INDUSTRY ANALYSIS

 

The chocolate industry in China is very consolidated. The top 3 companies account for 67% of the retail value sales. Currently, the main competitor is the leader of the market, Mars Foods (China), which has a wide range of chocolate products under its brand. It captures 39.5% of the whole market in 2014. Ferrero China, Shanghai Hershey Food Co and Nestlé (China) Ltd  are valuable competitors that combined represent 33.69% of the whole chocolate market.  There are other chocolate brands in the market that became popular within the industry, like COFCO Le Conte Food, Cadbury (China), Fuijian Yake Food Co and Meiji Seika Food, because of their unique flavors. These other brands have failed to reach the success that the leading companies like Mars or Ferrero have enjoyed.

 

BUYERS

 

The Chocolate market has been stable and growing, showing a 40% growth since 2009. Godiva calls China one of its two most important markets, since dark chocolate is thriving here. Most premium chocolates are bought as gifts, with the peak seasons being Christmas and Lunar New Year. Consumption on average in China is very low compared to Western countries, being between 50 and 100 grams annually. There are only roughly about 100 million true consumers of chocolate in China. Despite this, chocolate consumption is increasing 10-15% a year. Also, chocolate consumers put taste as the most important factor. What all this means is that buyer power is not very consolidated and the price is somewhat inelastic.          

 

SUPPLIERS

 

Chocolate manufacturing is an art, a very complex process that involves highly skilled professionals and expert tools. Furthermore, mass production of chocolate involves specific types of machinery for which there are not many suppliers who can provide it. The bulk commodities necessary to produce chocolate are vital to delivering high quality product. Such commodities are cacao mass, cacao butter, nuts, carton for packaging etc. There are many different suppliers that can provide packaging material at competitive prices. However quality cacao is scarce at the moment. It is expected that by 2020 that demand for chocolate will be 1 million tons more than the produced cacao per year. This will result in a significant increase in the price of the bulk material in the near future. The pressure of the suppliers can be translated into higher prices or more favorable terms, affecting the industry profitability. Therefore Senz has to be very good at playing the game and establish an excellent relationship with its suppliers in order to be competitive in the market.

 

SUBSTITUTES

 

All the substitutes’ products can hit the company’s profitability by taking its consumers and affecting long term consumption habits. This is the chocolate industry we are talking about, so it’s crucial to consider that there are plenty of products which can be seen as substitutes. It’s not just sweets or candies, but healthy replacements for a sweet tooth since people are becoming more concerned about nutrition.

 

Another factor to take into consideration is that chocolate is somewhat of a seasonal product, which means that in some periods of the year the sales are larger than in others. This seasonality makes the amount of substitutes even bigger since people can purchase other kind of product instead of just chocolates or snacks in general. For example, for anniversaries or birthdays, during Easter, Christmas, Valentine’s Day or Halloween,  when chocolate is highly valued as a commodity. However, substitutes such as flowers, stuffed animals, fruits, and even clothes can become as threat.

 

Senz is not only facing the same competition that regular chocolates face but it goes head to head with the healthy snacks field. People who buy regular chocolates are not as health conscious as those who buy dark chocolate. This fact opens up another discussion in terms of competitors. Senz is going to face with nutritional shakes, cupuaçu, dried fruit, protein bars, and so on.

The list of potential attackers of the brand (split by trends):

 

Regular Chocolate Substitutes:

• Non-chocolate snacks

• Ice cream

• Mooncakes

• Peanut butter

• Potato Chips

• Sweet Pastry

• Wrigley’s

 

Dark Chocolate Substitutes (Healthy Products):

 

• Fruits

• Nutrition shakes

• Dried fruit

• Cupuaçu

 

Chocolate As A Gift:

 

• Stuffed Animals

• Flowers

• Fruits

• Clothes

 

NEW ENTRANTS

 

With the growing prosperity of China, a rising middle class is being established. These consumers have financial stability, are getting more health conscious and are hungry for Western products.  European chocolate is a product that is a status symbol of success. Therefore the demand for it is constantly rising globally and . China is the main player for chocolate consumption in the world. This makes the industry very attractive for new entrants and competitors who want to increase their market share. At the moment there are several powerhouses already established on the market such as Godiva, Neuhaus and Hershey`s. However there are other brands such as Ritter Sport and Leonidas who have not yet looked East. Moreover it is possible that higher end brands decide to enter Senz territory in order to increase their revenue.