To break through the barriers the domestic corporations should focus on product up-grade and continuously promote new products as well as diversify product categories. Also tapping into consumers’ taste and emotional needs are also key to building a significant and lasting business since now candy & confectionery are far more than snack food itself in China’s market, they have been entrusted with certain emotional embodiment such as good and loving wishes. Last but not least, to divide the market and set up proper market orientation and target consumer instead of following suits also differentiate brands among others.

Future trend in selling candy & confectionery in China

China’s candy industry will keep focusing on high-end market. Although the Chinese Candy & confectionery market is large, the high-end confectionery market is still a blank field. At present, most of the high-end Candy & confectionery brands are still dominated by foreign brands, such as Cadbury, Ferrero, Dove and more, occupying about 70% of domestic market share. Domestic confectionery market, although there are many brands, most are still stuck in the middle and low-end market.

Competition in China’s candy industry is getting increasingly fierce. Firms will invest more in advertising and research for new products. Consuming candy itself is not people’s first consideration, they are more into personalized candy and what candy represents emotionally right through its packaging and brand effect. Therefore, the Chinese candy corporations not only shall invest larger funds and develop more flavors, but also pay more attention to their own branding, say, invite celebrity endorsements to advertise to make their brand popular.

Sugar-free candy will take the lead. Now consumers are increasingly concerned about their own health, many medical institutions have less sugar in promoting the benefits of the human body. Therefore, in recent years, about xylitol and other sugar-free candy become popular, such as sugarless gum. As being healthy is the theme in this modern society, sugar-free label is very attractive to consumers, even to those with diabetes.

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