Jing Book Review: Chocolate Fortunes By Lawrence L. Allen

    Lawrence L. Allen's Chocolate Fortunes -- a masterfully written journey into the "Chocolate Wars" of the '80s and '90s -- should be required reading for anyone even remotely interested in doing business in China.
    Jing DailyAuthor
      Published   in Finance

    CHOCOLATE FORTUNES: The Battle for the Hearts, Minds, and Wallets of China’s Consumers (AMACOM; October 13, 2009; $27.95 Hardcover) By Lawrence L. Allen#

    How do you sell something as culturally ingrained as chocolate, a product all but taken for granted throughout the Western world, to a country with 1.3 billion potential customers, hundreds of millions of whom have never tasted chocolate and even more who have never even heard of it? This is the question at the heart of Lawrence L. Allen's book Chocolate Fortunes (AMACOM, 2009), a true-to-life account of the so-called "chocolate wars" waged among the five superpowers of chocolate — Hershey, Nestlé, Cadbury, Mars, and Ferrero Rocher — for the hearts, minds, and taste buds of China's emerging consumer class.

    Allen, a former chocolate executive for two of the “Big Five” chocolate companies in China, takes his reader on a fascinating ride through the surprisingly fierce chocolate battles of the 1980s through the present day, examining in great detail the successes and failures experienced by the "Big Five" as they first struggled to enter the Chinese mainland, then to reach urban markets and consumers and finally to convince these consumers to spend a premium on a product few had even heard of. Along the way, these Big Five companies encounter miles of red tape and a labyrinthine bureaucracy, shadowy distributors and middlemen, ever-changing trade rules that nearly strand cargo containers on loading docks, sub-par milk that gives their domestically produced chocolate a revolting smell, internal power struggles, Chinese copycat brands, and a largely unrefrigerated supply chain that threatens to liquefy their inventory before it could even reach the consumer.

    Throughout Chocolate Fortunes, Allen shows a keen understanding of the not only China's burgeoning consumer market, but also Chinese culture, by calling attention to the fact that chocolate, as a foreign product in every sense of the word, is not a natural fit for the China market. As chocolate producers soon found after their arrival in the Mainland in the early 1980s, chocolate -- much like all rich and sugary foods -- is considered "heaty" in traditional Chinese pharmacognosy terms, and thus for many Chinese is considered something to only be consumed in the colder months. As Allen writes, although younger generations in China may not be as convinced of these pharmacognosy concepts as their parents or grandparents, the idea of "yin" and "yang" in food is an important factor in when Chinese consumers will purchase chocolate and how much of it they will choose to eat:

    Yin is described as the body's being in a "cool" condition, and Yang, the "heat" state, both of which can be regulated by the kinds of foods consumed. Being out of balance is considered toxic, resulting in various conditions and afflictions...Whether these beliefs are scientifically sound was irrelevant insofar as the chocolate companies were concerned. The vast majority of Chinese believe it and the question, therefore, was how it would affect the way they consumed chocolate. The principal impact was that people dramatically reduced their chocolate consumption during summer months, believing that "heaty" foods like chocolate should not be consumed when the weather was hot. (24)

    In addition to showing the cultural aspects of chocolate consumption and gift-giving, Allen gives his reader an invaluable introduction to the world of business in China, vividly illustrating the "Wild West" atmosphere that prevailed in the early years of the Big Five's entrance into the Mainland market. Splitting the book up into chapters dedicated to each company, Allen actively illustrates the successful as well as the disastrous techniques employed by different chocolate companies, which hailed from around the globe. From Ferrero Rocher's time-tested strategy of producing only in Italy and showcasing their product in ostentatious plastic containers suitable for Chinese gift-giving, to Hershey's accessible and attractive Kisses, to the localization plan that nearly sabotaged Cadbury's chances in the country, onward to the myriad management follies and eventual capitulation of Nestlé and the successful investment and product development initiatives employed by Mars, Allen captures the true essence of business in China -- the way that it differs for every company, even for companies in the same industry selling virtually the same product, because different parts of the country are drastically different from one another:

    To reach these new waves of consumers, and to stay ahead of aggressive local competitors...the Big Five must push ever farther and deeper into China's emerging retail stores in second- and third-tier cities, using the same store-driven approach as they used successfully in the first-tier cities. However, given the geographic reach of these new markets, which number in the hundreds, the challenge will be significantly more complex. And it is this trend, continually unfolding over the coming decasddes, that defines China s a multitier market: one nation with people at distinctly different stages of development. (219)

    Ending on a reflective note, Lawrence notes that the story of chocolate in China is still in its first chapters. Despite the struggles faced by the Big Five in entering and developing a strong footing in the Chinese mainland, Lawrence is quick to note that new challenges will always face chocolate companies in China -- from the low recognition and inadequate infrastructure that still dogs companies in more remote markets to new threats in the form of domestic Chinese chocolate producers who consistently undercut the Big Five on price and unforeseeable challenges such as last year's melamine milk contamination scandal. Through it all, Chocolate Fortunes gives anyone who is interested in doing business in China a crash course in how flexibility, cultural understanding, an ability to localize strategy and think in drastically different ways are all key to success in the China market, and even then, success is always tenuous due to the ever-changing character of China.

    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.

    CHOCOLATE FORTUNES The Battle for the Hearts, Minds, and Wallets of China’s Consumers Author Lawrence L. Allen Publication Date October 13, 2009 Price $27.95 Hardcover ISBN 978-0-8144-1432-3 Pages 256 Publication Website


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