Chocolate Fortunes - by Lawrence L. Allen

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  • Topic: Chocolate, Ferrero SpA, Mars, Incorporated
  • Pages : 22 (5807 words )
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  • Published : April 9, 2013
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L e A D A RT I CL e

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Chocolate Fortunes:
The Battle for the
Hearts, Minds, and
Wallets of China’s
Consumers
By
Lawrence L. Allen
The emerging China market was a level playing field for all of the Big Five chocolate companies when they arrived in the 1980s. Chinese consumers viewed chocolate as an exotic foreign product, so each of the chocolate manufacturers enjoyed the same level of prestige and credibility that China’s inexperienced consumers associated with foreign goods. Retail prices were relatively high and manufacturing costs relatively low, so none found pricing and cost to be barriers to entry. Importantly, each was flying blind when it came to consumer and market information, and by the seat of their pants when dealing with China’s mercurial economic and regulatory environment. How the executives of the Big Five applied the experience, management skills, and leadership capabilities they brought to China would be decisive in how each approached the emerging consumer market and whether they ultimately succeeded. © 2010 Wiley Periodicals, Inc.

I

n 2008, China celebrated the thirtieth anniversary
of the country’s reopening its doors to the outside
world. Over the past 30 years, China has transformed
itself from an isolated economic basket case to an indis-

pensable economic powerhouse within the global economy. Its gross domestic product (GDP) has grown by over 69 times, an astonishing 10% per year on average, and is
now the third-largest economy in the world behind the

Correspondence to: Lawrence L. Allen, c/o Heidrick & Struggles, Suite 718, South Tower, Kerry Center, 1 Guanghua Road, Chaoyang District, Beijing 100020, P.R. China, +86 10 6598 8288 (phone), lawrence.allen@chocolatefortunes.net.

Published online in Wiley InterScience (www.interscience.wiley.com). © 2010 Wiley Periodicals, Inc. • DOI: 10.1002/tie.20306

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L eAd ART ICL e

United States and Japan. China’s breathtaking transformation from a command to a market-socialist economy has turned some 300 million of its 1.3 billion people into
ravenous consumers of everything from candy to cars.
And 30 years ago, almost none of them had ever eaten a
piece of chocolate. They were, to coin a phrase, “chocolate virgins,” their taste for chocolate ready to be shaped by whichever chocolate company came roaring into the
country with a winning combination of quality, marketing
savvy, and manufacturing and distribution acumen. In
short, China was the next great frontier, a market of almost limitless potential to be conquered in a war between the world’s leading chocolate companies for the hearts,
minds, and taste buds—and, ultimately, the wallets—of
China’s consumers. To the victor of the chocolate wars
would go the spoils of over a billion potential consumers
for generations to come.

One C o u n tr y , Thr ee Ce nt ur i es
Despite China’s radical transformation over the past
three decades, it is still a work in progress. Figuratively
speaking, in China today there are fewer than 50 million
people living in the twenty-first century, about 300 million living in various stages of the twentieth century, and nearly a billion people living in the latter part of the nineteenth century. This historic mass economic migration— from the nineteenth century to the twentieth and even

twenty-first centuries—has made hundreds of millions of
Chinese consumers physically, culturally, and financially
accessible to multinational companies. As China’s distribution infrastructure and quality retail environments continue to penetrate ever deeper into the country, with
each new air-conditioned supermarket that opens, tens of
thousands of people will suddenly have access to chocolate for the first time. As this process continues, even if 20 million of China’s near billion inaccessible consumers
emerge each year to become accessible consumers, it
will take another half-century for all of China’s citizens to make this passage....
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