Matching Flavor Domestic candy makers continue to innovate amid the downturn of the industry
For many people, the pleasure of going out and buying some sweets at the grocery store or the bakery after class in school days is something unforgettable. But these sweets, which bring good memories to them, have seen their consumption drastically drop in recent years.
Indeed, as stated in the statistics published on a Chinese industry information website, the annual production of confectionery dropped from 3.62 to 2.88 million tons between 2014 and 2018. The turnover of the candy and chocolate retail market was 112.9 billion yuan ($16.05 billion) in 2018, a decline of 2 percent year on year.
The data also reveals that international brands, such as Wrigley and Mars, dominate the Chinese high-end confectionery market.
As for chocolate confectionery, four brands, which are Dove, Cadbury, Hershey’s and Leconte, alone occupy more than 60 percent of the Chinese market. The challenges are therefore considerable for domestic confectioners.
Customer strategy
The sale of candies has specificity in China, which is also a headache for confectioners. It often peaks at traditional festivals, especially during the Spring Festival, while it remains weak the rest of the year. Take Hsu Fu Chi, a Chinese confectioner established in 1992, for example. Its turnover during the Chinese New Year can represent up to 40 percent or even 50 percent of its total sales of the year.
At the same time, a change in consumer behavior has made confectioners shift their strategy. According to a survey on consumer behavior, 51 percent of those surveyed say they eat candies because they can’t resist the temptation of sweets, while 41 percent of them say that they do it when they play video games, surf the Internet or watch TV. In short, snacking is becoming a trend.
This trend led Hsu Fu Chi to readjust its strategy. In 2019, the company began to shift its target consumers to young people under the age of 22, who are more likely to nibble for pleasure. To this end, it released its new version of sachima in collaboration with HEYTEA, a chain store serving tea with different flavors very popular among young Chinese. The company also promotes its
products on social networks, where their target consumers are active.
“Confectionery has long been considered as a seasonal product in China. To reverse this trend, it is essential to innovate and communicate on a large scale,” commented Zhu Danpeng, a researcher at the China Brand Institute. “The rejuvenation strategy at Hsu Fu Chi is moving in this direction.”
Digital shift
In the age of the Internet, confectioners also know how to take advantage of e-commerce. While promoting in-store candies that often sell in bulk, candy producers are keen to launch more “sophisticated” versions on e-commerce platforms such as Alibaba, Jd.com and Suning.com. They try to attract customers with a variety of highvalue gift box packaging.
This is the case of Hsu Fu Chi, which has made e-commerce another “lever” of its reform. Its first online store was opened in 2013. Since then, its business practices have continued to evolve, and today include flagship brand stores, online supermarkets and New Retailing mode, with a compound annual sales growth of 170 percent.
According to Zhu, the offline sale of sweets is strategically directed toward mass consumers, whose purchasing power is relatively low. For its part, online marketing is no longer content with a simple price war. Today, confectioners rely on personalization through diversified packaging and flavoring. “They try to differentiate their products online and offline, to improve their gross margin,” he said.
Aiming higher
But Zhu also said that to gain ground in the high-end confectionery market, today’s confectioners can no longer just change their packaging like 10 years ago.
“Now they need to work more on their raw materials and ingredients to make products healthier, safer and more nutritious,” he said. He cited as examples candies without preservatives, artificial coloring, flavor enhancers, synthetic adjuvant and stabilizer. “This is how we will eventually solve the problem of homogeneity.”
His views were echoed by Zhong Chao, founder of LISMIS, a chocolate confectionery.
According to him, quality management serves as the basis for brand development. That’s why his team spent more than a year looking for international partners before launching their first product at the end of 2017. Each month, the confectioner’s partners in 10 countries supply quality candies to LISMIS, which will suit the taste of Chinese consumers. Made from naturally sourced cocoa, LISMIS chocolate takes on different shapes, such as pearl or gold.
The young brands target customers to people aged between 20 and 35 who pursue greater quality of life. Zhong said that many young men wish to offer quality sweets to their girlfriends as a gift when they propose, but they have little choice in the Chinese market. “That’s how I got the idea to create a domestic brand, to fill this gap in the market for high-end candy,” Zhong told Chinafrica.
The 32-year-old entrepreneur is optimistic about the future of Chinese confectionery in general and new brands. For him, the confectioners of his generation were born in the age of the Internet. Their marketing, communication and distribution networks are generally digital. They focus more on the value of a brand, with particular attention to the protection of intellectual property. “That’s what makes us different from traditional candy makers, and that’s where our comparative advantage lies,” added Zhong. CA