Sugar confectionery china - december 2014

Sugar
Confectionery -
China,
December 2014
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v 101013 Single

Table of Contents Sugar Confectionery
China, December 2014
© Mintel Group Ltd. All rights reserved. iii
INTRODUCTION ......................................................................................................................................8
Definition ..........................................................................................................................................8
Methodology.....................................................................................................................................8
Abbreviations ...................................................................................................................................9
EXECUTIVE SUMMARY........................................................................................................................10
The market.....................................................................................................................................10
Figure 1: Total sugar confectionery and chewing gum historical and forecast market value, 2009-19.............. 10
Companies and brands..................................................................................................................11
Fragmentation impedes strong brand penetration ............................................................................................ 11
Figure 2: Total sugar confectionery and chewing gum market value market shares of leading companies,
2012 and 2013 ................................................................................................................................................. 11
Sugar confectionery: All eyes on children......................................................................................................... 12
Target the women............................................................................................................................................. 12
Gum confectionery innovation .......................................................................................................................... 12
Confectionery brands go online ........................................................................................................................ 12
Key issues......................................................................................................................................13
Pursuing the online sales option....................................................................................................................... 13
Accentuate the artisanal ................................................................................................................................... 13
Segment to survive........................................................................................................................................... 13
The consumer ................................................................................................................................14
Consumption of confectionery and snacks ....................................................................................................... 14
Figure 3: Consumption of confectionery vs snack, September 2014 ................................................................ 14
Reason for confectionery purchase .................................................................................................................. 15
Figure 4: Reason for confectionery purchase, September 2014 ....................................................................... 15
Type of sugar confectionery products bought for self/family and gifting............................................................ 16
Figure 5: Types of sugar confectionery products bought for yourself/family or gifting, September 2014 ........... 16
Occasion of sugar confectionery gifting ............................................................................................................ 17
Figure 6: Occasion of sugar confectionery gifting, September 2014 ................................................................. 17
Premium element for sugar confectionery ........................................................................................................ 18
Figure 7: Elements in sugar confectionery that are worth premium price, September 2014.............................. 18
Premium element for gum confectionery .......................................................................................................... 19
Figure 8: Elements in gum confectionery that are worth premium price, September 2014 ............................... 19
Attitudes towards sugar and gum confectionery ............................................................................................... 20
Figure 9: Statements about sugar confectionery, September 2014 .................................................................. 20
What we think.................................................................................................................................21
ISSUES AND INSIGHTS........................................................................................................................22
Pursuing the online sales option....................................................................................................22
The facts........................................................................................................................................................... 22
The implications................................................................................................................................................ 22
Accentuate the artisanal ................................................................................................................23
The facts........................................................................................................................................................... 23
Segment to survive ........................................................................................................................24
The facts........................................................................................................................................................... 24
Figure 10: The population of over-60s in China, 2000-15 ................................................................................. 25
TREND APPLICATION..........................................................................................................................26
Trend: Sense of the Intense...........................................................................................................26
Trend: Cool Vending ......................................................................................................................27
Trend: Help Me Help Myself ..........................................................................................................28
MARKET SIZE AND FORECAST..........................................................................................................30
Key points ......................................................................................................................................30
Value growth slow: driven by trading up ........................................................................................30
Figure 11: Total sugar confectionery and chewing gum historical and forecast market value, 2009-19............ 30
Volume growth even slower: time for new innovation ...................................................................31
Figure 12: Total sugar confectionery and chewing gum historical and forecast market volume, 2009-19 ......... 31
Sugar confectionery lagging behind competing sectors ................................................................32
Figure 13: Comparative total market value growth for competing snack food options, 2009-13........................ 32

© Mintel Group Ltd. All rights reserved. iv
How competing sectors are innovating..........................................................................................32
MARKET SEGMENTATION ..................................................................................................................34
Key points ......................................................................................................................................34
Overall picture................................................................................................................................34
Figure 14: Total sugar confectionery and chewing gum market value and volume, by broad category,
2010-14 ............................................................................................................................................................ 34
Sugar confectionery .......................................................................................................................34
Figure 15: Total sugar confectionery historical and forecast market value, 2009-19......................................... 35
Figure 16: Total sugar confectionery historical and forecast market volume, 2009-19...................................... 35
Figure 17: Total sugar confectionery market value, by sector, 2010-14............................................................ 36
Figure 18: Total sugar confectionery market volume, by sector, 2010-14......................................................... 37
Chewing gum .................................................................................................................................37
Figure 19: Total chewing gum historical and forecast market value, 2009-19................................................... 37
Figure 20: Total chewing gum historical and forecast market volume, 2009-19................................................ 38
Figure 21: Total chewing gum market value, by sector, 2010-14...................................................................... 38
Figure 22: Total chewing gum market volume, by sector, 2010-14................................................................... 39
MARKET SHARE...................................................................................................................................40
Key points ......................................................................................................................................40
Value market fragmentation impedes strong brand penetration....................................................40
Figure 23: Total sugar confectionery and chewing gum market value market shares of leading companies,
2012 and 2013 ................................................................................................................................................. 40
Volume market even more fragmented .........................................................................................42
Figure 24: Total sugar confectionery and chewing gum market volume market shares of leading
companies, 2012 and 2013 .............................................................................................................................. 42
WHO’S INNOVATING?..........................................................................................................................43
Key points ......................................................................................................................................43
Sugar confectionery: All eyes on children......................................................................................43
Figure 25: Consumption of confectionery vs snack, by age of children in household, September 2014 ........... 43
Figure 26: Top 10 claims for sugar confectionery in China, 2011-14 ................................................................ 44
Target the women ..........................................................................................................................45
Gum confectionery innovation .......................................................................................................46
Figure 27: Top 10 claims for gum confectionery in China, 2011-14 .................................................................. 47
COMPANIES AND BRANDS.................................................................................................................49
Mars, Inc. .......................................................................................................................................49
Nestlé.............................................................................................................................................50
Fujian Yake Food Co., Ltd. ............................................................................................................51
Perfetti Van Melle Confectionery Co., Ltd......................................................................................52
Beijing Kangbeier Food Co., Ltd....................................................................................................52
Want Want China Holdings Limited ...............................................................................................53
THE CONSUMER – TRENDS IN CONSUMPTION OF CONFECTIONERY AND SNACKS ...............54
Key points ......................................................................................................................................54
Savoury snacks are preferred over sweet confectioneries............................................................54
Figure 28: Consumption of confectionery vs snack, September 2014 .............................................................. 54
Figure 29: Consumption of confectionery vs snack, by repertoire of consumption of confectionery vs snack,
September 2014............................................................................................................................................... 55
Figure 30: Elements in sugar confectionery that are worth premium price, September 2014............................ 56
Functional candy is the most preferred among other sugar confectioneries.................................56
Figure 31: Reason for confectionery purchase, September 2014 ..................................................................... 56
Figure 32: Consumers eating more functional candy, by gender and age, September 2014 ............................ 57
THE CONSUMER – REASON FOR CONFECTIONERY PURCHASE.................................................58
Key points ......................................................................................................................................58
Most buy on purpose rather than impulsively ................................................................................58
Figure 33: Reason for confectionery purchase, September 2014 ..................................................................... 58
Figure 34: Reason for confectionery purchase, by monthly household income group, September 2014 .......... 59
Figure 35: Reason for confectionery purchase, by marital status, September 2014 ......................................... 60

