research

1. December 2014 - China
SUGAR CONFECTIONARY
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MATTHEW CRABBE
Director of Research,APAC
INFOGRAPHIC OVERVIEW
The sugar confectionary
market faces slowing growth,
and high fragmentation, leaving brands
vulnerable to weak market share and
poor consumer loyalty. Companies are
selling more higher-end products to
alleviate this, but need to target specific
consumer groups more.
Sugar confectionary products aimed
at specific demographic groups could
focus on functional benefits and natural
ingredients, suited to the needs of each
group, such as helping with nutrition or
avoid ailments.
The high degree of market
fragmentation means margins are
being squeezed and brand penetration
remains low. Online retailing offers the
potential to reach more consumers
across the country and create closer
communication and engagement
with consumers, and from that more
responsiveness to their needs.
Fragmentation also means companies
must raise economies of scale, and
online retail also provides a means by
which to reduce costs while reaching
more potential customers.
WHAT WE THINK
COMPETITION MOUNTS IN A SLOWING MARKET FRAGMENTATION IMPEDES STRONG BRAND PENETRATION
MOST CONSUMERS BUY ON PURPOSE RATHER THAN IMPULSIVELY FESTIVALS AND CELEBRATIONS TOP PURCHASE OCCASIONS
Total value sales grew at a CAGR of 13.7% between 2010 and 2014, but with slowing growth, and is forecast to grow at
a CAGR of 9% between 2014 and 2019. Competing sectors, especially salty snacks and chocolate confectionary, have
grown faster and taken consumer attention. Volume sales grew more slowly, as consumers trade-up to higher quality,
higher priced products.
The market remains highly fragmented, making it harder for companies to achieve significant market shares. This leaves
companies vulnerable to shifts in the market, especially as competition is coming from other snacking markets. Even
market leaders, such as Nestlé SA, have suffered from an erosion of their market share in 2013, compared with 2012.
Most consumers who make a deliberate purchase decision, rather and an impulse one, do so for a functional benefit, such
as to freshen their breath or soothe their throat. However, impulse purchasing is still important, especially among younger
adults with younger children, indicating the importance of “pester power”.
45% of surveyed consumers bought sugar confectionary for gifting during Chinese traditional festivals, especially older
people in their 30s and 40s. The next most important gifting occasions were to express gratitude (38%) and as house
warming gifts (36%). Men are more likely than women to purchase it as dating gift or during Valentine’s day, typically men
in their 20s.