Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China's Consumers [Hardcover]

Lawrence L. Allen (Author)

Book Description

Publication Date: October 1, 2009

As China comes into its own as a world economic power, a new, huge consumer class is emerging, hungry for all things Western. In this land where twenty-five years ago most of the population had never tasted chocolate, five icons of Western business are now slugging it out in a battle royal to see which will become the Emperor of Chocolate in China. Chocolate Fortunes offers the first inside look at the battle for China's newfound chocolate addiction. The book devotes individual chapters to each of the five major players Hershey, Nestle, Cadbury, Mars, and Ferrero and the trials they face as they attempt to dominate their market in an enigmatic and still-developing economy. More broadly, Chocolate Fortunes examines the unique opportunities and challenges inherent in the Chinese business universe. Probing not only the economic, political, and cultural conditions that have given rise to a seemingly insatiable new market, the book delves into the mystique of chocolate itself and how it captivates not just the Chinese, but people all over the world.

Editorial Reviews

From Publishers Weekly

Allen, a senior international executive with a 20-year track record of international branding, offers a fascinating look at the chocolate wars in China. Allen, himself a participant in bringing chocolate to this new frontier as an executive for Hershey and Nestlé, recounts the struggles of doing business in a rapidly changing market of almost limitless possibility. For five global chocolate titans (Ferrero Rocher, Cadbury, Hershey, Nestlé and Mars) entering this market, the stakes were extremely high and included a billion potential customers for generations to come. Allen details the challenges these organizations endured, including copyright infringement, dedicating lengthy chapters to each corporation, documenting their failures and successes and ultimately demonstrating that there's no single path to business success in this emerging world power. In addition to the many trials these firms encountered, Allen notes a new one that will soon emerge—competition from local Chinese companies. While local competitors are a low-level threat today, in the future, they will gain greater market share. Informative, cautionary and essential, this book is a must-read for executives currently doing business, or planning to, in this most volatile and critical market. (Oct.)
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Review

“Informative, cautionary and essential, this book is a must-read for executives currently doing business, or planning to, in this most volatile and critical market.” --Publishers Weekly

"Allen focuses exclusively on China's nascent chocolate market, but he makes sure to write his book so the lessons learned by the five companies can be applied to other industries looking to break into an emerging economy." --Houston Business Journal

"For anyone thinking of bringing their product to the Chinese consumer market, or even simply interested in the cultural characteristics of the Chinese consumer, Chocolate Fortunes offers valuable, hard-won insight from a true industry expert. The branding and marketing case studies alone make this book a worthwhile read, but Allen’s skillful prose — which at times is as smooth and enjoyable as the chocolate he describes — and deep understanding of Chinese culture and history make Chocolate Fortunes much more than just another business-in-China book." --Jing Daily (www.jingdaily.com)

"For anyone who is thinking of going into consumer products or food or retail in China (and who out there is willing to ignore 1.3 billion customers?) this book is a must read." --China Law Blog (www.chinalawblog.com)

"a fascinating look at the process of establishing business connections in [China]" --Women's LifeStyle

"Chocolate Fortunes captures the essence of China’s fast-moving consumer market. It tells the story of the global chocolate industry's entry into China in a style which is captivating and informative. Allen presents a compelling story with personal anecdotes, historical perspective and some clear lessons for the future. Chocolate Fortunes is a delightful book to read that is strongly recommended for those seeking to understand this most dynamic of markets." --Lorna Davis, President and Chairman, Kraft Foods China

"a scintillating glimpse inside one of the most hard-fought cross-cultural indulgence battles since the Opium Wars" --Global Times

"In Chocolate Fortunes, Allen describes these strategies in detail, offering a fair, informed and often fascinating assessment of where they succeeded and where they failed.... Chocolate Fortunes is a case study that delivers broad, transferable advice to Western corporations looking to move into one of the world's largest and most potentially lucrative markets. Offering unusual insight into the complexities of manufacturing and selling Western goods in China for Chinese consumers, the stories of the Big Five combine the emotional power of the cautionary tale with the practical precision of the how-to book. Far more elementally, Chocolate Fortunes is a helpful primer on basic business practice." --Knowledge@Wharton

See all Editorial Reviews

Product Details

• Reading level: Ages 18 and up
  
• Hardcover: 256 pages
• Publisher: AMACOM; 1 edition (October 1, 2009)
• Language: English
• ISBN-10: 081441432X
• ISBN-13: 978-0814414323
• Product Dimensions: 9.1 x 6.1 x 1.2 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 4.9 out of 5 stars  See all reviews (7 customer reviews)
• Amazon Best Sellers Rank: #503,163 in Books (See Top 100 in Books)

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6 of 6 people found the following review helpful:

5.0 out of 5 stars The Doves of Mars in China, September 12, 2010

By 

Hugh Murray - See all my reviews
(REAL NAME)   

This review is from: Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China's Consumers (Hardcover)

The Doves of Mars in China
While teaching at a university in China, I was occasionally surprised by differences between American and Chinese societies. For example, few of my students knew how to swim; almost none used deodorant. Lawrence Allen's book makes me aware that in 1978 almost no one in China ate chocolate. More, he explains how Chinese were first exposed to chocolate after the horrors of Mao's economic experiments left millions starved, and tens of millions more uprooted. In 1978 Deng Xiaoping sought to rebuild China's economy in a one-party state by encouraging trade with the West and allowing some Chinese to engage in individual enterprise.