© Mintel Group Ltd. All rights reserved. v
Inter-city differences ......................................................................................................................................... 60
Figure 36: Reason for confectionery purchase, by city, September 2014 ......................................................... 60
Impulse purchase...........................................................................................................................60
Figure 37: Impulse purchase reason for confectionery purchase, by age of children, September 2014............ 61
Figure 38: Impulse purchase reason for confectionery purchase, by gender and age, September 2014 .......... 61
Figure 39: Impulse purchase reason for confectionery purchase, by monthly household income group,
September 2014............................................................................................................................................... 62
Inter-city differences ......................................................................................................................................... 62
Figure 40: Impulse purchase reason for confectionery purchase, by city, September 2014.............................. 62
THE CONSUMER – TYPE OF SUGAR CONFECTIONERY PRODUCTS BOUGHT FOR
SELF/FAMILY AND GIFTING................................................................................................................63
Key points ......................................................................................................................................63
Individually wrapped and assorted flavours are two most considered ..........................................63
Figure 41: Types of sugar confectionery products bought for yourself/family or gifting, September 2014 ......... 63
Self/family use consumption by demographic group .....................................................................64
Figure 42: Types of sugar confectionery products bought for yourself/family, by gender and age,
September 2014............................................................................................................................................... 65
Figure 43: Types of sugar confectionery products bought for yourself/family, by age of children in
household, September 2014............................................................................................................................. 66
Self/family use consumption by city...............................................................................................66
Figure 44: Types of sugar confectionery products bought for yourself/family, by city, September 2014 ........... 67
Gifting use consumption by demographic group ...........................................................................67
Figure 45: Types of sugar confectionery products bought for gifting, by gender and age, September 2014 ..... 68
Figure 46: Types of sugar confectionery products bought for gifting, by age of children in household,
September 2014............................................................................................................................................... 69
THE CONSUMER – OCCASION OF SUGAR CONFECTIONERY GIFTING.......................................70
Key points ......................................................................................................................................70
Chinese traditional festivals are still the major occasions .............................................................71
Figure 47: Occasion of sugar confectionery gifting, September 2014 ............................................................... 71
Married people have more gifting occasions .................................................................................72
Figure 48: Occasion of sugar confectionery gifting, by marital status, September 2014 ................................... 72
People from tier two cities are more likely to purchase as wedding gift ........................................73
Figure 49: Occasion of sugar confectionery gifting, by city, September 2014 ................................................... 73
Figure 50: Occasion of sugar confectionery gifting, by city tier, September 2014 ............................................. 74
THE CONSUMER – PREMIUM ELEMENT FOR SUGAR CONFECTIONERY....................................75
Key points ......................................................................................................................................75
All-natural ingredient sugar confectionery on demand in premium category ................................75
Figure 51: Elements in sugar confectionery that are worth premium price, September 2014............................ 75
Figure 52: Elements in sugar confectionery that are worth premium price, by gender and age, September
2014 ................................................................................................................................................................. 76
Figure 53: Selected claims of sugar confectionery launched in US, UK and China, 2011-June 2014............... 76
Figure 54: Examples of sugar confectionery claiming all-natural, China and US, May-April 2014 .................... 77
Functional ingredients need to be highlighted to claim health benefits .........................................77
Figure 55: Elements in sugar confectionery that are worth premium price, by monthly personal income
group, September 2014.................................................................................................................................... 78
Figure 56: Selected claims of functional ingredients and benefit for sugar confectionery, US, UK, Japan
and China, 2011-June 2014 ............................................................................................................................. 78
Figure 57: Examples of sugar confectionery claiming health benefits, China and Japan, –2013 and 2014 ...... 79
THE CONSUMER – PREMIUM ELEMENT FOR GUM CONFECTIONERY.........................................80
Key points ......................................................................................................................................80
Long-lasting flavour is the key for premium price ..........................................................................80
Figure 58: Elements in gum confectionery that are worth premium price, September 2014.............................. 80
Figure 59: Chewing gum products launched claiming health benefits or natural ingredients as % of all such
products launched over the period, 2009-14..................................................................................................... 81
Figure 60: Elements in gum confectionery that are worth premium price, by age, September 2014 ................. 82
Inter-city differences.......................................................................................................................83
Figure 61: Elements in gum confectionery that are worth premium price, by city, September 2014.................. 83
THE CONSUMER – ATTITUDES TOWARDS SUGAR AND GUM CONFECTIONERY......................84

© Mintel Group Ltd. All rights reserved. vi
Key points ......................................................................................................................................84
Purity and health head consumer demand prerogatives ...............................................................84
Figure 62: Statements about sugar confectionery, September 2014 ................................................................ 84
Figure 63: Statements about sugar confectionery, by gender and age, September 2014 ................................. 86
City tier differences ........................................................................................................................86
Figure 64: Statements about sugar confectionery, by city tier, September 2014 .............................................. 87
APPENDIX – MARKET SIZE AND FORECAST ...................................................................................88
Market value...................................................................................................................................88
Figure 65: China – Total historical and forecast value retail market for sugar and gum confectionery, 2009-
19 ..................................................................................................................................................................... 88
Market volume ...............................................................................................................................88
Figure 66: China – Total historical and forecast volume retail market for sugar and gum confectionery,
2009-19 ............................................................................................................................................................ 88
APPENDIX – MARKET SEGMENTATION............................................................................................89
Segment value ...............................................................................................................................89
Figure 67: Total historical and forecast value retail market for sugar and gum confectionery, by segment,
2009-19 ............................................................................................................................................................ 89
Segment volume ............................................................................................................................89
Figure 68: China – Total historical and forecast volume retail market for sugar and gum confectionery, by
segment, 2009-19............................................................................................................................................. 89
APPENDIX – THE CONSUMER – CONSUMPTION OF CONFECTIONERY AND SNACKS .............90
Figure 69: Consumption of confectionery vs snack, September 2014 .............................................................. 90
Figure 70: Consumption of confectionery vs snack – Chewing gum, by demographics, September 2014........ 91
Figure 71: Consumption of confectionery vs snack – Bubble gum, by demographics, September 2014........... 92
Figure 72: Consumption of confectionery vs snack – Lollipop, by demographics, September 2014 ................. 94
Figure 73: Consumption of confectionery vs snack – Hard candy, by demographics, September 2014 ........... 96
Figure 74: Consumption of confectionery vs snack – Soft candy, by demographics, September 2014............. 98
Figure 75: Consumption of confectionery vs snack – Crisp candy, by demographics, September 2014........... 99
Figure 76: Consumption of confectionery vs snack – Nougat, by demographics, September 2014 ................ 101
Figure 77: Consumption of confectionery vs snack – Functional candy, by demographics, September 2014. 103
Figure 78: Consumption of confectionery vs snack – Savoury snacks, by demographics, September 2014... 104
Figure 79: Consumption of confectionery vs snack – Meat/seafood snacks, by demographics, September
2014 ............................................................................................................................................................... 106
Figure 80: Consumption of confectionery vs snack – Preserved fruit, by demographics, September 2014..... 108
Figure 81: Consumption of confectionery vs snack – Chocolate confectionery, by demographics,
September 2014............................................................................................................................................. 109
Repertoire – Consumption pattern...............................................................................................111
Figure 82: Repertoire of consumption of confectionery vs snack, September 2014........................................ 111
Figure 83: Repertoire of consumption of confectionery vs snack, by demographics, September 2014 ........... 112
Figure 84: Consumption of confectionery vs snack, by repertoire of consumption of confectionery vs
snack, September 2014.................................................................................................................................. 113
APPENDIX – THE CONSUMER – REASON FOR CONFECTIONERY PURCHASE ........................116
Figure 85: Reason for confectionery purchase, September 2014 ................................................................... 116
Figure 86: Most popular reason for confectionery purchase, by demographics, September 2014 .................. 116
Figure 87: Next most popular reason for confectionery purchase, by demographics, September 2014 .......... 118
Figure 88: Other reason for confectionery purchase, by demographics, September 2014.............................. 120
APPENDIX – THE CONSUMER – TYPES OF SUGAR CONFECTIONERY PRODUCTS
BOUGHT FOR SELF/FAMILY.............................................................................................................122
Figure 89: Types of sugar confectionery products bought for yourself/family, September 2014 ..................... 122
Figure 90: Types of sugar confectionery products bought for yourself/family – By packaging format, by
demographics, September 2014..................................................................................................................... 122
Figure 91: Types of sugar confectionery products bought for yourself/family – Individually wrapped or not,
by demographics, September 2014 ................................................................................................................ 124
Figure 92: Types of sugar confectionery products bought for yourself/family – Assorted or not, by
APPENDIX – THE CONSUMER – TYPES OF SUGAR CONFECTIONERY PRODUCTS
BOUGHT FOR GIFTING......................................................................................................................128

