China Biscuits Confectionery Industry Faces Challenges

  2008 is the Chinese biscuit confectionery industry can feel the rush the pace of the world’s giant merger year.

    In October 2008, Mars announced a 23 billion U.S. dollars acquisition of Wrigley, Cadbury and thus beyond the world’s largest confectionery company. Mars’s Wrigley as a stand-alone business unit, Mars product groups in the non-chocolate confectionery sugar brands such as rainbow, star bursts, and is located in Australia, the Czech Republic, Mexico, candy manufacturing plant will be transferred to other units under the management of Wrigley . Mars and Wrigley’s business in China could be completed in 2009 integration.

    In November 2008, Kraft Foods China Co., Ltd. announced that, with the Kraft China headquarters to Shanghai, and Kraft for Danone biscuit business in China has basically completed the merger integration is expected early next year, packing the “Danone” logo disappeared from the domestic biscuit market. Kraft Foods will occupy the Chinese biscuit market share of more than 20% or more, becoming the oldest Chinese biscuit market.

    In December 2008, from the world’s largest food and convenience food production cereal Kellogg’s acquisition of businesses in northern China, Qingdao, an important manufacturer of biscuits are Air China Foods Limited and its Yishui, after the established production bases in Fushun Kellogg (Qingdao ) Food Co., Ltd. moved to new premises, indicating that Kellogg acquired the new group of enterprises will be opened to enter the Chinese market a new page.

    Industry expert analysis, transnational mergers and acquisitions intensive initiatives, is not a simple merger of strong opponents, the weak action, but show a strong combination with a complementary advantages, strategic layout of the characteristics of industry-wide market. Mars and Wrigley is a typical case of mergers and acquisitions. Mars is the world’s largest chocolate maker, Wrigley is the world’s largest chewing gum manufacturers. According to the analysis, chocolate manufacturers believe that chocolate foods reflects the low profitability of the market is still a lack of integration, while chewing gum compared to a higher profit margin, and showed high growth in Asia. The chewing gum manufacturers are hoping for more candy, chocolate, brand integration, strengthen the economy down during the anti-risk capability and increase its influence on the pathway.

    Kraft on the acquisition of Danone biscuit business, even more multinational companies to strengthen a profession emerged in the field of brand concentration of food, access to market the initiative of the strategic perspective. For Kraft, the acquisition “devour” a strong competitor, expand market share, and with the second camp distanced themselves from competitors. For up to be able to run, get rid of some decline in business, concentrated Specializes in dairy products and beverages.

■ Recent did not form a direct competitive threat

    Will integrate acquisitions of transnational corporations to step up local Chinese biscuits, candy and related businesses of greater competition resulting pressure?

    On this issue, China’s Bakery & Confectionery Industry Association ZHU Nian-lin in the interview with this reporter said that at present foreign companies biscuits, confectionery businesses targeting the high-end, China’s domestic product positioning in the low end, it is not the formation of a direct competitive threat. However, with the brand concentration increased, multinational companies to increase market coverage, low-end products to penetrate and positive competition in the future is inevitable.

    Chinese companies, according to Kraft, at present, Kraft biscuit in China, is a two-step implementation of market strategy, first cover the amount of urban centers on the basis of the original double, and then with neighboring cities to explore ways to cover the number of cities to three times the original. In order to implement a two-step marketing strategy, Kraft will increase a full range of branded products Distribution volume of traditional retail channels, the terminal stores the distribution, wholesale market management and market coverage suburban district towns.

    There are the domestic biscuit industry, domestic biscuit to middle and low end products, mainly occupy the rural areas and small towns such as 34-line market. This time can be integrated Ka Fuda, is bound to occupy the 12 lines on the basis of the market continue to be pressed three or four-line market. If domestic enterprises do not change, failed to avoid being acquired or squat keep their own small positions in a difficult situation.

    Indulge in the domestic confectionery brand positioning in the end, rabbits, Hsu Fu Chi, Ya-off, Le Conte, snub-nosed monkey and other brands have a certain degree of market competition. But this may also mean a positive confrontation confectionery industry will be arisen even earlier.

■ local industries to upgrade in the competition urgent

    ZHU Nian-lin said that the face of transnational mergers and acquisitions brought changes in the market should be viewed in two ways. On the positive side, no doubt, multinational companies operating at the same time the Chinese market, bringing high-quality products, advanced equipment and technology, globalization of standards, modern marketing, management philosophy, which had virtually driven the domestic home the progress of enterprises, and promoted to enhance the level of the domestic industry as a whole. From the crisis side, multinational giants gradual monopolization of the market has indeed reduced the survival of local enterprises, which requires domestic businesses to enhance competitiveness and industrial upgrading and differentiation to find a way out, if you only stick to low-end and low-cost competitive strategy, it will be difficult to survive.

    Local enterprises should be a solid low end, mass-market basis, to mid-market development. Low-end, low-price products are often low-tech products in this area is difficult to form a brand, it is difficult to form a loyal consumer base and, therefore, it is difficult to obtain a firm’s competitiveness. Improve product quality, with a certain degree of technical content, the establishment of a certain brand, in order to have a stable market. Able to produce quality and affordable products. The same quality products, local businesses more cost-effective, it will be in the future survival of local enterprises to develop core competitive advantages to be achieved.

    Respond to the fierce competition in the future, local companies should also be through technological innovation, a rich new products, development of health products, functional products, with the local regional characteristics of the product, look for market segments and follow the road of difference. For example, YaKe vitamin-rich foods through the development of the sandwich candy, accurate market positioning, the rapid expansion of the market share. Is the local enterprises seeking to differentiate the good case.

    To industry sources, China’s biscuits, confectionery market has a rich variety of consumer demand, there are many sub-species to be developed. Local enterprises are familiar with local culture as long as the focus on improving quality, technical innovation, can prop up the market one days, to avoid being eliminated in the industry reshuffle.
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