If Hershey arrived in China later than some rivals, it has more than made up for lost time since, delegates at the Food Technology & Innovation Forum in Chicago learned this week.
And a key part of its success has been its ability to tailor products and packaging to local tastes, said global product development VP Dr Jorge Bouzas, who gave a presentation at the conference Tuesday. (Click here for more on the conference)
After extensive testing with 3,000 consumers in three major cities, Hershey quickly discovered that Chinese consumers like chocolate that is smoother, and "significantly less sweet" than their US counterparts, he said. So it reformulated its product accordingly.
Chinese consumers also love gold, prompting Hershey to switch to gold, instead of silver, foil to wrap up its Kisses in China, he revealed.
Shanghai R&D center was built in just 10 months
Much of his presentation was devoted to Hershey’s new Asia innovation center in Shanghai, which was constructed in just 10 months - compared with the standard three years for projects of this magnitude, he said.
While construction work was progressing, meanwhile, Hershey recruited a group of Chinese R&D experts to staff the center and brought them over to Pennsylvania to gel with their US counterparts and get to know how Hershey operates.
In turn, they were able to share their insights and expertise with Hershey’s US team and cross pollinate, he said, pointing out that Hershey had achieved a compound annual growth rate of 84% in China in the past five years.
“Our growth in China has been phenomenal.”
China will be the number two market behind the US for Hershey within five years
According to chief growth officer Michele Buck, Hershey is “placing a big bet in China”, which is set to be its number two market behind the US within five years if current growth rates continue.
Speaking at the recent Consumer Analyst Group of New York (CAGNY) conference, Buck said bosses had tailored packaging as well as products to meet local preferences.
She added: “We evolved our Kisses packaging to better suit the expectations and needs of the China consumer. We’ve also expanded our gifting offerings, especially for the Chinese New Year. And we’ve created a new chocolate opportunity, leveraging the special attributes of Kisses, to participate in the wedding channel business that is highly unique to this market.”
The mint category is growing faster than chocolate in China
Meanwhile, the mint category, while small, is growing faster than chocolate in China, she said, noting that Hershey entered this category last April with the launch of Ice Breakers mints in Shanghai and Chengdu.
“With flavors to suit the Chinese palette and in-store activation we are seeing solid performance, with half of the line performing in the top 25% of the mint segment, in terms of velocity.
“Our plans are to build on this foundation, expanding Ice Breakers to more cities over the next few years.”
Additional products will also be introduced later this year, she said: “We will be broadening our line and refreshments, gifting with a new Kisses deluxe item, and bringing our successful hand-to-mouth platform to China, all in 2013.
“We're building distribution, deepening store penetration and expanding to surrounding cities, we have appropriately invested to build a sales team to enable strong distribution and merchandising.
New plant in China
Hershey has reached capacity at its current plant in China that it holds in a joint venture with Korean firm Lotte and plans another factory in southern Asia that should be operational in 2014/15.
Click here to read more about the 2013 Food Technology & Innovation Forum, which was organized by WTG Group.