© Mintel Group Ltd. All rights reserved. vii
Figure 93: Types of sugar confectionery products bought for gifting, September 2014................................... 128
Figure 94: Types of sugar confectionery products bought for gifting – By packaging format, by
Figure 95: Types of sugar confectionery products bought for gifting – Individually wrapped or not, by
Figure 96: Types of sugar confectionery products bought for gifting – Assorted or not, by demographics,
September 2014............................................................................................................................................. 132
APPENDIX – THE CONSUMER – OCCASION OF SUGAR CONFECTIONERY GIFTING ..............134
Figure 97: Occasion of sugar confectionery gifting, September 2014 ............................................................. 134
Figure 98: Most popular occasion of sugar confectionery gifting, by demographics, September 2014 ........... 134
Figure 99: Next most popular occasion of sugar confectionery gifting, by demographics, September 2014 ... 136
APPENDIX – THE CONSUMER – PREMIUM ELEMENT FOR SUGAR CONFECTIONERY ...........138
Figure 100: Elements in sugar confectionery that are worth premium price, September 2014........................ 138
Figure 101: Most popular elements in sugar confectionery that are worth premium price, by demographics,
September 2014............................................................................................................................................. 138
Figure 102: Next most popular elements in sugar confectionery that are worth premium price, by
APPENDIX – THE CONSUMER – PREMIUM ELEMENT FOR GUM CONFECTIONERY ................142
Figure 103: Elements in gum confectionery that are worth premium price, September 2014.......................... 142
Figure 104: Most popular elements in gum confectionery that are worth premium price, by demographics,
September 2014............................................................................................................................................. 142
Figure 105: Next most popular elements in gum confectionery that are worth premium price, by
APPENDIX – THE CONSUMER – STATEMENTS ABOUT SUGAR CONFECTIONERY .................146
Figure 106: Statements about sugar confectionery, September 2014 ............................................................ 146
Figure 107: Most popular statements about sugar confectionery, by demographics, September 2014........... 147
Figure 108: Next most popular statements about sugar confectionery, by demographics, September 2014 .. 149
APPENDIX – CHINA RESEARCH METHODOLOGY.........................................................................152

Introduction Sugar Confectionery
© Mintel Group Ltd. All rights reserved. 8
Introduction
“The sugar confectionery market faces slowing growth and high fragmentation, leaving brands
vulnerable to weak market share and poor consumer loyalty. Leading companies are selling
more higher-end products to alleviate this, but have done little to target the needs of specific
consumer groups based on gender or age group lines.
Sugar confectionery 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 avoiding 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.”
– Matthew Crabbe, Director of Research, APAC
Definition
Sugar and gum confectionery follows the same definition as Mintel’s Sugar Confectionery – China,
May 2012 report. The scope of this report analysis and forecast covers both imported and locally made
sugar and gum confectioneries which are sold in China.
The market size and forecast in this report cover all sugar confectionery sales sold into the China
market through retail channels – including both bricks-and-mortar stores and online B2C (business to
consumer) retailers – such as company’s official online store, tmall.com, etc.
The sugar and gum confectionery market includes the following segments.
Sugar confectionery:
 Fruit soft – this includes pastilles, gums, jellies and chews.
 Other flavours – this includes liquorice, marshmallows, fudge, toffee, caramels, nougat, Turkish
Delight, Halva and others, such as éclairs and marzipan.
 Mints – this includes regular mints and breath fresheners.
 Hard – this includes boiled sweets and lollipops.
 Functional – this includes medicated and energy-giving products.
 Other – this includes mixed assortments and other sugar confectionery.
Gum confectionery consists of regular chewing gum, sugar-free chewing gum and bubble gum.
Methodology
This is a market intelligence report published by Mintel. The consumer research exclusively
commissioned for this report was conducted by a Chinese licensed market survey agent (see Research
Methodology China for more information).

Introduction Sugar Confectionery
For the purposes of this report, Mintel commissioned a quantitative research survey carried out online
to explore consumer attitudes towards sugar and gum confectionery. Fieldwork was conducted in
September 2014, in four tier one cities, two tier two cities and four tier three cities of 3,000 internet
users aged 20-49. Tier one cities are Shanghai, Beijing, Guangzhou and Chengdu. Tier two and tier
three cities are Jinan, Linyi, Nantong, Hefei, Shantou and Changsha.
Abbreviations
B2C Business-to-consumer
CAGR Compound annual growth rate
C2C Consumer-to-consumer
GNPD Global New Products Database
NBS National Bureau of Statistics

Executive Summary Sugar Confectionery
Executive Summary
“The sugar confectionery market is facing the twin problems of slowing growth and high
fragmentation. Lack of differentiation between brands means more companies need to target
specific gender or age groups with products suited to their particular needs. This could include
more functional benefits and natural ingredients, or gift options and individualised product
offerings. However, companies will have to become more creative and innovative whilst also
staying financially competitive. Using more online sales channels to reach more consumers, and
reduce costs, is likely to become more important in the coming years, having barely taken off as
a feature of the industry to date.”
The market
FIGURE 1: TOTAL SUGAR CONFECTIONERY AND CHEWING GUM HISTORICAL AND FORECAST MARKET VALUE, 2009-19
SOURCE: NBS/COMPANY INFORMATION/MINTEL ESTIMATIONS
The total sugar confectionery and chewing gum market grew by 90% in value between 2010 and the
estimated value for 2014, at a CAGR (Compound annual growth rate) of 13.7%, with a slight uptick in
growth since 2012. Yet, the market is seeing slowing growth, and is forecast to grow by about 53% in
the period between 2014 and 2019, at a CAGR of about 9%. All the while, other snack food sectors,
especially salty snacks and chocolate confectionery, have been growing faster and competing for
consumer attention.
In volume terms, the total sugar confectionery and chewing gum market grew by 58.6% between 2010
and the estimated volume for 2014, at a CAGR of 9.7%. There has been a strong trend towards
consumers trading up to higher-quality, higher-priced products, and this is likely to continue over the
coming years. This trading up is being driven by rising average incomes and spending power. The
volume market is also seeing slowing growth, and is forecast to grow by about 42% in the period
between 2014 and 2019, at a CAGR of about 7%.

While the gum sector has enjoyed stronger growth in terms of both value and volume sales than was
the situation with sugar confectionery, average unit prices have actually grown faster for the latter
sector. In value terms, while sugar confectionery grew by 69% between 2010 and 2014, chewing gum
sales value grew by 74%. However, more recently it has been the sugar confectionery sector that has
grown fastest thanks to consumers trading up.
Companies and brands
Fragmentation impedes strong brand penetration
FIGURE 2: TOTAL SUGAR CONFECTIONERY AND CHEWING GUM MARKET VALUE MARKET SHARES OF LEADING COMPANIES, 2012
AND 2013
SOURCE: NATIONAL BUREAU OF STATISTICS OF CHINA/COMPANY INFORMATION/MINTEL
The sugar confectionery market remains highly fragmented, and this is making it harder for companies
to achieve more significant market shares. Lack of strong market shares leaves companies vulnerable
to shifts in the market, especially as competition is coming not only from within the sugar
confectionery market, but also from competing markets such as chocolate confectionery and salty
snacks. Even market leaders, such as Nestlé SA, have suffered from an erosion of their market shares
in 2013, compared with 2012.
To reduce vulnerability to the fragmented market, companies with wider ranges of products, more
higher-end products and with the ability to improve efficiencies of scale will be those best placed to
face off competition. Those companies quickest to embrace the potential of online retailing will also
stand a better chance of reaching more consumers while keeping costs down.

