See the brand, and you’ll like it. The Influence of Brand Information on Chocolate Preferences of Chinese Consumers The First Conference on Economics and Politics of Chocolate LICOS, September 16-18 2012 Di Mo and Johan Swinnen LICOS, K.U. Leuven Linxiu Zhang Center for Chinese Agricultural Policy, Chinese Academy of Sciences Scott Rozelle Center for Food, Security and the Environment Stanford Center for International Development Stanford University
Over the millenniums, the Chinese had developed a wide range of cuisines and snacks. “Food is what matters.” --An old Chinese saying
Chocolate is new to Chinese. Before China’s economic reforms in 1970s and 1980s, almost no one in China had tasted chocolate (Allen, 2010). Too sweet…
Although there are many fresh and enthusiastic chocolate fans, on average they only consume 100 grams per capita in 2008.
1 to 100 Ratio!! Germany = 100 China = 1
However, China’s chocolate market has been growing rapidly. From 1996 to 2005, per capita consumption of cocoa grew at about 6% per year (ICCO, 2010). It grows faster at 9% after 2007. Source: ICCO (2007) & National Bureau of Statistics of China (2011)
And China’s chocolate market is expected to accelerate in the future, growing by 10% to 15% per year (Buffy, 2011). Source: Euromonitor, 2011
In 2010, total market size of chocolate in China was USD 1.4 billion (Euromonitor, 2011).It is believed that China could soon consume up to 7 billion USD per year(China Daily, 2004). Yes: lots of little chips can add up to a HUGE pile of chocolate!!
Such potential has made China market a battle field for the top 20 world chocolate producers , domestic producers and many other companies (Scott-Thomas, 2011). China now has around 250 chocolate companies with an annual production capacity of chocolate of 150,000 tons(Buffy, 2011).
China’s chocolate market • Who are the actors? • FDI • Imports • Domestic producers • How do they compete? • Branding strategies • Localization (adapt to Chinese culture and taste) • Technology and ingredients
The market is dominated by foreign brands. Imported (Ferrero,Godiva etc.) Domestic (LeConte etc.) FDI produced (Mars, Kraft, Nestlé, Hershey's, etc.) Source: CMMS (2010)
The foreign brands adopted various advertising and marketing strategies to build the brands. e.g. luxurious self-indulgence (Dove fromMars)
Some of these foreign chocolate brands have also tried to localize their taste and adapt to Chinese culture (Wood and Grosvenor, 1997). • Mars, Hershey’s, Cadbury (now owned by Kraft) and Nestlé set up factories in China. • They adapted their chocolate recipes by making them less sweet; and at the same time, more variety of “creamy” and “nutty” chocolates were created to cater to the Chinese taste.
They also designed products as unique gifts, using this as a cultural gateway (71% of chocolate purchase is for gifts in 2010).
During the past decade, a large number of imported brands have also entered China. It grew from $17.7 million in 1999 to nearly $50 million in 2003 (Asia Times, 2005). Consumers in China now have access to more than 70 imported chocolate brands in the nation’s large urban cities (Chocolate News, 2009). Belgian Truffles Côte d'Or milk chocolate
The prestigious Belgian brand, Neuhaus, opened its café in Shanghai, 2011. World’s largest chocolate and cocoa producer/supplier, Barry Callebaut, launched its branch in Suzhou, Jiangsu Province, 2008.
Domestic competitors have also joined the battle. • However, they are less competitive. • less-developed technology • low-quality ingredients • less sophisticated marketing strategies Fantastic photos … take your time … one photo per page …
A chocolate factory in Tianjing producing low-quality chocolates which were sold in more than four provinces in China.
The ingredients of chocolates The Tianjing factory The imported brand
A few domestic companies have managed to invest in the technology and ingredients. They have also emphasized Chinese culture and tradition in advertising to invoke the patriotism of consumers (World Executive, 2004). Through the efforts, LeConte, the chocolate brand of COFCO (the largest domestic food company), has reached a sale of 600 million USD in 2006.
So, how do consumers perceive these brands? • These brands differ in several aspects: • Source of chocolate (imported or locally produced) • Nationality of producer (foreign or domestic) • Branding strategies
On the one hand, consumers in China have been found to have strong preferences for foreign brands—both FDI and imported ones (Sin, Ho and So, 2000). • Higher quality , authenticity • (Li, Fu and Murray, 1997) • Social and symbolic values (Valentine’s, individualism) • (Li, Li and Kambele, 2012). On the other hand, foreign brands face the challenge of consumer patriotism. Chinese united, buy domestic!!
