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  1. Analysis
March 17, 2011

Focus: Income and health drives China’s confectionery sector

China's confectionery sector enjoyed a strong 2010, with sales up 8%, driven by the chocolate category. Euromonitor International points to rising economic growth as a key factor for the sector's growth - and says increasing consumer awareness of health is driving demand for dark chocolate and functional gum.

China’s confectionery sector enjoyed a strong 2010, with sales up 8%, driven by the chocolate category. Euromonitor International points to rising economic growth as a key factor for the sector’s growth – and says increasing consumer awareness of health is driving demand for dark chocolate and functional gum.

Rapid economic growth and an increasing awareness of health is driving demand for confectionery categories in China. Products such as chocolate confectionery and functional gum are becoming mainstream indulgences in urban areas. This trend is being underpinned by higher disposable incomes among middle-class consumers, who are turning to snacks offering not only indulgence but also health properties.

Retail value sales of chocolate confectionery in China rose by 8% in 2010 to reach US$1.3bn, while volume sales also increased by 8%. Chocolate is the most dynamic category within confectionery and, compared with other confectionery categories, it achieved the fastest growth in both volume and value terms in 2010. Demand for chocolate confectionery benefited from strong economic growth and the rapid expansion of middle-class consumers in urban areas, who account for most consumption of chocolate products in China. 

Countlines witnessed the fastest value growth (+18%) within chocolate confectionery in 2010, according to Euromonitor International’s estimates. Due to mounting pressure from rising production costs, many companies have had to raise their prices or reduce their relative costs in order to maintain profitability. However, most countlines are partially filled chocolates and have lower production costs, making them popular among manufacturers. Furthermore, countlines come in many flavours from which consumers can choose, and it is a category characterised by continuous new product launches. Due to intensive promotions and advertising campaigns, brands such as Nestlé Wafer, Kinder Country, Snickers and Oreo Wafer all achieved double-digit growth in value shares in 2009.

Dark chocolate recorded strong growth in 2010 due to its health-related benefits: it has a lower fat content compared to other types of chocolate and is therefore particularly favoured by female consumers. In addition, dark chocolate producers claim that it can increase antioxidants in the blood, thereby preventing high blood pressure and heart disease. Therefore, companies such as Mars (China) and Ferrero China launched Dove Xinshui dark chocolate and Ferrero Rocher Lang Mu respectively in late 2009 and 2010. In contrast with the rapid growth of dark chocolate, plain white chocolate declined in 2009 and 2010, mainly thanks to its relatively high fat content.

Sugar confectionery achieved growth of 3% and 4% in retail value and volume terms respectively in 2010, according to Euromonitor International’s estimates. With the melamine contamination scandal fading away, as well as the country’s economic recovery, both retail value and volume growth were slightly faster than in the previous year. 

Pastilles, gums, jellies and chews remained the most dynamic category within sugar confectionery in 2010, recording an 8% increase in retail value sales. These products are very popular among young consumers due to their great variety in terms of packaging design and flavours. For instance, Frutips, launched by Nestlé (China) in 2008, offers eight different flavours (orange, lemon, blackcurrant, apple, mango, litchi, strawberry and grapefruit). Due to the various tastes and different packaging, Frutips has achieved considerable growth since its initial launch. 

Lollipops recorded the second fastest growth within sugar confectionery, up by 5% in value, in 2010. Thanks to the bombardment of advertisements and intensive promotions, lollipops are increasingly being accepted by Chinese youngsters. Brands such as Chupa Chups, Alpenliebe Rich Milky Lollipop, Hsu-Fu-Chi and Pim Pom all saw impressive growth in their value sales. 

Health benefits underpin growth of functional gum 

Gum witnessed 4% growth in value terms, reaching US$2.2 billion, in 2010. Within the gum category, functional gum and sugar-free gum posted relatively strong value growth in 2010, whilst bubble gum and sugarised gum were characterised by slower growth.

Functional gum continued to be the fastest growing category, with 8% value growth in 2010. As Chinese consumers have become more health conscious, functional gum has gained increasing popularity among consumers. Many leading manufacturers have emphasised the health benefits of the ingredient Xylitol, either through packaging or advertising. For example, Extra Xylitol is promoted as offering “care for your teeth”, a slogan that has been widely used in its advertising  and packaging campaigns.

Sugar-free gum is another category which achieved considerable growth in 2010, with retail volume and value sales increasing by 7% and 6% respectively. Sugar-free gum is dominated by two foreign brands, Extra and Mentos, with the latter recording impressive growth in 2009 due to its unique packaging and cube shape, which is particularly attractive to young people. 

Sugarised gum experienced a slowdown in 2010, achieving a mere 0.3% value increase on the previous year. This was mainly due to fierce competition from functional gum and sugar-free gum, which are preferred by an increasing number of consumers in light of their health-related benefits.

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