Sugar confectionery: All eyes on children
In the sugar confectionery market, children remain a key consumer segment. From Mintel’s survey
results, it was found that the incidence and proportion of consumers buying different types of sugar
confectionery generally decline the older the children in their households are. This is especially so for
impulse purchases, and indicates that not only are the key consumers children (or the parents of
children), but also that those children have a significant amount of “pester power” in influencing many
purchases.
This consumer trend is reflected in the relative significance within new product launches, captured by
Mintel’s GNPD (Global New Products Database), of products making the claim of being aimed at, or
suitable for, children aged 5-12.
Target the women
However, manufacturers would be wise not to simply focus on children, but also to develop products
and marketing strategies aimed at other demographic groups, especially women. Mintel’s consumer
survey found that while over a third of consumers (35%) agreed that they would like to try more sugar
confectionery products that were designed for a specific consumer group, this agreement rate rose to
41% among women in their thirties, and 42% of women in their twenties.
However, there are as yet very few sugar confectionery products targeted specifically at women,
indicating there is a large amount of potential for more products to target female consumers. For its
part, in 2013, leading company Yake introduced a personalised jelly candy aimed specifically at
women. However, of all the many sugar confectionery products launched in China in recent years,
Mintel’s GNPD identified very few.
This shows there is a great deal of untapped potential in developing more products aimed specifically
at women for self-use, as well as at men to buy gifts for women, especially among people in their
twenties and thirties.
Gum confectionery innovation
Reflecting the strong shift towards sugar-free gum sales in the total segment, the proportion of new
products being launched claiming to be low, no or reduced sugar products significantly increased in
2014. In the first half of the year, 75% of new products claimed to be low, no or reduced sugar
products, up from about half of new products in previous years.
But this presents a new challenge to the segment. With the low, no or reduced sugar claim having
become so ubiquitous, companies will have to develop product innovation in other areas, such as use
of natural ingredients or additional health or other functional benefits.
Breath-freshening claims also significantly jumped in the first half of 2014, reaching 15% of all new
products, up from about 10% for the previous two years. Yet this too will quickly become less of a
differentiator and more of an expected feature, meaning more companies will have to keep looking at
other features to capture consumer interest.
At present, one of the most significant new claim trends emerging was for environmentally friendly
packaging, which rose to 15% of all new products surveyed in first half of 2014, up from only 3% of
products in the previous two whole years, and none prior to that. Environmental responsibility could
become a new trend across the market, not just in the chewing gum sector.
Confectionery brands go online
Several key brands have begun marketing online recently, most using the route of establishing a
presence via social media sites, especially WeChat. For example, Wrigley’s Doublemint and 5 brands
both opened their own official WeChat accounts in the middle of 2014. Nestlé’s Frutips brand also
opened a WeChat site, in May 2014, offering online purchasing, interesting information about the
brand, and promoting the brand with a “having fun” positioning.

The local brands are also taking their place online, with Yake also launching and selling products
through Weidian, the WeChat e-commerce platform. Likewise, Kangbaier also sells via Weidian, as
well as promoting its brand through the Weibo social media platform. Such social media platforms
offer the opportunity to engage more closely with consumers, and communicate to them about new
products, flavours and promotions, as well as offering fun content such as videos and competitions.
Companies are also adding these social media presences to a wider portfolio of sites on online
supermarkets, such as yhd.com and tmall.com. Using this wide range of different online outlets
increases potential consumer reach, and therefore brand recognition and sales penetration.
Key issues
Pursuing the online sales option
Almost a quarter (23%) of those surveyed for this report had bought sugar confectionery online, rising
to over a quarter (26%) of men in their thirties. This is similar to the proportion of the Chinese
population who are shopping online, which is also about 23%. This indicates that the proportion of
people shopping online for confectionery, among the tier one to tier three urban online users surveyed
for this report, is about the same as the overall online shopping proportion.
Yet, despite such high penetration of online retailing to date, food sales still only represent under 3%
of total online retail value, despite growing by over 880% between 2009 and 2014. This indicates still
strong growth potential in online retailing for shelf-stable food products such as sugar confectionery.
An added advantage of such products is they are more likely than fresh produce to survive the delivery
process, can be bought and sent as gifts (with personalised messages) and are strongly associated with
seasonal and festival spending, where online retail has been particularly successful.
Accentuate the artisanal
Almost a quarter (24%) of surveyed consumers agreed that they would be willing to pay more for
handmade candy in specialised candy stores, rising to 25% of men in their twenties, and 26% of
women in their twenties. Young dating couples, eager to impress their loved ones with a gift of
sweetness, are therefore a key potential target market for handmade gift confections.
While consumers are trading up to buying more better-quality sugar confectionery, there is the
potential for confectionery manufacturers to extend their brands into premium-end candy store chains.
Successful examples include Mars Inc.’s chocolate confectionery brand M&M’s setting up its new
“experience” store on Shanghai’s Nanjing Road and Australian brand Sticky’s individualised candy
stores in Hong Kong and Southeast Asia.
Such a move could add wider brand presence and differentiation against competitor brands, both in the
broad retail environment, and at tourist sites and transport hubs, to capture a share of the travel gifting
market.
Segment to survive
Over a third of surveyed consumers (35%) agreed that they would like to try more candy or chewing
gum products designed for a specific group, rising to 42% among women in their twenties and 41%
among women in their thirties. Yet very few products are targeted at specific consumer groups, with
only a handful being targeted at women, for example.
As competition in the sugar confectionery market heats up, focusing products and marketing on
consumer by gender or age group could become an increasingly useful marketing strategy. This
applies not only to women and children, but also the increasing elderly consumer group. According to
predictions from the United Nations, about three in 10 Chinese people will be older than 60 by 2040.

This indicates a significant potential market for sugar confectionery products providing functional
health benefits that suit the needs of different consumer segments by age or gender. This could include
added health functions, such as minerals and vitamins to help fight off demographic-specific disorders,
and to help people control weight gain, reduce the effects of ageing or boost their immune systems.
The consumer
Consumption of confectionery and snacks
FIGURE 3: CONSUMPTION OF CONFECTIONERY VS SNACK, SEPTEMBER 2014
“Compared to 6 months ago, which of the following types of confectionery/snacks would
you say that you are eating more, less or about the same?”
Base: 3,000 internet users aged 20-49
8
9
13
15
20
21
22
23
31
31
33
35
28
33
42
39
45
43
43
43
46
47
46
48
34
34
33
31
25
25
25
21
17
18
16
14
29
24
13
15
9
11
10
13
7
4
6
3
0 10 20 30 40 50 60 70 80 90 100
Bubble gum
Lollipop
Hard candy (including mints)
Soft candy (eg pastilles, toffee, pressed candy)
Preserved fruit (eg dried plum, preserved olive)
Nougat (eg milk, cranberry nougats)
Crisp candy (eg almond, sesame crisp candy)
Functional candy (eg VC candy, TCM throat candy)
Chewing gum
Chocolate confectionery
Meat/seafood snacks*
Savoury snacks (eg nuts, seeds, potato chips)
%
Eating more About the same Eating less Haven’t eaten this in the last 6 month
* eg jerky, pork scratching, dried fish slices
SOURCE: QQSURVEY/MINTEL
The major problem facing the sugar confectionery market in China is that it is losing consumers to
other sectors, especially chocolate confectionery and savoury snacks, according to Mintel’s survey
data. Comparing the repertoire analysis of consumers’ snacking habits, sugar confectionery
consumption is very low (almost negligible) among those with a narrower range of product
consumption. This indicates many people will give up eating sugar confectionery before other types of
snacks.
The largest group (with 57% of all consumers surveyed) is people who eat 12 types of snack products,
but even among this group sugar confectionery consumption remains significantly lower than for other
snacks. The issue for the industry is how to make their sugar confectionery products more of a
conscious, first choice of snacks.
The industry is already producing more added-value products, and more products with natural
ingredients and functional health claims. However, increasing relevance to different consumer groups
will require much more specific targeting of products at consumers based on age and gender.

