Godiva, Others Hope For More Chinese [Chocolate] Consumption



Godiva hopes to have three branded locations in Shanghai by the end of this year

Godiva hopes to have three branded locations in Shanghai by the end of this year

Last month, we covered Beijing’s recently opened “World Chocolate Wonderland,” a lavish promotional event that included a chocolate Great Wall of China, hundreds of miniature chocolate terracotta warriors, and even a chocolate BMW-1 SUV. Organizers of the chocolate wonderland have said they hope the exhibition will promote wider chocolate consumption in the mainland market, where most of the world’s major chocolate brands have struggled over the past quarter century to gain strong footholds.

As Lawrence Allen wrote in his new book Chocolate Fortunes (book review), despite the inroads made by the “Big Five” chocolate brands (Cadbury, Hershey, Mars, Ferrero-Rocher, Nestlé) the Chinese chocolate market remains highly fragmented, geographically and culturally diverse, and dogged by uneven infrastructure and distribution networks.

However, as Howard Abe of global management consulting firm AT Kearney told China Daily, the chocolate industry seems to be finally seeing more positive growth in China. According to Abe, “The total size of the chocolate market in China in 2009 [was] approximately 7 billion yuan and is expected to grow about 11 percent a year through 2011.” An impressive figure, but the important thing to consider, as Allen’s book also points out, is that individual consumption of chocolate in China remains minuscule, with the majority of chocolate being purchased in gift boxes around holidays or special events.

Perhaps looking to cash in on the propensity of more cosmopolitan, urban Chinese to give expensive or boutique chocolate as gifts (and, increasingly, to eat for themselves), Belgian chocolate giant Godiva has aggressively sought expansion in the Chinese market. Having entered Hong Kong in 1998, Godiva decided to test the waters in the mainland last September, opening a store in Shanghai’s Grand Gateway Mall. Apparently satisfied with that store’s popularity, the company has announced that it plans to open two new flagship stores in Shanghai‘s swish Xintiandi area and at the Shanghai International Financial Center (IFC). According to China Daily:

The 300 sq m Xintiandi store, slated to be its biggest in the world, will have a very broad range of chocolates, chocolate-related desserts, and snacks and beverages, according to the company.

“We perceive that luxury brands are coming here and have done well with much growth and it’s a very big step for us, we will open the Xintiandi store some time in March or April of this year,” [Jim Goldman, president of Godiva Chocolatier Inc] said. The IFC outlet will open in April.

And in the eyes of Goldman, the Chinese market is the single most important given its size, as well as the growing wealth and appreciation of luxury products in the nation.

As the China Daily article notes, the success Godiva has had so far at its Shanghai location, and its optimism about planned locations in Beijing and Guangzhou, is no guarantee of success. As many chocolate brands — even very established companies like Hershey — have found out, the China chocolate market is unlike any other in the world, and even the most well-capitalized companies must essentially start from scratch when mapping out a China strategy.

However, one thing that Godiva certainly has going for it in China is that the company will likely be able to restrict its chocolates to branded retail outlets, and as such won’t directly compete with the larger chocolate brands, so won’t have to contend with the logistical nightmares that companies like Nestle and Mars struggle with as they distribute their products nationwide.