Chockablock with sweet success

Western companies are cashing in by satisfying Chinese consumers' cocoa cravings

For chocoholics it was no doubt a dream come true: a landmark department store throwing open the doors of a swish new cafe laden with displays of the finest Belgian chocolate, pastries and drinks - including thick, decadent chocolate, of course - to wash it all down.

And for Chinese shoppers who have visited the cafe in the London department store Harrods since it opened in June, there may have been something vaguely familiar about it. It is an outlet of the chocolatier Godiva, which opened a similar shop in Xintiandi, the entertainment enclave of Shanghai, in 2010.

"My view is that China has a huge potential market, and we feel that we should allow Chinese consumers to feel the chocolate experience," says Godiva's international general manager, Mohamed Elsarky.

"If you're in Belgium you see chocolates everywhere. Similarly, if you sit in our Xintiandi cafe you feel chocolates around you, you taste some chocolate pastries and chocolate drinks, and then you start to know what our brand is all about."

The cafe's signature items include milk and dark chocolate sin cake, hazelnut delice, chocolate fondue drawn from a forever cascading flow of molten chocolate and chocolixir, a combination of ice-cream, ganache and chocolate.

The entrancing flow of smooth, dark, rich chocolate, in particular, enticed China's burgeoning middle-class consumers, and when Elsarky went to Shanghai to check on the cafe, he could not even find a seat.

"But I don't mind, I'm happy," he laughs.

Well aware of the importance of the shopping experience in China, Godiva decorated all its retail stores in the country with elegant dark chocolate colored walls, in a Belgian art nouveau interior design.

"It makes a big difference to how people feel when they enter the store," Elsarky says.

Since Godiva entered China three years ago, 21 retail stores have opened. Elsarky says Godiva, which was bought by the Turkish company Yidiz Holding in 2007, plans to extend its store network in China to include about 33 shops across nine cities by the end of this year.

That may seem incredibly fast, but Elsarky stresses that Godiva is picky about locations for its new stores, typically opting for upmarket shopping malls and high streets of commercial districts.

"We want to make sure that when new shops open, they open to high standards."

As with other goods and services, China has experienced a boom in chocolate consumption in the past 30 years, although it is still seen as a largely untapped market by international chocolatiers.

According to the British market research firm Mintel Group Ltd, in China people consume 180 grams of chocolate a year each on average; in Switzerland the corresponding figure is 10 kilograms.

But last year retail sales of chocolates totaled $1.1 billion (898 million euros), and Mintel reckons that the market will have grown 11 percent a year between 2010 and 2014. World Trade Organization figures highlight the industry's growth in China. In 2003 the value of sales was $49.2 million, whereas in 1999 it was $17.7 million.

"It's not that Chinese people didn't like chocolates before, but that they are discovering chocolate as it becomes increasingly available," says Crispin Reed, managing director of the British consultancy Brandhouse.

Since the late 1980s multinational chocolate brands have entered China's market one by one.

The US brand Mars is now the most successful, with a 40 percent market share, followed by the Swiss brand Nestle, 11 percent, and Italian Ferrero, 9 percent, according to Euromonitor data last year. Following closely behind are Cadbury and Hershey.

"There's a cachet about Western products in the same way that French wine or Cuban cigars are popular in Britain," Reed says.

Because Godiva markets itself as a more premium brand than Nestle and Mars, its strategy of opening a cafe for customers to experience its culture is "brilliant", he says.

"I think this is what I'd call three-dimensional branding, because you have the product itself, you have it online, and then you have a retail presence."

Another aspect of branding that Reed says is important in China is designing special packages for Chinese cultural festivals.

"For many brands it's the way into the market and will create stickiness with the brand."

Reed has advised Dove, a subsidiary brand of Mars, in China for more than eight years, and he says Dove has taken care to produce elaborate Chinese New Year gift packs with three layers.

"It's not about immediately discovering what the gift is, but embellishing it and surrounding it so it enhances the ritual of the opening."

Unlike multinational chocolate brands, local competitors such as Golden Monkey and Leconte are still finding it hard to gain premier-brand recognition among Chinese consumers.

Their cost advantages received a further blow when the world's largest chocolate manufacturer, Barry Callebaut, opened a new factory in Suzhou, Jiangsu province, in 2008.

Economies of scale reduced Barry Callebaut's overheads, and it later became an original equipment manufacturing supplier for about 15-20 percent of the chocolate that Cadbury, Hershey's and Nestle produce worldwide.

As a testimony to Barry Callebaut's commitment in China, the brand moved its Asian headquarters from Singapore to China, also in 2008.

Despite the cost advantage of making chocolates in China, Godiva insisted on importing chocolates from its Belgium factory to justify its premium pricing strategy in China.

"It is an important part of keeping the authenticity of the chocolates," Elsarky says.

Ninety-three percent of what Godiva makes in Belgium is exported, the US and Japan being the biggest markets, although Elsarky expects China eventually to supplant them.

"We treat China as the priority market," says Elsarky, who led Godiva's China expansion when he joined the company in early 2010.

Having come into contact with China's food industry through his previous jobs at the cereal brand Kellogg and the crackers brand Jacob's Bakery, he immediately recognized the opportunity China presented to Godiva.

"I think the food market in China has evolved significantly in the last 20 years in terms of the variety of products locally and from overseas," he says, adding that the size of the market means there is always room for new brands.

He says he believes Godiva's strategy of building a luxury brand in China has been successful, because loyal customers often praise the brand's authenticity.

"Some Chinese consumers who travel to Brussels tell us upon return that the offering in China is exactly the same as in Brussels."

Part of that success can also be attributed to the mystique engendered in Chinese consumers by the company's name and logo, he says.

The brand was named after the legendary Lady Godiva, an 11th century Anglo-Saxon noblewoman said to have ridden naked through the streets of Coventry in an effort to gain remission for tenants from an oppressive tax imposed by her husband.

In honor of the legend, the Godiva chocolate brand was founded in Belgium in 1926. It now has more than 600 retail shops across the United States, Canada, Europe and Asia.

To share with its Chinese customers the brand's passion for the art of chocolate making, as well as to increase interaction with the customers, Godiva often puts on chocolate making classes. The classes, typically lasting two-and-half hours, allow students to take part in the entire chocolate making process.

Another Godiva service that recently became available in Shanghai is home delivery, sending the chocolates in a gold-colored van.

"China is growing faster than anyone can keep up with," Elsarky says. "We just want to make sure that we expand our brand in the right way."

Contact the writers at cecily. liu@chinadaily.com.cn and zhanghaizhou@chinadaily.com.cn

(China Daily 07/27/2012 page19)