Reason for confectionery purchase
FIGURE 4: REASON FOR CONFECTIONERY PURCHASE, SEPTEMBER 2014
“Thinking about purchasing sugar and gum confectionery in the last 6 months, for which of
the following reasons, if any, have you bought them?”
Most consumers who make a deliberate purchase decision, rather than an impulse one, do so based on
wanting a functional benefit, such as to freshen their breath or soothe their throat. This means the
majority of consumers need a deliberate reason to buy, and that manufacturers need to provide specific
benefits in their product development and marketing to meet that demand.
Consumers earning a monthly household income of RMB12,000 or more are those most likely to
purchase deliberately across all reasons, with the exception of “to freshen my breath/soothe my throat”,
which actually ranks as more significant among people in the RMB5,000-7,999 income bracket. This
indicates that the types of product functions desired the most differ according to income group, and
that products could be marketed accordingly.

Type of sugar confectionery products bought for self/family and gifting
FIGURE 5: TYPES OF SUGAR CONFECTIONERY PRODUCTS BOUGHT FOR YOURSELF/FAMILY OR GIFTING, SEPTEMBER 2014
“Which of the following types of sugar confectionery products (chewing gum and bubble
gum excluded) have you bought most often in the last 6 months for yourself/family?”
Base: 2,917 internet users aged 20-49 who have purchased sugar/gum confectionery in the last 6 months
Assorted flavours and individually wrapped are the two most considered products for both gifting and
self-consumption. Products combining individually wrapped assorted flavours therefore show the
greatest potential in attracting more consumers. Yet, for individual consumption, there is a stronger
likelihood people will buy single-flavour packs, showing that there is a strong distinction between the
gifting and self-consumption motives.
This provides evidence that developing products for self-consumption and gifting has some benefit to
brand marketing. Thus, using different pack types in different outlets, according to likely purchase
reason in each, would be beneficial, for example, self-consume packs in convenience stores, and gift
packs in department stores. Providing a combination of both assorted and single-flavour packs can also
help to cover both gifting and self-use occasions.

Occasion of sugar confectionery gifting
FIGURE 6: OCCASION OF SUGAR CONFECTIONERY GIFTING, SEPTEMBER 2014
“Thinking about buying sugar confectionery (chewing gum and bubble gum excluded) as a
gift, for which of the following occasions, if any, have you bought sweets in the last 6
months?”
Base: 2,420 internet users aged 20-49 who have purchased sugar/gum confectionery for gifting in the last 6
months
Some 45% of surveyed consumers bought sugar confectionery for gifting during Chinese traditional
festivals, especially older people in their thirties and forties. 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 a dating gift or during Valentine’s Day, typically men in their twenties.
It is also significant that a third of consumers (34%) bought gift candies as a holiday souvenir, which
indicates strong opportunities to market gift products at transport hubs and key vacation sites. This
could include providing promotional or seasonal pop-up outlets and in-store displays to capture
spending during these key traditional festivals.

Candy companies could use online gift ordering and delivery to provide consumers with an easy way
to send someone a birthday or anniversary gift, especially online. Online sites could encourage people
to enter details of all their friends’ and family’s key birthdays and anniversaries into a calendar that
then sends them a reminder, and a prompt towards suitable gift packs of candies, to help boost
purchasing, and save people time – and the embarrassment of forgetting someone’s birthday or
anniversary.
Premium element for sugar confectionery
FIGURE 7: ELEMENTS IN SUGAR CONFECTIONERY THAT ARE WORTH PREMIUM PRICE, SEPTEMBER 2014
“Thinking about buying sugar confectionery for you or your family, which of the following
factors, if any, are you willing to pay more for? Please select up to 3 options for each type.”
Consumers are significantly more willing to pay more for products that are made from natural
ingredients, with almost half (48%) of respondents surveyed agreeing that natural ingredients are what
they would pay more for, especially older people in their forties.
Meanwhile, men in their twenties are those most likely to spend more on candies offering additional
health benefits, such as added vitamins or a throat-soothing function. Also, men in their thirties and
forties are those most likely to pay more for low- or no-sugar candies. Health and naturalness are
therefore key elements in driving the premiumisation of the sugar confectionery market.

Premium element for gum confectionery
FIGURE 8: ELEMENTS IN GUM CONFECTIONERY THAT ARE WORTH PREMIUM PRICE, SEPTEMBER 2014
“Thinking about buying gum confectionery for you or your family, which of the following
factors, if any, are you willing to pay more for? Please select up to 3 options for each type.”
Aside from the dominant feature of long-lasting flavour, additional health benefits or natural
ingredient use are also features with a strong level of interest among consumers in the chewing gum
sector. The percentage of all chewing gum new product launches claiming such attributes, as captured
by Mintel’s GNPD, is heavily weighted towards more recent years, with over half of the new launches
(55.3%) of products making such claims having been launched since 2013.
Just over a quarter (25.5%) of all GNPD chewing gum products made the claim of being sugar-free,
which reflects the strong consumer demand for such products, but also that this feature is no longer
such a differentiating feature.

Attitudes towards sugar and gum confectionery
FIGURE 9: STATEMENTS ABOUT SUGAR CONFECTIONERY, SEPTEMBER 2014
“Thinking about sugar confectionery, which of the following statements, if any, do you agree
with?”
^ based on 2,917 internet users aged 20-49 who have purchased sugar/gum confectionery in the last 6 months
That over half (52%) of survey respondents stated a willingness to pay more for candies not containing
additives gives a strong indication that manufacturers need to use more natural flavours and
ingredients to attract more consumers and differentiate from competitors. This also provides
manufacturers with greater potential to achieve higher margins by selling more expensive products.
Premiumisation could also be brought about through clever use of packaging, such as bundle packs,
since over a quarter (26%) of respondents agreed they would pay reasonably more for such packs.
Another similar proportion (24%) stated their willingness to pay more for handmade candy from
specialised candy stores, raising the possibilities for more artisanal candy chains.
Three in 10 (30%) survey respondents stated that they prefer mints rather than chewing gum when
they want to freshen their breath, rising to 38% among men in their forties. This indicates another
means to target a specific consumer group with a specific function. Over a third (35%) of respondents
agreed they were interested in products designed for their specific consumer group.
Nearly four out of 10 (39%) respondents agreed that they would prefer candies containing nuts or
seeds. This shows consumers not only want natural ingredients, but also identifiable fruit and/or nut
pieces that they feel provide more of a healthy nutritional snack.

What we think
The sugar confectionery market has been slowing down in its growth, and that has put increasing
pressure on the many competing manufacturers and brands. The market remains highly fragmented,
leaving brands vulnerable due to weak market shares. While producing and selling more higher-end
products has helped many companies, and been a positive reaction to consumer demands for such
products, manufacturers have done little to target specific consumer groups.
More focused market segmentation along gender or age group lines looks to be a promising area that
has as yet been little explored. This, combined with rising consumer demand and willingness to pay
for more candies with functional benefits and natural ingredients, provides an opportunity to develop
products aimed at the specific needs of different consumer groups. This is something that has still been
little explored by the industry as yet.
Another problem with slowing market growth and a high degree of fragmentation is that margins are
being squeezed and brand penetration remains low. Online retailing offers a potential solution to this.
Not only can online retail reach many more consumers across the whole country than physical store
chains, it also creates an environment where brands can communicate and engage with consumers
more directly, learning what they like and don’t like, and responding in kind.
Online retail also offers the potential to sell more products for lower overheads, thus helping to
increase profit margins and raise economies of scale. This will become important as competition in the
market heats up, and consolidation naturally intensifies. It will be the companies that can adapt
products to more specific consumer needs, and that can embrace and utilise online retail, that are likely
to be those that best survive the coming years of intense competition.