After decades of Mao's government-inspired chaos and corruption, - disrupting agriculture to the point that millions starved, crippling older industries, closing schools, humiliating any who showed initiative, - Deng pointed China in a new direction. Not only would there be opportunity for Chinese entrepreneurs (if they could make appropriate deals with government/party bureaucrats), but the new policy would also permit greater trade with capitalist nations (again, they might have to make deals with Chinese officials).

For the West, the hope to sell to a billion new customers various products was tempered by the realization that there would be many problems in winning that market. To a people more familiar with Red Guards than Right Guard, how do you sell them deodorants? Allen's book asks that very question about chocolate. Chocolate was not part of the traditional Chinese diet. It was as alien to them as underarm protection.

However, the hope of selling chocolate to a billion more customers stirred some of the world's largest candy makers to enter the race to become the favorite confection of the Middle Kingdom.

As a spoilt American I had never considered the problems of attempting to sell candy bars to China in 1978. The problems were not merely bureaucratic. The law regarding private property was beginning to evolve. The infrastructure of the nation was inadequate, even when the dream of most was to acquire not an automobile but a bicycle. In such a nation, air-conditioning and refrigeration were rare. In hot weather, and without air-conditioned facilities, chocolate melts and it is unappetizing for consumer. Supermarkets did not exist in China, and in many stores, the customer would tell the clerk what he wanted to purchase, and the clerk would go in the back, find the item(s) and sell it to the purchaser who would then depart without seeing the full inventory of the store. There was no browsing through the aisles for an item - like chocolate - to be bought on impulse.

With the relaxed atmosphere under Deng, it was easier for those who had fled Communist China and who had settled in Hong Kong to visit relatives on the mainland. Many would visit during the traditional Chinese holidays, Chinese New Year's (January or February) and the Moon Festival holidays in September or October. This was a time for gift giving. An Italian company had recently expanded into the chocolate business, and its Ferrero Rocher chocolate boxes were expensive, with the chocolates wrapped in individual gold foil. These had already made headway in Honk Kong, and now individuals took them as gifts to relatives in nearby provinces. Ferraro Rocher, began to follow along, trying to place its expensive, exotic treats in high-end stores as they emerged, first in the South, and then in Shanghai, Beijing, and other large cities as markets and malls began to open. Ferrero Rocher aimed to be an expensive gift sold mainly during the holidays (when the weather might be cooler). With its modest aim, Ferrero Rocher succeeded and expanded with the growth of malls and the Chinese middle class who could afford a luxury chocolate. The Italian chocolatier won its modest niche in the Chinese market.

Most Chinese were not high-end consumers, however. Other corporations sought to entice the Chinese to buy and consume their candies, not as gifts for others but for individual enjoyment. Britain's Cadbury built a factory in Beijing determined to expand its Milk Chocolate bar from the Hong Kong colony to the opened Chinese mainland. Unfortunately, the milk used in its chocolate bars, bought from Chinese dairymen, was inferior, and the Cadbury candy emerged as a chocolate that tasted like cheese. The bar was rather large, and too expensive for many Chinese to experiment with. Some who did were disappointed with the taste. Cadbury's growth was stunted and the brand name tainted.

America's Hershey also entered the fray for the Chinese market. Like Ferrero Rocher, it built no factory and instead imported its products. Within a few years Hershey's Kisses caught on with the public. The unusual shape and the silver foil individually wrapped chocolates were appealing. Furthermore, sold in packs of four, Kisses were cheaper than the competitors larger bar candies. Just as Hershey was achieving momentum in the expanding Chinese market, decisions made in America altered the race. Pennsylvania changed the staff in China. There was suddenly chaos, bills were not paid, candies were not distributed, and Kisses disappeared from the shelves of the supermarkets and malls. Hershey kissed the China market goodbye.

Nestle, the Swiss giant, invaded the Chinese market on several fronts - baby formula, Nescafe (most Chinese had never drunk coffee), and food items. Nestle's chocolates arrived too, in the form of Kit Kat and a Nestle wafer candy. It too built a chocolate factory in China. However, to increase profits, there was little advertising for the candy products, and worse, the chocolate formula was altered, cheapened, so it differed from that in the West. Unfortunately, Nestles cheaper product tasted cheaper, and failed to maintain sales with competitors.

