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The Pennsylvania State University Schreyer Honors College THE PENNSYLVANIA STATE UNIVERSITY SCHREYER HONORS COLLEGE DEPARTMENT OF AGRICULTURAL ECONOMICS AND RURAL SOCIOLOGY THE EMERGENCE OF THE CHOCOLATE MARKET IN ASIA CHELSEA E. FRANCIS Fall 2010 A thesis submitted in partial fulfillment of the requirements for a baccalaureate degree in Agribusiness Management with honors in Agribusiness Management Reviewed and approved* by the following: Spiro E. Stefanou Professor of Agricultural Economics Thesis Supervisor Theodore R. Alter Professor of Agricultural, Environmental, and Regional Economics Honors Adviser * Signatures are on file in the Schreyer Honors College. i Abstract The emerging economies of the Asian region, more specifically China and India, prove as ideal prospective markets for competitive firms in the global market landscape. Their large populations are experiencing greater purchasing power and increasing wealth after their governments recently opened their country‟s doors to foreign investment. As global firms flock to both Chinese and Indian cities, so too do large masses of the local populations in search of jobs. With large amounts of cheap labor and an emerging consumer market the size of the United States in both China and India individually, firms are looking to competitively penetrate these markets by establishing their brands and building market share to capitalize on the rapid growth of the region and further expand their international scope. The chocolate confectionery industry is one such market. With heavily saturated and stagnant markets in both Europe and the United States, the leading global firms hope to introduce their chocolate products to these emerging Asian economies. With chocolate‟s unfamiliarity throughout the local population, the main global competitors – Hershey, Cadbury, Nestle, Mars, and Ferrero – have each worked to stimulate demand at a local level. However, with differing backgrounds, histories, and firm structures, each of the firms have attacked the Asian markets of China and India in their own unique ways. Marketing, manufacturing, and procurement have proved as strategic endeavors to the success of a firm in these foreign markets, with marketing proving the optimal obligation for achieved success. Since the Asian consumers‟ palates are not attuned to purchasing, liking, or enjoying chocolate, their purchasing decisions are based on the experience the purchase ii provides. Chocolate symbolizes a Western indulgence for the new and previously impoverished consumers. With increases in income, these indulgences provide a way for consumers to indulge in their newfound financial freedom. The firms whose brands exemplify these product qualities of extravagance, luxury, and fun are more probable to succeed in these emerging Asian markets. Thus, firms are seeking to create brand experiences to perpetuate sales and to truly drive the growth of their chocolate business within the emerging economies of both China and India. iii Table of Contents List of Tables .....................................................................................................................vi List of Figures ...................................................................................................................vii Acknowledgements .........................................................................................................viii Chapter 1: Introduction 1.1 Statement of Problem ....................................................................................................1 1.2 Thesis Objectives ..........................................................................................................3 1.3 Thesis Overview ...........................................................................................................4 Chapter 2: Overview of Main Players: Asian Countries 2.1 Introduction ...................................................................................................................5 2.2 China .............................................................................................................................5 2.2.1 Introduction ....................................................................................................5 2.2.2 History ............................................................................................................6 2.2.3 Transformation ...............................................................................................8 2.3 India ............................................................................................................................11 2.3.1 Introduction ..................................................................................................11 2.3.2 History ..........................................................................................................11 2.3.3 Transformation .............................................................................................13 2.4 Japan ...........................................................................................................................18 2.5 Concluding Comments ................................................................................................19 Chapter 3: The Current Global Chocolate Market 3.1 Introduction .................................................................................................................22 3.2 The European and United States Market ....................................................................22 3.3 The Asian Market .......................................................................................................24 3.3.1 Overview ......................................................................................................24 3.3.2 China & India ...............................................................................................24 3.3.3 Japan ............................................................................................................28 3.3.4 Comparison ..................................................................................................29 3.4 Concluding Comments ................................................................................................30 Chapter 4: Overview of Main Players: Chocolate Firms 4.1 Introduction .................................................................................................................33 4.2 The Hershey Company ...............................................................................................33 4.2.1 Overview ......................................................................................................33 4.2.2 Asia ..............................................................................................................36 4.3 Cadbury Limited .........................................................................................................37 4.3.1 Overview ......................................................................................................37 iv 4.3.2 Asia ..............................................................................................................39 4.4 Nestle S.A ...................................................................................................................40 4.4.1 Overview ......................................................................................................40 4.4.2 Asia ..............................................................................................................42 4.5 Mars, Inc .....................................................................................................................43 4.5.1 Overview ......................................................................................................43 4.5.2 Asia ..............................................................................................................44 4.6 Ferrero .........................................................................................................................46 4.6.1 Overview ......................................................................................................46 4.6.2 Asia ..............................................................................................................48 4.7 Concluding Comments ................................................................................................49 Chapter 5: Marketing Strategy & Globalization 5.1 Introduction .................................................................................................................51 5.2 Target Market ..............................................................................................................51 5.3 Products .......................................................................................................................54 5.3.1 Overview ......................................................................................................54 5.3.2 Hershey ........................................................................................................54 5.3.3 Cadbury ........................................................................................................55 5.3.4 Nestle ...........................................................................................................56 5.3.5 Mars .............................................................................................................58 5.3.6 Ferrero ..........................................................................................................58
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