Issues and Insights Sugar Confectionery
Issues and Insights
“Competition in the market is forcing manufacturers to diversify their product to meet the needs
of increasingly sophisticated consumers. There are increasing new opportunities for products
aimed at specific consumer segments, such as women and the elderly. There is also the
opportunity to target high-end consumers with hand-made candies sold through high-end
stores. The rapid expansion of online retail is also creating opportunities for sugar
confectionary makers to reach many more new consumers, and engage with them directly to
learn more about their likes and spending habits.”
Pursuing the online sales option
The facts
 Almost a quarter (23%) of those surveyed for this report had bought sugar confectionery online.
 This rose to over a quarter (26%) of men in their thirties.
 Women and men in their forties were less likely to buy confectionery online.
The implications
In 2013, the number of people in China who had shopped online reached 302 million, having nearly
trebled in number in just five years. This number of people represented about 23% of the total
population of the country. This indicates that the proportion of people shopping online for
confectionery, among the tier one to tier three urban online users surveyed for this report, is about the
same as the overall online shopping proportion.
Between 2009 and 2014 the total online retail market will have increased by a factor of 10, while the
B2C (Business-to-consumer) online retail market value in 2014 will be more than 40 times the size it
was in 2009. The combined C2C (Consumer-to-consumer) and B2C online retail market reached 10%
of total retail sales in 2012, and should surpass 15% in 2014. Mintel predicts that total online retail
sales will reach a quarter of total retail sales in China within five years.
The mobile retail market has gone from virtually nothing in 2010 to nearly a third (31.7%) of total
online B2C retail sales expected by the end of 2014.
What this indicates is that there is great potential for sugar confectionery brands to sell online. Already
there are examples of this, discussed later in the report, from sugar confectionery makers selling
products via social media platforms, to online-only chocolate confectionery brands achieving strong
sales. Yet the sugar confectionery market has still only just really entered the online retail market. In
this sense, confectionery brands lag behind chocolate confectionery and salty snacks brands. Some
small manufacturers of salty snacks have turned to popular online sales vehicles such as tmall.com and
yhd.com to directly sell products to consumers in order to save on the cost of rent.
For manufacturers, reducing the cost of production and distribution is a major challenge, given rising
costs of raw materials, labour, rents and fuel. Online shopping channels provide a cost-efficient place
to communicate the brands and product concepts to more consumers at a lower cost than negotiation
sales through, and delivering to, bricks-and-mortar retailers.
Not only does online selling help to reach more consumers, but because of the growth in mobile online
retail, brands can reach consumers when they are on the move. This provides the potential to market
sugar confectionery as a snack option when people are out and about. For instance, using satellite geo-
positioning to identify where a consumer is, brands could identify nearby stores or vending machines
for their products should a consumer wish to have a quick sugar rush.

The fragmented nature of the market, and the fact that growth is slowing and (relative to other snacks
sectors) was already quite mature, means that competition among the many brands is intensifying. The
need to be able to stand out from the crowd and offer a differentiated marketing approach is therefore
becoming more crucial. This is where online (especially mobile online) retailing can come into its
own, by building ongoing engagement with consumers outside of the shops.
Food retailing online still only represents less than 3% of total online retail sales value, but will have
grown by about 880% between 2009 and the expected total market value in 2014. For shelf-stable food
products such as sugar confectionery, that are more likely than fresh produce to survive the delivery
process, the continued rapid growth of online food sales should present even more opportunities than
in the more developed sectors of the online retail market, such as clothing and electronics.
It is likely that the companies and brands that will continue to succeed in the future sugar
confectionery market will be those quickest and best at harnessing the potential of the online retail
channel.
Accentuate the artisanal
The facts
 Almost a quarter (24%) of surveyed consumers agreed that they would be willing to pay more for
handmade candy in specialised candy stores.
 This rises to 25% of men in their twenties, and 26% of women in their twenties.
 Women are those most likely to agree with this statement.
The implications
Given that consumers are willing and able to pay more for better-quality sugar confectionery, there is a
great deal of potential in leading confectionery brands taking their brands out of the factories and
putting them into premium-end candy store chains. There are precedents, such as Tingyi’s Master
Kong noodle brand establishing a chain of premium noodle restaurants, and chocolate confectionery
brands such as Mars’ M&M’s setting up specialist stores, such as its new “experience” store on
Shanghai’s Nanjing Road main shopping thoroughfare.
Just as selling bread in China has gone from packaged, pre-sliced loaves sold in supermarkets and
hypermarkets to artisan bakers selling bread fresh from the oven to an increasingly well-heeled urban
consumer base, so there is also potential for confectionery brands to establish artisan stores selling
high-end, handmade candies to those same wealthy urbanites. Given the slight bias towards people in
their twenties, and women, this kind of artisan shop could be a great way to tap into the gifting
business upon which sugar confectionery relies heavily.
Looking at how the surveyed consumers who had bought sugar confectionery for the purpose of
gifting have behaved in the previous six months, 25% bought such gifts in large tins or boxes, 56%
bought individually wrapped confectionaries, and 54% bought packs of assorted flavours.
This indicates that gifting leads to larger purchases, in more elaborate packaging and with more
individually wrapped flavour assortments – precisely the higher-end products that an artisanal outlet
could provide, and with the in-store experience (combining seasonal decorations, taste-testing, branded
merchandise, etc).
Shifting the brand emphasis away from just being a manufacturer, and more towards being an
exclusive retailer, can add kudos to a brand and give it a significant differentiation against its
competitor brands. Such a retail brand could work well not only in the usual retail settings of shopping
malls and main thoroughfares, but also at tourist sites and transport hubs, capturing a share of the
travel gifting market.

Such artisan shops could also provide personalised gift products. For example, Australian candy
company Sticky has opened stores in Singapore, Hong Kong, Malaysia and Indonesia which allow
people to personalise their candies with witty phrases or personal names. This could work well for
occasions such as Valentine’s Day or White Day, when boyfriends could buy their girlfriends
personalised candy with messages inside, or for wedding gifts, birthdays, etc. In Shanghai, a similar
business model can be seen in the company Candy Master, also an Australian company.
Segment to survive
The facts
 Over a third of surveyed consumers (35%) agreed that they would like to try more candy or
chewing gum products designed for a specific group (such as women, children or the elderly).
 This proportion rises to 42% among women in their twenties and 41% among women in their
thirties.
 Although there are already some products focused on children and women (see the section Who’s
Innovating? below), these products are few in number, and none exist targeted at the elderly,
indicating there is a big potential gap to fill.
The implications
As competition in the sugar confectionery market heats up, it will be harder for brands simply to
compete as generalist product manufacturers. More companies, in order to find a new competitive
niche where there is less competition, are already looking at becoming specialists focused on certain
consumer groups. If 35% of consumers are receptive to trying products aimed specifically at their
demographic group, then this is a wise move.
This is especially the case for brands targeting the female market in particular, with interest in such
products being higher among women in their twenties and thirties. But, according to Mintel’s GNPD
(Global New Products Database), the offering thus far is still very scant, with very few products aimed
specifically at a female market, and most of those being aimed at children.
Women, from their teens to their thirties, would appear to be a key segment that manufacturers should
be focusing on, either with existing products, or with products adapted to suit the needs of women.
These could be low or no-fat/sugar products that help women to enjoy confectionery without fear of
putting on weight, or providing additional healthy functions, such as throat-soothing or added vitamins
or minerals – for example, with calcium or added Vitamin D to help avoid osteoporosis, especially for
older women.
The elderly should also not be ignored. China’s over-65 population is growing as a proportion of the
total population as the country ages. China’s rapidly changing demographic profile with a falling birth
rate and enhanced longevity suggests that the country’s population pyramid will increasingly trend
towards an older society in the coming decades. The NBS (National Bureau of Statistics) has indicated
that it expects (even with the ongoing liberalising of the One-Child Policy) that China’s population
number of 12-19-year-olds will drop by a significant 18.2% over 2010-20. China’s teenage population
is set to decline further still to approximately 9.1% of the total population in 2050, from 13.8% today.

