See the brand, and youll 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

But they mostly share one trait:

Salty not sweet

Chocolate is new to Chinese.

Before Chinas 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.

Chocolate consumption per

capita (kg)

12

11.4

10
8
6
4
2

0.1

Germany

China

1 to 100 Ratio!!
China = 1

Germany = 100

However, Chinas 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.

Per capita consumption of

cocoa

0.05

0.045
0.04
0.035
0.03
0.025

0.02
0.015
0.01
0.005
0

2001

2003

2005

2007

Source: ICCO (2007) & National Bureau of Statistics of China (2011)

2009

2011

And Chinas chocolate market is expected to

accelerate in the future, growing by 10% to 15% per
year (Buffy, 2011).

Market size (billin USD)

8
7

With an annual growth of 15%

6
5
4
3
2

With an annual growth of 10%

Source: Euromonitor, 2011

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

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).

Chinas 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.)

16%

14%
Domestic
(LeConte etc.)
70% FDI produced

Source: CMMS (2010)

(Mars, Kraft,
Nestl, Hershey's,
etc.)

The foreign brands adopted various advertising and

marketing strategies to build the brands.
e.g. luxurious self-indulgence (Dove fromMars)

Hersheys : 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, Hersheys, Cadbury (now owned by Kraft) and

Nestl 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

Belgian
Consumers in China now have access to more than 70 imported
Truffles
Times, 2005).

chocolate brands in the nations large urban cities (Chocolate News,

2009).

Cte d'Or
milk chocolate

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

Worlds 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

5% Cocoa powder

20%
Starch

15%
Milk
35%
Vegetable
oil
Sugar

40%

Sugar
30%
Other
ingredients

18%
Cocoa
butter
Cocoa
powder
35%

2%

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 brandsboth FDI and imported
ones (Sin, Ho and So, 2000).
Higher quality ,
authenticity
(Li, Fu and Murray, 1997)

Social and symbolic

values (Valentines,
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, Whrer 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

Tell her
the
brands

Do not
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)

Imported Milk Chocolate

(represented by Cte d'Or)

Foreign-Branded Milk Chocolate/Produced

in China (represented by Dove from Mars)

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.

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
Short survey
YES: Information about
the chocolate brands

Blind Group
Short survey
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 nonblind participants were instructed to read the stickers
before tasting.

No brand information

Blind Group

Brand names on stickers:

LeConte (Domestic Brand)
Dove (Foreign Branded/Produced in China)
Cote dOr (Imported from Belgium)
Truffle (Imported from Belgium)

Non-blind Group

Participants of both groups were then asked to taste the

chocolate samples from the plate.

Non-blind Group
Short survey
YES: Information about
the chocolate brands

Blind Group
Short survey
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

Results

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.

Percentage of ranking

0.6

0.55

0.5

0.4

0.4

0.3

0.22
0.2

0.17

0.1

Nonblind

Blind

Blind

Nonblind

Rank as best tasting

chocolate

Rank as worst tasting

chocolate

Percentage of ranking

The ranking of Foreign Branded Milk

Chocolate/Produced in China are similar across
the blind and non-blind conditions.
0.5
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0

0.43

0.45

0.26
0.22

Blind

Nonblind

Rank as best tasting

chocolate

Blind

Nonblind

Rank as worst tasting

chocolate

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.
0.45

Percentage of ranking

0.4
0.35

0.39
0.35

0.35

0.3

0.23

0.25
0.2
0.15
0.1

Blind

Nonblind

Blind

Nonblind

0.05
0

Rank as best tasting

chocolate

Rank as worst tasting

chocolate

Imported Truffles are ranked higher when

participants were informed about the brands.
The difference is significant at 5% level.

Percentage of ranking

0.4

0.34

0.35

0.37

0.3
0.25
0.2

0.23

0.2

0.15
0.1
0.05

Blind

Nonblind

Blind

Nonblind

Rank as best tasting

chocolate

Rank as worst tasting

chocolate

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.

0.55

0.6
0.5

0.4

0.4
0.3
0.2
0.1
0

0.22
0.17
Blind Nonblind

Blind Nonblind

Rank as best Rank as worst

tasting
tasting
chocolate
chocolate

Imported Truffle
Percentage of ranking

Percentage of ranking

Chinese Domestic Milk

Chocolate
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0

0.34
0.2

NonBlind blind

0.37
0.23

NonBlind blind

Rank as best Rank as worst

tasting
tasting
chocolate
chocolate

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:
Chocolate brand A

Chocolate brand B

Chinese Domestic Milk

Chocolate

Foreign Branded Milk

Chocolate/Produced in China

Chinese Domestic Milk

Chocolate

Imported Milk Chocolate

Foreign Branded Milk

Chocolate/Produced in China

Imported Milk Chocolate

Imported Milk Chocolate

Imported Truffles

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)

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%.

[1]

[2]

Condition
(1=non-blind
condition;
0=blind
condition)
Control
variables a

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/Produce
d in China (1=yes;
0=no)

Imported
Truffles >
Imported Milk
Chocolate
(1=yes; 0=no)

(1)

(2)

(3)

(4)

0.08

0.11*

0.11*

0.28**

(0.06)

(0.06)

(0.07)

(0.13)

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).
Foreign Branded
Imported Milk
Imported Milk
Imported
Milk
Chocolate >
Chocolate >
Truffles >
Chocolate/Produced
Foreign Branded
Chinese
Imported
in China > Chinese
Milk
Domestic Milk
Milk
Domestic Milk
Chocolate/Produce
Chocolate
Chocolate
Chocolate (1=yes;
d in China (1=yes;
(1=yes; 0=no)
(1=yes; 0=no)
0=no)
0=no)

[1]

[2]

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

Control
variables a

(1)

(2)

(3)

(4)

0.08

0.11*

0.11*

0.28**

(0.06)

(0.06)

(0.07)

(0.13)

Yes

Yes

Yes

Yes

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 todays and
tomorrows chocolate consumer