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Monday, December 26, 2011
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Tuesday, December 20, 2011
China's Chocolate Market Dominated by Foreign Brands
Foreign chocolate brands such as Dove, Cadbury and Hershey's have now captured about 70% of the Chinese chocolate market. As Barry Callebaut, the world's largest chocolate manufacturer with 25% of the global market, recently opened its first chocolate factory in China in Suzhou City, the top 20 chocolate companies in the world have now all entered the Chinese market. But in the face of global competition, China's local chocolate companies have been further suppressed down the value chain.
Second largest chocolate market
As the CHF 4 billion-revenue-per-year Barry Callebaut set up its first production line in Suzhou, a complete multinational chocolate industry chain is also emerging. Industry insiders suggested that this would be a blow to local Chinese chocolate companies in this globalized competition. It further indicated that keeping up with international competition is particularly important, or the Chinese industry chain will become even more vulnerable.
In recent years, the global chocolate market has notably slowed down, with only 2-3% growth per annum. This is mainly because per capita chocolate consumption in developed countries is already at a high level, averaging 11 kg. On the other hand, China's per capita chocolate consumption is only 0.1 kg, and its domestic chocolate market has been growing at a staggering 10-15% per year, with an estimated market potential of US.7 billion. Thus China has become the world's second biggest chocolate market only behind the US. The world's top 20 chocolate companies have all entered China, and there are more than 70 imported or JV chocolate brands in today's Chinese market.
Barry Callebaut has made it clear that they are coming to share and participate in China's economic growth. It plans to build the Suzhou factory into the largest among its 38 factories globally, and achieve a 6-fold sales increase in the next five years via the Suzhou factory's high capacity. "We hope we can fully utilise this factory's capacity to rapidly increase output from 25,000 tons to 75,000 tons, making it the world's largest chocolate factory," said Barry Callebaut CEO Patrick De Maeseneire.
Multinational ambitions
It is understood that Barry Callebaut's new plant in Suzhou will become the company's Asia-Pacific headquarter, as well as a sales network centre for serving China and multinational food manufacturers and specialised customers. Major brands, such as Cadbury, Hershey's and Nestle, all currently have large quantity of outsourcing manufacturing contracts with Barry Callebaut, whose OEM output of cocoa liquor and chocolate products amounts to 15-20% of each of the three major brands' annual output. So the Swiss Barry Callebaut is indeed the Big Brother of the global chocolate industry.
In fact, even before the arrival of Barry Callebaut, China's local chocolate companies had already been losing market shares to multinational competitors. The US Hershey's has determined to plough the Chinese market, planning to achieve 23% share of the local market by 2010 and the runner-up position in China. Meanwhile, Korean and Japanese chocolate producers are also accelerating their entry into the Chinese market.
Local companies not in the local market
Although the rapidly growing Chinese chocolate market is good news for its local chocolate companies, Chinese consumers today are frequently referring to foreign brands such as Dove, Cadbury, Hershey's and Ferrero but seldom mentioning local brands.
As a foreign product, China only has a chocolate manufacturing history of less than 50 years, so there is inevitable gap behind foreign brands in terms of production techniques and technologies. Due to inappropriate processing equipment and incomplete production facilities, product quality assurance is difficult for many local chocolate companies. Furthermore, most Chinese chocolate companies are weak in product R&D, resulting in slow product changes and updates. At present, most local chocolate companies are stuck in an embarrassing situation of low product quality.
The above industry issues have costed local companies' opportunities to participate in the competition for the Chinese chocolate market. Multinational chocolate brands have come to the Chinese market one by one since the 1990s, and now they are in a dominant market position. With their considerable financial power, multinationals can play their technological and cultural cards, as well as promoting their premium quality and unique tastes, to rapidly capture the Chinese market.
As Barry Callebaut finally entered the Chinese market, its Suzhou factory will make chocolate production even cheaper for multinational brands. For local Chinese companies that are mostly in the low-end market, they may no longer hold this market segment firm.
Keep up with the globalization
Statistics showed that there are about 63 large-scale local chocolate companies in China, with annual production of 150,000 tons. Statistics from industry associations also revealed that China currently has about 250 chocolate companies in total.
Industry insiders pointed out that the Chinese food and beverage industry is a highly and internationally competitive market. The vast potential of China's chocolate market is not only for foreign brands, but is also laid in front of local chocolate producers. The local chocolate industry is now in a structural change and survival-of-the-fittest stage, and no doubt the entry of foreign brands will present challenges to the local industry. But if local chocolate companies can participate in this international competition, it could not only drive the chocolate demand from Chinese consumers, but also promote development of China's chocolate market.
Local Chinese chocolate companies need to constantly improve their product quality, select finer raw ingredients, upgrade production facilities, adopt international technologies, enhance product innovation and brand management. Only then can they compete with multinational companies on a level-playing field, and make a breakthrough in this foreign-dominated Chinese chocolate market.
For more information on Chinese businesses, please visit www.chinabizintel.com
Friday, December 2, 2011
The Cailler Chocolate Train at Broc in July 2010
Friday, November 25, 2011
Famous Chocolate Companies
Almost everyone loves chocolate, from the Meso-American peoples who cultivated it thousands of years ago to the modern day chocoholic. There's a wide variety of choices out there, from low end chocolate flavored bars referred to as "confections" to the priciest dark chocolate truffle, which contains a real black truffle. In between, you'll find every kind of bonbon, fudge, candy bar, and other chocolate treats. Some companies have become extremely famous for their chocolate. Here are a few.
Mars and the Hershey Company are the biggest manufacturers in the world, producing popular, inexpensive candies that are enjoyed by large numbers of people. Other important chocolate makers in this price range include Nestle, Cadbury, and Lindt.
They all make some of the most popular candies there are, but there have been recent concerns over quality decreases and the sourcing of these companies' chocolate, as some African chocolate producers make use of child and slave labor.
Hershey is the biggest company in North America that makes chocolate. Headquartered in the town of the same name in Pennsylvania, this company makes the area smell of cocoa. The town is also home to a theme park - Hershey's Chocolate World. The company was founded in the 1890s by Milton S. Hershey, and is most famous for Hershey's Kisses, the Hershey Bar, and Reese's Peanut Butter Cups.
Mars is headquartered in McLean, Virginia, and owned by the Mars family. That makes it one of the largest privately owned companies in the US. It's know for the Milky Way, Mars, and Snickers bars, as well as M&Ms and Twix.
Other chocolatiers make their candy for a market willing to pay a higher price for chocolate made from better ingredients. Such chocolatiers as Godiva, Leonidas, and others produce high end chocolates for people who want a truly high quality confection.
There are other chocolate makers that produce even more expensive chocolates, made from beans sourced from single plantations, using no fillers, and using only the best fruits, nuts, and other ingredients. However, they're often not as well known by the average person as the larger distributors.
One chocolate maker that most people think is fictional is Willy Wonka. In this fantasy movie this candy maker had a content to see who would take over as the new owner of a fantastic candy factory. They gave away gold tickets in chocolate bars and the winners came to the factory to be secretly evaluated. This movie was so popular it was remade recently with actor Johnny Depp. Although not a real chocolate factory it was popular and had a chocolate moat in the movie.
Chocolate has a big influence on many of us. While we might not think a lot about it on a daily basis, we'd be disappointed if we weren't able to get this wonderful confection any more. Next time you have a piece of chocolate, whether it's an inexpensive Hershey's bar or a fine, hand-crafted truffle, think about the famous chocolate makers who are responsible for it being there.
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