Hershey bets big on China’s e-commerce boom

By Oliver Nieburg

- Last updated on GMT

Hershey spots opportunities in e-commerce in China, where online chocolate sales set to grow 21% per year
Hershey spots opportunities in e-commerce in China, where online chocolate sales set to grow 21% per year

Related tags Compound annual growth rate Chocolate China Hershey

Hershey has earmarked China’s thriving e-commerce channel as a future growth driver despite setbacks in the country’s overall confectionery market.

The North American giant recently lowered its global net sales growth guidance for 2015 from 6-7% to 2.5-3.5% due to lower than expected chocolate growth in China in April and May this year.

For Hershey, China is its international priority market and in 2013 the chocolate major said the country would become its number two market behind the U.S. within five years. However, macroeconomic challenges in China have weakened trade in tier one hypermarkets; the company’s main channel for chocolate sales in the country.

Despite this, the company is still profiting from an e-commerce boom in China and therefore hard-focused on developing this channel.

Hershey's e-wish cards aim to personalize the online shopping experience
Hershey's e-wish cards aim to personalize the online shopping experience

Hershey has an array of online offerings in China, including personalized gifting options and a mobile chat app. The target for the chocolate major is educated female consumers and millennials.

“E-commerce is the fastest growing distribution channel in China,”​ Richard Camacho, vice president supply chain - Asia, Europe, Middle East, Africa at Hershey, told delegates at last month’s Asia Choco Cocoa Congress in Singapore.

Online chocolate sales in China to triple by 2020

A report from SmartPath pegged online chocolate confectionery sales in China at $386m in 2014 and it expects sales to more than triple by 2020 to $1.2bn, a compound annual growth rate (CAGR) of 21%.

This growth is far above China’s overall chocolate confectionery market, which Euromonitor International expects will register a CAGR in value sales of 7% in the next five years.

Hershey accounted for 12% of China’s overall – online and offline - chocolate sales in 2014, the same level as Ferrero, but behind market leader Mars, which holds a 39% value share, according to Euromonitor.

The educated female

e-wedding invitation
Hershey's e-wedding invitations

Hershey has a Mobile Flagship store as well as online distribution with over 12 third-party websites, which together account for 90% of its online chocolate sales.

“The typical online chocolate confectionery shopper is female,”​ Sylvia Fu, senior manager of China e-commerce at Hershey, told ConfectioneryNews.

She said women represent 60% of online chocolate sales, while the 18-35 age group makes up 85%.

“Generally, they have a more advanced educational background and income level vs. the general public. Their primary need states and purchase drivers online are premium choices, price and convenience,”​ said Fu.

Hershe's tailor-made photo gifting box
Hershey's tailor-made photo gifting box

Desire for imported chocolate

The Hershey spokesperson said her company had catered to online shoppers by offering a diverse portfolio available for web purchase including SKUs sold exclusively online. Weddings and gifting are the firm’s two biggest consumer purchasing occasions, representing 70% of Hershey’s online business.

“Besides these two major occasions, we have also observed an increasing desire for imported chocolate, which we will also introduce and sell this year,”​ said Fu.

Shanghai Golden Money update


Hershey acquired an 80% stake in Chinese confectioner Shanghai Golden Monkey​ in 2013 for around $498m in a bid to shore up its distribution capacity. Prior to the acquisition, Hershey had 50,000 points of sale mainly on the East Coast of China, but it has now expanded its national coverage to 950,000 points of sale. But Hershey said in a release last week that it is working with Shanghai Golden Monkey representatives to reassess the value of the business and scheduled plans to acquire the outstanding 20% of the firm after the recent setback in China.

Consumer engagement with WeChat

Hershey has also sought to ensure swift payment and delivery with online purchases and utilizes messaging app WeChat to allow buyers to interact with family and friends.

“For example, consumers can send a Hershey e-wish card together with the gifting box to their friends, who can listen to the wish by keying in the wish password on the e-wish card,”​ said Fu.

Consumers can also send e-wedding invitations; create a Hershey’s Kisses DIY gifting box and Hershey’s tailor-made photo wrapper gifting box through WeChat.

Kisses DIY game and gift boxing
Hershey's Kisses DIY game and gifting box

Shanghai Chocolate Festival marketing boost

Shanghai choc festival
Shanghai Chocolate Festival in Pudong

The firm has also leverage precision marketing to increase consumer engagement with a dedicated booth for its online business at the recent Shanghai Chocolate Festival in Pudong.  It says the event and engagement on WeChat helped it to triple e-commerce sales during the 3-day festival.

Fu said: “Having a large presence at Shanghai’s first-ever Chocolate Festival was a great opportunity to highlight the company’s beautiful online-only packaging, customizable products and engaging online content.”

Factfile: Hershey in China

  • In 2013, Kisses became Hershey’s first $100m brand outside North America thanks to its popularity in the Chinese market.
  • Hershey has reached capacity at its Chinese factory held in a joint venture with Lotte, but will open a $250 million factory​ in Johor, Malaysia to serve China and Asia-Pacific by 2015.
  • Hershey recently launched Reese’s in China as well as newly acquired snack brand Brookside.
  • Hershey said in a release this week that in China  it would focus on “distribution gains in smaller format stores, core SKUs and brands that deliver the highest return, and determination of the optimal organization structure to drive future growth”.

Related topics Business Confectionery China East Asia

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