According to Allen, the American company, Mars, was victorious in the struggle to win the taste buds of the Chinese. Mars had traditionally manufactured chocolate covered nougat bars or peanut candies - Snickers, Three Musketeers, M&Ms. Only in the 1980s did it acquire the Dove ice cream company, and not until 1991 did it launch a chocolate bar of similar rich chocolate called the Dove bar. Dove was to provide its main thrust into China. Advertised as having a "silky smooth taste," the product lived up to its claims. Buyers preferred Dove to the cheesy Cadbury, or the cheapened Nestles. Mars' M&Ms, Snickers, but especially Dove began to dominate. Allen explicates how this was done; he even describes the uniforms of the cyclists who delivered the candies to the many kiosks and small stores.

I worked in a provincial capital a few hours by train from Beijing. (Shijiazhuang was a city about the size of Chicago, and I had never heard of it until I began teaching there.) Dove, Snickers, M&Ms, and occasionally Kit Kat were some of the candies I bought. But there was another that I thought was a French brand, Le Conte. It was similar to Dove, but cost about a third less, and it was not nearly as rich and sweet as the Dove. I preferred Le Conte. Only upon reading Allen's work did I discover that Le Conte is actually a Chinese firm. The foreign name is to give it cachet (after Mao's chaos, most Chinese assumed anything made in the West would be of higher quality than a domestic item. Another example was Haier, the maker of air conditioners, TVs, appliances, etc., from Qingdao. Because of the name, many assume it is a German rather than a Chinese corporation, which aids its sales in the West and in China).). Le Conte is not part of the big 5 chocolatiers discussed by Allen. But he does note that the battle for Chinese consumers is ongoing, and in the long run, a native company may well have an advantage over a foreign one. Might the next book have to count upwards to include a big sixth?

I am not an economist. Allen's book is an easy read that raises important questions about how to enter any market. He himself was an employee of Hershey and Nestle, and his account seems filled with insider knowledge. More, this book can be used to raise important questions of how to get any new product into any new market. In this book, warrior Mars used the peaceful Dove to win the Chinese confection affections. Simply, Allen has written a very good book.

3 of 3 people found the following review helpful:

5.0 out of 5 stars Great read for business school students, April 29, 2010

By 

Alexei Merkoulov (Chicago, USA) - See all my reviews
(REAL NAME)   

This review is from: Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China's Consumers (Hardcover)

This is a great read for anybody interested in real-life lessons of product category introduction into a market which had very little experience with chocolate. You get to know potential size of the market, distribution issues, consumer preferences and tastes at the time, major players, their strategies, pivotal decisions and, most importantly, results over past 10 years. You also get a glimpse at the internal culture of the players. The book details how the chocolate market in China has changed, how it has been segmenting itself over time, and where it might be headed in the future. It is an easy read too! Did you know chocolate is considered Yang food in China (page 23)?

2 of 2 people found the following review helpful:

4.0 out of 5 stars China - chocolate's last great frontier, March 16, 2010

By 

Adrenalin Streams (UK) - See all my reviews

This review is from: Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China's Consumers (Hardcover)

The author, Lawrence Allen, is a former senior executive of both Hershey and Nestle, and a long time veteran of the chocolate industry and of doing business in China. This book provides a fascinating account of how the big 5 chocolate companies, Hershey, Nestle, Ferrero Rocher, Mars and Cadbury, have attempted to establish successful operations in China since Deng Xiaoping kicked off the move towards a more open market economy in 1978. Starting with a chapter that describes the cultural and economic landscape with which the chocolate companies had to contend, Allen then examines in turn the strategy that each company pursued in trying to get a foothold on, and then dominate, the Chinese chocolate market. The challenges faced by the big 5 when they first started to move into China in the early 1980's were immense - bureaucracy, low disposable incomes, piecemeal distribution channels, poor raw material quality, very few outlets with refrigeration, language issues, lack of availability of local employees with the right educational background, and a population that had had very limited exposure to chocolate (with those that had seeing chocolate as a gift product and not as one bought for personal consumption). On the plus side, foreign goods were seen as prestige, the potential marketplace was enormous and, as the Chinese were virtual chocolate virgins, with a magnificent opportunity for companies to establish themselves as market leaders. Each company adopted its own approach, all made mistakes, some fundamental and devastating, but there have been major successes too, and Allen makes it clear who he thinks has won the first round in the competition for the hearts and minds of the Chinese public. Allen's overall conclusion is that to succeed in China, given the economic and cultural dynamics, companies need to be prepared to commit themselves for the long term and not seek quick wins. For those interested in chocolate as a subject and/or who are interested in what to consider when doing business in an evolving economy with huge cultural differences from your own, this book, with its practical case-study approach, is well worth investing in.