FIGURE 10: THE POPULATION OF OVER-60S IN CHINA, 2000-15
2000 2005 2010 2015
As a % of the Chinese population 10.66 13.01 14.85 16.91
Number of people (million) 132.49 167.42 197.97 233.06
Number of women (million) 66.59 85.50 100.24 116.96
% women 50.26 51.07 50.64 50.18
Number of people (million):
60-64 39.35 50.70 66.37 85.64
65-69 37.18 42.72 45.89 51.77
70-74 27.90 34.48 37.37 38.04
75-79 16.06 22.01 26.70 32.30
80-84 8.25 11.84 14.09 16.71
85-89 2.76 4.25 5.79 6.74
90-94 0.87 1.16 1.33 1.36
95+ 0.13 0.25 0.42 0.50
Total 132.49 167.42 197.97 233.06
SOURCE: NATIONAL BUREAU OF STATISTICS (NBS)
According to the China National Committee on Ageing, some 200 million Chinese adults were over
age 60 as of 2013. Nearly three out of 10 Chinese people will be older than 60 by 2040, according to
predictions from the United Nations. This marks the decline in the number of economically active
people in China, in contrast to the increasing proportion of elderly dependents.
This also shows that there will be a significant potential market for sugar confectionery products that
can focus on older people, also providing functional health benefits that suit the needs of older people,
such as added minerals and vitamins to help fight off degenerative disease, added dietary fibre or
traditional Chinese medicinal ingredients used to help alleviate the problems of ageing.

Trend Application Sugar Confectionery
Trend Application
Trend: Sense of the Intense
Sense of the Intense is a trend identified by Mintel which suggests intense physical and sensory
experience give life, brands and products a deeper meaning.
The stat: More than a third of consumers (37%) say they are interested in trying sugar confectionery
products with innovative flavours, rising to 40% of men in their thirties.
The issue: This is a high proportion, and it indicates that many consumers are simply not excited by
the flavours available. It is possible that boredom with the available sugar confectionery products is
what is driving more consumers to consider other alternatives, such as chocolate confectionery,
leading to the slowing of the sugar confectionery market (see The Market, below).
In the past 30 years of economic reforms, China’s consumers have witnessed massive and continuing
rapid changes. Not only have the products in the shops completely changed and are being continually
renewed with new ideas, but the way they shop, the way they travel, where and how they live, and
even their cities have all completely changed. People have come to expect change and innovation.
With rapidly rising average incomes, consumers have also come to expect better products for their
money, not only better ingredients and health benefits, but also more of an experience. This is where
sugar confectionery products are still in “catch-up” mode. Manufacturers are only recently getting to
grips with offering consumers more natural ingredients and health functions in their candies. But there
has still been a lack of an “experience”. Some manufacturers, discussed below, have begun to
experiment with online retail via social media, using online competitions and promotions, but they are
only just beginning to develop the idea of there being an experience attached to their brands.
In a highly fragmented market, where consumers consider flavour, ingredients and benefits above
brand, brand loyalty is very weak. To increase loyalty, brands need to encourage consumers to identify
with them, and the only way to do that successfully is to get people excited about the product.
The idea: This is where the idea of sensory stimulation can come in to help brands differentiate from
their competitors. Offering innovative and unusual flavours of sugar confectionery could help to
satiate the expectation of the new and challenging among consumers, and deflect the idea of sugar
confectionery being boring or un-challenging. Jelly Belly of the US, which has already been selling in
China for many years and has several imitators, is a good example of offering different unusual
flavours of sweets to consumers.

Companies could produce more seasonally limited flavours, such as summer fruit assortments.
Mintel’s survey data found that 38% of consumers would like to see more candy products designed for
summer, this rising to 41% among women in their twenties. Such seasonal flavours could add repeat
points of interest throughout the year through which to engage with consumers, run online
competitions and have pop-up promotions in stores. Marketing could challenge consumers to try
something new, to rate new flavours in return for special offers, contribute to social media forums
where people can rank their favourite flavours, or even combinations of flavours.
This seasonality focus could help sugar confectionery to increase purchasing during key festive
shopping occasions. According to Mintel’s report Festive Foods – China, July 2013, while 61% of
people had bought sugar confectionery as a gift for family or friends in the previous 12 months, this
proportion rose to 73% for chocolates. Creating seasonal flavours could help sugar confectionery
products reach a much higher proportion of consumer spending thanks to creating more of a seasonal
experience and making the products more interesting as gifts.
Trend: Cool Vending
Cool Vending is a Mintel trend about how consumer expectations of what, when and where they
can buy have changed vending machines forever.
The stat: Two thirds (66%) of consumers surveyed had bought sugar confectionery on impulse in the
previous six months, and a third (32%) when prompted by seeing products displayed at a store
checkout.
The issue: Consumers may be more likely to make a deliberate purchase of sugar confectionery (93%
of surveyed consumers had made a deliberate purchase in the previous six months), but there is a great
deal of scope in capturing their attention when they are tempted to snack.
Consumers have become used to constant access and shopping without going to shops (or dealing with
service staff) thanks to the rapid and widespread growth of online retail. The convenience of vending
machines is that they don’t require people to spend time going into shops and searching for what they
are looking for – they can walk past, see something they like and buy it.
Vending machines are becoming increasingly visible in main transport hubs, shopping centres and
even in offices. According to a September 2013 article in the Want China Times, there were only
40,000 vending machines across the whole of China, much less than the reported 5 million in
operation in Japan. There is therefore still great scope to expand the vending machine delivery market
for snacks, including sugar confectionery.
The idea: One way to achieve additional market penetration is by selling through vending machines.
According to Mintel’s survey of where snack consumers bought their snacks in April 2012, 6% said
they had bought from vending machines in the past three months. In the survey for the report
Traditional Chinese Snacks – China, March 2013, it was found that 13% of people had bought snacks
from vending machines in the previous six months.

The vending machine idea is interesting because there are vending machines selling beverages or even
chocolate but seldom sugar confectionery. Through vending machines, brands can more easily reach
the busy people on the go who do not have time to always buy a snack from a shop. Vending machines
also provide the opportunity for a brand to stand out in a location where other competing brands are
not present, unlike the situation on the supermarket or hypermarket shelves. The vending machines
shown below stock both snacks and confectionery products and are situated in subway stations in
Shanghai.
In a similar vein, other potential new brand penetration opportunities also exist at petrol station
convenience stores, where hungry drivers can be attracted to buy snacks for the road as they pay for
their petrol at the pump, rather than in-store. Convenience being the key to the potential success of
selling via vending machines, developments such as an online smartphone application that allows
users to pay for a vending machine purchase without cash could also help to increase impulse sales
and raise consumer interest in a particular brand.
Trend: Help Me Help Myself
Help Me Help Myself talks about how consumers are learning new ways to nudge themselves
towards better habits and how brands could play to help.
The stat: More than a third (36%) of consumers who have bought sugar confectionery in the previous
six months would pay more for additional health benefits from the products they buy, over a quarter
(28%) of those buying chewing gum. A quarter (25%) of sugar confectionery purchasers would pay
more for low/no-sugar confectionery, rising to 30% for chewing gum.
The issue: The rapid change in the lifestyles of Chinese consumers has led to rapid changes in their
diets. In the past 30 years, people have gone from rationing on many basic foods to a situation where
they can afford to buy a wide variety of fresh produce and processed foods, both in stores for home
consumption and when eating out.
According to a study produced by the University of Washington’s Institute for Health Metrics and
Evaluation, published in the medical journal The Lancet and reported in the Wall Street Journal, China
had a rapid increase in obesity rates in the last 30 years, with 46 million Chinese adults now being
classed as obese, and a further 300 million classed as overweight. According to the study, which
researched weight trends in 188 countries, over 28% of adult men and 27% of adult women in China
are overweight or obese.

While the causes of this epidemic are complex, the increased consumption of high-fat and sugar foods,
combined with increasingly sedentary lifestyles, are key components. This poses a challenge for sugar
confectionery, which is mainly comprised of sugar. Clearly, developing more low- and no-sugar lines
is a first step to proactively becoming part of the solution, rather than the problem. But manufacturers
could also do more to engage with children and parents about portion control, daily calorific intake,
taking more exercise, etc.
Avoiding more people becoming obese also needs to focus on children’s health and diet. According to
the same study, China’s child obesity situation is “alarming”, the findings indicating that almost a
quarter (23%) of boys under the age of 20 and 14% of girls are overweight or obese, significantly
higher than in comparative high-income countries in Asia, such as Japan and South Korea.
Manufacturers can provide a better image for their products not just by using less or no sugar, adding
natural ingredients, adding vitamins, minerals or dietary fibre, but also by suggesting how often it is
appropriate for children (or adults) to eat their product, what they should avoid eating their product
with (such as soft drinks) and how much exercise they should undertake to burn off the extra
carbohydrate. This might result in less frequent sales, but by improving the functional ingredients,
manufacturers could charge more per unit, and make up for slower sales.
It would also arguably show that a brand of candy actively takes care of its consumers, and helps them
to avoid the health issues associated with poor diet and lack of exercise. By taking responsibility to
help people help themselves, brands could both differentiate themselves from their competitors, and
win a significant public relations result.

