see the brand, and you’ll like it. the influence of brand information on

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 ChocolateLICOS, September 16-18 2012

 Di Mo and Johan Swinnen

LICOS, K.U. Leuven  

Linxiu ZhangCenter for Chinese Agricultural Policy, Chinese Academy of Sciences

 Scott Rozelle

Center for Food, Security and the EnvironmentStanford 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

But they mostly share one trait:Salty … not sweet

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…

Serves better as fabric than food?

Chocolate Buddha

Although there are many fresh and enthusiastic chocolate fans, on average they only consume 100 grams per capita in 2008.

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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)

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And China’s chocolate market is expected to accelerate in the future, growing by 10% to 15% per year (Buffy, 2011). 

200720082009201020112012201320142015201620172018201920202021202220232024202520262027

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With an annual growth of 10%

With an annual growth of 15%

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.

FDI produced (Mars, Kraft, Nestlé, Hershey's, etc.)

Domestic (LeConte etc.)

Imported (Ferrero,Godiva etc.)

Source: CMMS (2010)

70%

14%

16%

The foreign brands adopted various advertising and marketing strategies to build the brands.

e.g. luxurious self-indulgence (Dove fromMars) 

Hershey’s : cute and whimsical KISSES.

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

World’s largest chocolate and cocoa producer/supplier, Barry Callebaut, launched its branch in Suzhou, Jiangsu Province, 2008.

The prestigious Belgian brand, Neuhaus, opened its café in Shanghai, 2011.

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.

35%

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Vegetable oil

Sugar

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Cocoa powder

The Tianjing factory

18%

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Cocoa powder

Cocoa butter

Sugar

Milk

Other ingre-dients

The imported brand

The ingredients of chocolates

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.

These brands differ in several aspects:• Source of chocolate (imported or locally

produced)• Nationality of producer (foreign or domestic)• Branding strategies

So, how do consumers perceive these brands?

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

We randomly divided the 234 participants into two groups.

Two Identical Groups

34

Two Identical Groups

35

Tell her the brands

Do not tell her the brands

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.

Foreign-Branded Milk Chocolate/Produced in China (represented by Dove  from Mars)

Imported Truffles (represented by Belgian truffles)

Imported Milk Chocolate (represented by Côte d'Or)

Domestic Milk Chocolate (represented by LeConte)

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.

感受巧克力传奇

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.

YES: Information about the chocolate brands

Taste the chocolate samples

Rank the chocolate samples

Taste the chocolate samples

Rank the chocolate samples

Short survey Short survey

Non-blind Group Blind Group

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. 

NO: Information about the chocolate brands

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.

Blind Group                                    Non-blind Group

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

YES: Information about the chocolate brands

Taste the chocolate samples

Rank the chocolate samples

Taste the chocolate samples

Rank the chocolate samples

Short survey Short survey

Participants of both groups were then asked to taste the chocolate samples from the plate.

Non-blind Group Blind Group

NO: Information about the chocolate brands

Participants could not see the chocolate samples in either group.(The chocolate samples were served on a white paper plate with the chocolates covered)

YES: Information about the chocolate brands

Taste the chocolate samples

Rank the chocolate samples

Taste the chocolate samples

Rank the chocolate samples

Short survey Short survey

After tasting, the participants were asked to rank the chocolate samples  from the best tasting to the worst tasting.

Non-blind Group Blind Group

NO: Information about the chocolate brands

Results

Rank as best tasting chocolate

Rank as worst tasting chocolate

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Non-blind

Non-blindBlind Blind

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.

Rank as best tasting chocolate

Rank as worst tasting chocolate

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0.45

0.22

Perc

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Blind BlindNon-blind

Non-blind

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.

Rank as best tasting chocolate

Rank as worst tasting chocolate

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Non-blind

Non-blind

Blind Blind

Imported Truffles are ranked higher when participants were informed about the brands. The difference is significant at 5% level.

Rank as best tasting chocolate

Rank as worst tasting chocolate

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Non-blind

Non-blind

Blind Blind

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.