The literature suggests that brand information may affect consumer preferences: • Information about food products may shape the tasting experience of consumers (Deliza and MacFie, 1996). • Among the various information cues, brands have been found to influence consumer choice (Allison and Uhl, 1964; Aaker, 1992; Keller, 1993; de Chernatony and McDonald, 1998) • In developing economies, brands of new products from developed countries can be powerful sources of information (Carpenter and Nakamoto, 1989; Zhang, 1996)
More importantly, how different aspects of branding affect the preferences of consumers? • Experimental studies on brand information mostly simply compare consumer preferences of knowing and not knowing the brand of product (without much discussion on the different aspects of branding) (McClure et al. 2004; Wansink et al., 2000). • Those that do look at different aspects typically rely on case studies or focus group analysis (e.g. Delong et al., 2004; Chao, Wührer and Werani, 2005). • We need more empirical evidence.
Goal of the study • Test how different types of information that are associated with different brands affect the tastes and preferences of consumers. • Two Objectives: • First, we test if the preferences towards each brand change when consumers are informed about the brands* (non-blind condition) from the case when consumers are blind about the brands (blind condition). • *Brands are defined by distinguishing among source of chocolate (imported or produced locally), nationality of producer (foreign or domestic) and types of chocolate (milk chocolate or truffle). • Second, we explore if knowing the brands also affects the pair-wise rankings*of brands. • *Pair-wise rankings are used to reveal whether one brand is preferred over another brand (in order the test directly how the different information affects preferences).
Approach: we conducted a chocolate tasting experiment in Beijing. Beijing Municipality
We recruited participants from the Olympic Forest Park and Renmin University in Beijing.
We recruited a total of 234 participants to be included in the experiment. =234
Two Identical Groups Do not tell her the brands Tell her the brands 35
Two identical groups: blind and non-blind • Blind: the participants are not informed about the chocolate brands before tasting • Non-blind: the participants are informed about the chocolate brands before tasting
We used four brands of chocolate in the experiment. Domestic Milk Chocolate (represented by LeConte) Foreign-Branded Milk Chocolate/Produced in China (represented by Dove from Mars) Imported Milk Chocolate (represented by Côte d'Or) Imported Truffles (represented by Belgian truffles)
The three brands of milk chocolate have similar basic ingredients (in terms of percentage of cocoa mass, cocoa butter, milk etc.). • However, interviews after the experiment suggest that domestic brand has an unpleasant taste of milk that the foreign brands (FDI & imported) do not have, while the imported brand is a bit too sweet despite of the strong and nice flavor of cocoa.
Truffles are more different, and more exotic to Chinese consumers. • Truffles contain more cream and they are dusted in cocoa powder (using different production technology from milk chocolate). • Truffles have a different texture (softer) and taste (bitter coat made of cocoa powder). • It is advertised as one of the most prestigious types of chocolate in China. 感受巧克力传奇
In the experiment, there is only one difference between the two groups: • The non-blind participants received information about the brands before tasting; while the blind participants did not. Non-blind Group Blind Group Short survey Short survey YES: Information about the chocolate brands NO: Information about the chocolate brands Taste the chocolate samples Taste the chocolate samples Rank the chocolate samples Rank the chocolate samples
On the plate for the non-blind group, there were stickers on the edge indicating the chocolate brands. The non-blind participants were instructed to read the stickers before tasting. Brand names on stickers: LeConte (Domestic Brand) Dove (Foreign Branded/Produced in China) Cote d’Or (Imported from Belgium) Truffle (Imported from Belgium) No brand information Blind Group Non-blind Group
Participants of both groups were then asked to taste the chocolate samples from the plate. Non-blind Group Blind Group Short survey Short survey YES: Information about the chocolate brands NO: Information about the chocolate brands Taste the chocolate samples Taste the chocolate samples Rank the chocolate samples Rank the chocolate samples
Participants could not see the chocolate samples in either group. (The chocolate samples were served on a white paper plate with the chocolates covered)
After tasting, the participants were asked to rank the chocolate samples from the best tasting to the worst tasting. Non-blind Group Blind Group Short survey Short survey YES: Information about the chocolate brands NO: Information about the chocolate brands Taste the chocolate samples Taste the chocolate samples Rank the chocolate samples Rank the chocolate samples
The ranking by the non-blind participants of Chinese Domestic Milk Chocolate is lower than the blind participants. (When they are informed about the brands, they rank the chocolate lower). The difference is significant at 5% level.
The ranking of Foreign Branded Milk Chocolate/Produced in China are similar across the blind and non-blind conditions.
The Imported Milk Chocolate is ranked higher by participants that were in the non-blind condition than those in the blind condition. The difference is significant at 10% level.
Imported Truffles are ranked higher when participants were informed about the brands. The difference is significant at 5% level.
In summary, the ranking of Chinese Domestic Milk Chocolate is lower for the non-blind participants than blind participants; In contrast, the ranking of Imported Truffles is higher for the non-blind participants. Chinese Domestic Milk Chocolate Imported Truffle