Market Size and Forecast Sugar Confectionery
Market Size and Forecast
Key points
 Total market value growth is continuing to slow, having achieved a CAGR (Compound
annual growth rate) of only 13.7% between 2009 and 2013, compared to higher rates for
other snack markets.
 Total market volume growth was even slower, at only 9.7% CAGR, indicating both
mounting competitive pressure within the market, and a shift towards more consumers
purchasing higher-priced products.
 Not only is competitive pressure mounting from within the market, but it is also coming
from other competing snack market sectors, especially chocolate confectionery and salty
snacks.
 These combined factors are likely to cause rationalisation and consolidation within the
market, with more innovative companies producing higher-quality products surviving at the
expense of the mass of less innovative companies with lower-quality, lower-priced products.
Value growth slow: driven by trading up
The total sugar confectionery and chewing gum market grew by 90% in value between 2010 and the
estimated value for 2014, at a CAGR of 13.7%, with a slight uptick in growth since 2012. However,
the market is seeing slowing growth, and is forecast to grow by about 53% in the period between 2014
and 2019, at a CAGR of about 9%.
FIGURE 11: TOTAL SUGAR CONFECTIONERY AND CHEWING GUM HISTORICAL AND FORECAST MARKET VALUE, 2009-19

In volume terms, the total sugar confectionery and chewing gum market grew by 58.6% between 2010
and the estimated volume for 2014, at a CAGR of 9.7%, also with a slight uptick in growth since 2012,
but then levelling off. This indicates that not only did average unit sales values grow over the historical
period, but this trend is likely to continue over the coming years. This reflects a trading up to higher-
value products by more consumers, thanks to rising incomes and spending power – as well as stronger
demand for better-quality products. The volume market is also seeing slowing growth, and is forecast
to grow by about 42% in the period between 2014 and 2019, at a CAGR of about 7%.
Volume growth even slower: time for new innovation
FIGURE 12: TOTAL SUGAR CONFECTIONERY AND CHEWING GUM HISTORICAL AND FORECAST MARKET VOLUME, 2009-19
The slowing market growth rates and shift towards more consumers buying more higher-end products
will create challenges for competing manufacturers in what is still a highly fragmented market. The
competitive pressure will also be heightened by the growing costs of production and marketing, from
raw materials, to rising employment costs and logistics costs. The resulting squeeze on profit margins
will favour the larger companies with greater economies of scale, and it is likely that the industry will
see greater consolidation in the coming years due to the combination of these factors.
In order to remain competitive, manufacturers will need to become much more innovative. Stronger
growth has been seen in other competing sectors, such as savoury snacks, chocolate confectionery and
baked goods. As consumers have shifted their spending more towards these competitor products, sugar
confectionery and gum makers would do well to learn from the innovations that have raised interest in
those sectors.

Sugar confectionery lagging behind competing sectors
One of the main problems for the sugar confectionery market is that it is struggling to compete with
more dynamic snack alternatives, and this indicates that sugar confectionery manufacturers need to
become more innovative in developing new products that keep up with the changing tastes of
consumers. The main direct competing sector for sugar confectionery is chocolate confectionery,
which grew at nearly twice the speed of sugar confectionery total market value between 2009 and
2013.
FIGURE 13: COMPARATIVE TOTAL MARKET VALUE GROWTH FOR COMPETING SNACK FOOD OPTIONS, 2009-13
% growth, 2009-13
Sweet bakery 231.6
Chocolate confectionery 106.8
Snack bars 92.0
Biscuits (cookies & crackers) 78.5
Salty snacks 75.1
Sugar and gum confectionery 65.4
SOURCE: MINTEL MARKET SIZES
Not surprisingly, given this competition from chocolate, some new products in the sugar confectionery
market are featuring chocolate as a primary flavour. For example, Japanese brand A&J launched these
Kyoto chocolate-flavoured boiled sweets in China during the latter half of 2014. The product retails in
a 31g pack featuring a Japanese geisha design.
However, simply trying to add popular flavours, such as chocolate, in order to ride on the growth in
that market is not sufficient for the market to develop. As the market has been slowing, there has been
a shift towards consumers buying more expensive, higher-quality products. For this extra cost,
consumers are demanding more functional benefits. In order to compete with these faster-growing
sectors, sugar confectionery makers should learn to incorporate some of the successful marketing
techniques and product development trends of their competitors in other snack sectors. This will
increasingly be in the realm of providing more functional benefits, as has been the major trend in those
competing markets.
How competing sectors are innovating
Some new domestic chocolate brands have been able to capitalise on the rapid growth in online
shopping by striking a balance between product quality, price and the convenience and market
penetration of online shopping. For example, there are chocolate confectionery brands like AMOVO
(by Beijing Meiyiyang Foods Ltd) and CAKOVE (by Taicang Nike Foods Ltd) which only sell their
chocolates via popular online retailers such as Tmall and Yihaodian. According to the sales data
published on the Tmall website, AMOVO was able to achieve over RMB10 million in annual sales in
2013 through this online-only business model.

We discuss how some leading sugar confectionery brands have embraced direct online selling via
WeChat in the Who’s Innovating? section below. However, most are only recent entrants to the online
market. What online retailing helps to do is not only raise awareness of products, and allows for more
personalised consumer engagement, but it also allows for much greater penetration into the market,
reaching people when they are not in stores, and even in regions where a company’s products are not
yet distributed.
Despite being domestic brands, AMOVO and CAKOVE have been highlighting the use of natural
ingredients (eg, cocoa instead of cocoa butter substitutes) of high quality (eg, imported from Europe)
in the manufacture of their chocolate products. This ties in well with consumers placing more
importance on high-quality ingredients rather than brands. It is the quality of ingredients that sugar
confectionery consumers also want. Nearly half (48%) of those surveyed for this report agreed that
they would pay more for sugar confectionery products made with more natural ingredients. The second
most important choice factor in choosing products that consumers would pay more for was that
products contain additional health benefits, chosen by over a third (36%) of survey respondents.
Sugar confectionery products making more functional claims about nutrition and health are illustrated
below, and we are seeing an increasing number of such claims in new product launches. This makes
sense, as this is also a trend being seen in the salty snacks market, another sector growing faster than
sugar confectionery, despite being quite mature and already very large.
Within salty snacks, nuts and seeds are the biggest sector, and they have derived much of their appeal
in recent years on being a healthier alternative to other salty snacks. The healthy benefits of nuts have
been promoted by many manufacturers using overt functional claims. An example is nut brand
Cherikoff, which has launched an assorted nuts product, for which the manufacturer highlights that
nuts contain fibre, niacin, B Vitamins, folic acid, magnesium, zinc, copper, potassium, antioxidants
and Vitamin E. Nut processors also highlight ideas such as nuts helping lower cholesterol levels and
reducing the risk of coronary heart disease and myocardial infarction.
Candy containing nuts could similarly target the 39% of consumers surveyed for this report who
agreed that they prefer candy containing nuts/seeds as they are better for health than regular candies.
Playing up this healthier aspect could help sugar confectionery manufacturers to raise consumer
interest. Developing sugar confectionaries, such as nougats, that contain nuts and dried fruit could also
create opportunities, as seen in the other snacks sectors, to promote the healthy aspects of sugar
confectionery products with these (preferably “natural”) ingredients.

Sugar confectionery china - december 2014

Sugar confectionery china - december 2014

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