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Non-blind

Blind Non-blind

Blind

00.10.20.30.4

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BlindNon-blind Blind

Non-blind

Chinese Domestic Milk Chocolate Imported Truffle 

Summary statement

• This allows us to draw the conclusion that:─ The brand information does influence consumer preference

─ The brand information increases consumer preferences towards imported brands relative to the domestic brands 

As mentioned before, our goal of study is to test how different types of information of brands affect the tastes and preferences of consumers.

•    However, it is not clear so far that whether there is preference change towards foreign-branded milk chocolate/produced in China relative to other brands. 

•    It is not clear either that whether there is any significant difference between the two imported brands. Are truffles more likely to be preferred over milk chocolate when participants are informed? 

Therefore, we conduct pair-wise comparisons to answer these questions.

In doing so, we examine whether the brand information changed the probability that one brand of chocolate was ranked higher than another brand. We compare four pairs of chocolate brands:

We estimate the model:

Brand B is ranked higher than brand A (1=yes; 0=no)

= Condition (1=non-blind; 0=blind) + Control variables (including participant characteristics, experiment location and tasting order of each chocolate)

Chocolate brand A Chocolate brand B

1 Chinese Domestic Milk Chocolate 

Foreign Branded Milk Chocolate/Produced in China

2 Chinese Domestic Milk Chocolate 

Imported Milk Chocolate 

3 Foreign Branded Milk Chocolate/Produced  in China

Imported Milk Chocolate

4 Imported Milk Chocolate  Imported Truffles

　　Foreign Branded Milk Chocolate/Produced in China > Chinese

Domestic Milk Chocolate (1=yes;

0=no)

Imported Milk Chocolate >

Chinese Domestic Milk

Chocolate (1=yes; 0=no)

Imported Milk Chocolate >

Foreign Branded Milk

Chocolate/Produced in China (1=yes;

0=no)

Imported Truffles >

Imported Milk Chocolate

(1=yes; 0=no)

　　 (1) (2) (3) (4)

[1]

Condition (1=non-blind condition; 0=blind condition)

0.08 0.11* 0.11* 0.28**

(0.06) (0.06) (0.07) (0.13)

[2]Control variables a Yes Yes Yes Yes

      The pair-wise comparisons demonstrated a higher preference of Chinese consumers toward imported brands.       The Imported Milk Chocolate was more likely to be preferred in the non-blind condition than the blind condition over both the Chinese Domestic Milk Chocolate and the Foreign Branded Milk Chocolate/Produced in China by 11%.

　　 Foreign Branded Milk

Chocolate/Produced in China > Chinese

Domestic Milk Chocolate (1=yes;

0=no)

Imported Milk Chocolate >

Chinese Domestic Milk

Chocolate (1=yes; 0=no)

Imported Milk Chocolate >

Foreign Branded Milk

Chocolate/Produced in China (1=yes;

0=no)

Imported Truffles > Imported

Milk Chocolate

(1=yes; 0=no)

　　 (1) (2) (3) (4)

[1]Condition (1=non-blind condition; 0=blind condition)

0.08 0.11* 0.11* 0.28**

(0.06) (0.06) (0.07) (0.13)

[2]Control variables a Yes Yes Yes Yes

        The biggest effect was for Truffles.         Truffles were also more preferred by 28% over Milk Chocolate when participants received the brand information (than the case when they did not receive the information).

Conclusion•      Brand information does influence Chinese consumers’ preferences for chocolate. 

•     Chinese consumers have higher preferences for the imported brands (Imported Milk Chocolate and Imported Truffle) than the domestic brand (Chinese Domestic Milk Chocolate).

•    They also have higher preferences for the imported brands than the foreign brand which is produced in China (Foreign Branded Milk Chocolate/Produced in China) when they are informed about the brands. 

•     As discussed in the introduction, the reason for the higher preference for the imported brands is likely to be the image of authenticity, high quality or the social and symbolic value that Chinese consumers associate with the brands. 

• The number of China chocolate fans are growing, year by year.

• The growth has accelerated in recent years.

•  Growth potential is huge.

Who will get the largest “bite of the chocolate market”?─ FDI─ Imported─ Domestic?

What type of chocolate will consumers like in the future?

• Can preferences be changed? • What form of branding will be successful?

More experiments need to be conducted to understand the mind and belly of today’s and

tomorrow’s chocolate consumer