Setting a course for China
This past July, Mars, Inc. announced a partnership with Alibaba, the Chinese on-line and mobile commerce company, to sell products in China. Mars brand foods will be available on Alibaba’s on-line platforms, Tmall and Rural Taobao. As part of the partnership, Mars said it plans to use Alibaba’s marketing services to improve its efficiency. Many of Mars’ brands already have been successful on Tmall, the company said.
A month later, Mondelez International announced its entrance into what it said is China’s $2.8 billion chocolate market. Sales of the company’s Milka brand will begin this month with more than a dozen core products, alongside special editions created for seasonal occasions, according to the company.
|Tim Cofer, chief growth officer at Mondelez|
“When we launched our growth plan last year, we said we’d focus on geographic white spaces where we could accelerate the growth of our core categories and power brands,” said Tim Cofer, chief growth officer at Mondelez. “This is a perfect example of that plan in action — launching a snacking category where we’re already a world leader into an emerging market where we have an established, successful presence.
“We see enormous potential for the growth of the chocolate category in China, where consumption today is low — even by emerging market standards. We expect our industry-leading innovation, manufacturing, sales and marketing capabilities to attract more consumers, more often — growing our business and the category.”
Mondelez has been doing business in China for over 30 years, said Stephen Maher, president of Mondelez China. “In 2012, we entered the gum category in China for the first time and have now built this into a $200 million business with two much-loved brands,” he said. “The strength of our iconic Milka brand, combined with a winning recipe uniquely designed for Chinese consumers gives us great confidence that we’ll be successful with chocolate in China, too.”
In a conference call with financial analysts on July 27, chairman and c.e.o. of Mondelez said, “We have been planning this for some time … and one of the most important poles in that tent is local production. We have a factory now up and running in Suzhou, and it is ready to go.
|Irene Rosenfeld, chairman and c.e.o. of Mondelez|
“We have continued to monitor the marketplace to understand the opportunities, both in terms of our portfolio, as well as in our channels. Obviously, e-commerce is an important channel for us in China and our partnership with Alibaba is a critical piece of our launch plan.
“So it was frankly just the opportunity to get all the various elements together for the launch plan. But we think it is quite representative of the growth opportunity that we see in a number of our emerging markets.”
Yet not all companies have been successful in China. In 2013, The Hershey Co. acquired a stake in Shanghai Golden Monkey and later took full ownership of the company. At the time of the acquisition, Hershey said it expected China would become its second largest market by the end of 2015 with net sales of approximately $500 million on a constant currency basis.
In 2015, Hershey took an impairment charge of $249.8 million because the Shanghai Golden Monkey business was performing below expectations.
During the July 28 conference call with analysts to discuss Hershey’s second-quarter results, the company said its gross sales in China would come in below expectations.
“I think that the market in China as you’ve heard from a lot of companies is pressured,” Mr. Bilbrey said during the conference call. “I think we would align with that. The consumer obviously has to show up, but we feel good about where we are at. And we will continue, though I would say to as I’ve said before, (we will) make sure we are right sizing all of our businesses to the opportunities.”