selling candy in developing markets

Tuesday 8 May, 2007

Hershey tries to gain global ground

By Marc Levy
Associated Press
Published May 1, 2007

Wrigley, Cadbury, Mars and Nestle: It’s hard to mistake the dominant presence of Western candies, gum and chocolates over Asian, and even traditional Chinese herbal candies, on display at the 7-Eleven store in downtown Beijing.

“Sales of Western candies and chocolates are much better,” store manager Wang Peng said. “Dove and Nestle are the most popular here.”

Most people in China prefer fruit as a dessert. But tastes are changing — driven partly by the desire of young people to adopt some Western customs — so many corner stores in bigger cities such as Beijing and Shanghai now carry chocolate bars.

mm comment: I can’t think of anything more culture-bound than dessert. I lived in Europe for a couple of years & got a little frustrated with my inability to find restaurants or even bakeries that offered good old fashioned chocolate chip cookies.
Now America’s leading candymaker, The Hershey Co., is seeking to join its top competitors on more candy shelves in places like India and China as it makes a bid to expand its global presence. In India, it already sells Hershey’s chocolate syrup. In China, it also sells the syrup and a few of its chocolate products but barely registers any market share.

Hershey has the largest stake in the world’s largest candy market, the United States. But the fastest growth in the $137 billion global confectionery market is occurring in nations where people don’t eat as much chocolate as Europeans or Americans. Confectionery sales are projected to grow more than 5 percent annually in the next five years in India and more than 6 percent in China, with growth in chocolate sales alone in China approaching 10 percent annually over that period.

For Pennsylvania-based Hershey, that means looking for ways to cater to different tastes, such as offering its Reese’s cups with almonds and hazelnut. It also means playing catch-up: With a head start of a decade or more, Hershey’s top competitors have accumulated solid market shares while learning important lessons in distribution and pricing.
mm comment: Hershey is adapting their products, which is good. But it seems like they’re starting late & that their competitors have a head start on them, so it might be time-consuming & more expensive to catch-up & overtake them.

Hershey is promising to quickly capitalize on cheaper labor and materials by making products in China and India for the first time. But because the company will be unable to trade on its iconic status, analysts say it shouldn’t expect to reap much profit from its expansion any time soon.

Major competitors — Wm. Wrigley Jr. Co., Nestle SA, Mars Inc. and Cadbury Schweppes PLC — have been heavily involved in the developing world since the 1990s, if not for decades longer.

London-based Cadbury Schweppes is the world’s largest candy company by retail market share, according to Euromonitor International Inc. After nearly six decades of selling chocolate in India, it has five factories there and is India’s leading candymaker.

America’s second-biggest candy company, McLean, Va.-based Mars, rushed into Eastern Europe when the Iron Curtain fell. Amid the economic chaos in the former Soviet Union, the Snickers bar became one of Russia’s top brands, according to Euromonitor.

mm comment: I spent 7 months in Poland in the mid-90’s & was happy to find Snickers, etc. They gave me an occasional taste of home.

Chicago-based Wrigley has nearly one-tenth of the confectionery market in China, Euromonitor data show.

Swiss food giant Nestle began distributing its candy in India in 1991 and built its first plant there in 1995. To cut its labor costs and secure established distribution routes, Hershey has struck joint ventures with two companies — Godrej Industries Ltd. in India and South Korea’s Lotte Confectionery Co., which has a factory in Shanghai.

In countries like China and India, retail distribution routes run like spider webs among tiny family-run groceries and street vendors where most people buy their food. The giant retail chains and merchandise warehouses that are Hershey’s biggest customers in the United States are just starting to establish footholds.

Late to the competition, Hershey’s chairman and chief executive, Richard H. Lenny, defended the company’s timing.

“India’s and China’s markets for chocolate are just beginning to show explosive growth,” Lenny told The Associated Press after the company’s April 17 annual shareholder meeting. “We view now as the time.”

mm comment: I’m disappointed no 1 has brought up the social responsibility aspects of selling more sugar. Alongside tooth decay, empty calories will not help the people of developing economies grow up healthfully.


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