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    See the brand, and youll like it.

    The Influence of Brand Information on

    Chocolate Preferences of ChineseConsumers

    The First Conference on Economics and Politics of Chocolate

    LICOS, September 16-18 2012

    Di Mo and Johan Swinnen

    LICOS, K.U. Leuven

    Linxiu Zhang

    Center for Chinese Agricultural Policy, Chinese Academy of Sciences

    Scott Rozelle

    Center for Food, Security and the Environment

    Stanford Center for International Development

    Stanford University

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    Over the millenniums,

    the Chinese had

    developed a wide range

    of cuisines and snacks.

    Food is what matters.

    --An old Chinese saying

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    But they mostly share one trait:

    Salty not sweet

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    Chocolate is new to Chinese.

    Before Chinas economic reforms in 1970s and 1980s,

    almost no one in China had tasted chocolate (Allen, 2010).

    Too

    sweet

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    Serves better as

    fabric than food?

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    Chocolate Buddha

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    Although there are many fresh and enthusiastic

    chocolate fans, on average they only consume 100

    grams per capita in 2008.

    11.4

    0.10

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    Germany China

    Chocolateconsumptio

    nper

    capita(kg)

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    1 to 100 Ratio!! Germany = 100

    China = 1

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    However, Chinas chocolate market has been growing rapidly.

    From 1996 to 2005, per capita consumption of cocoa grew at

    about 6% per year (ICCO, 2010). It grows faster at 9% after 2007.

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

    0

    0.005

    0.01

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    0.030.035

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    2001 2003 2005 2007 2009 2011

    Perc

    apitaconsumptionof

    cocoa

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    And Chinas chocolate market is expected to

    accelerate in the future, growing by 10% to 15% per

    year(Buffy, 2011)

    .

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    Marketsize(billinUS

    D)

    With an annual growth of 10%

    With an annual growth of 15%

    Source: Euromonitor 2011

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    In 2010, total market size of chocolate in China was USD 1.4

    billion (Euromonitor, 2011).

    It is believed that China could soon consume up to 7 billion

    USD per year(China Daily, 2004).

    Yes: lots of little chips can add up to a HUGE pile of chocolate!!

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    Such potential has made China market a battle field for

    the top 20 world chocolate producers , domestic

    producers and many other companies (Scott-Thomas, 2011).

    China now has around 250 chocolate companies with an annual

    production capacity of chocolate of 150,000 tons(Buffy, 2011).

    http://article.directory4u.org/profile/Phybie-Buffy/44170http://article.directory4u.org/profile/Phybie-Buffy/44170
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    Chinas chocolate market

    Who are the actors?

    FDI

    Imports

    Domestic producers

    How do they compete?

    Branding strategies

    Localization (adapt to Chinese culture andtaste)

    Technology and ingredients

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    The market is dominated by foreign brands.

    FDI produced

    (Mars, Kraft,

    Nestl, Hershey's

    etc.)

    Domestic

    (LeConte etc.)

    Imported(Ferrero,Godiva

    etc.)

    Source: CMMS (2010)

    70%

    14%

    16%

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    The foreign brands adopted various advertising and

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

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    Hersheys : cute

    and whimsical

    KISSES.

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    Some of these foreign chocolate brands have also tried

    to localize their taste and adapt to Chinese culture (Woodand Grosvenor, 1997).

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

    Nestl set up factories in China.

    They adapted their chocolate recipes by making them

    less sweet; and at the same time, more variety of

    creamy and nutty chocolates were created to cater to

    the Chinese taste.

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    They also designed products

    as unique gifts, using this as a

    cultural gateway (71% of

    chocolate purchase is for gifts

    in 2010).

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    During the past decade, a large number of imported brands have

    also entered China.

    It grew from $17.7 million in 1999 to nearly $50 million in 2003 (AsiaTimes, 2005).

    Consumers in China now have access to more than 70 importedchocolate brands in the nations large urban cities (Chocolate News,2009).

    BelgianTruffles

    Cte d'Ormilk chocolate

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    Domestic competitors have also joined the battle.

    However, they are less competitive.

    less-developed technology

    low-quality ingredients

    less sophisticated marketing strategies

    Fantastic photos take your

    time one photo per page

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    A chocolate factory in Tianjing producing

    low-quality chocolates which were sold in

    more than four provinces in China.

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    A few domestic companies have managed to invest in the

    technology and ingredients.

    They have also emphasized Chinese culture and tradition in

    advertising to invoke the patriotism of consumers (World Executive,2004).Through the efforts, LeConte, the chocolate brand of COFCO (the largest

    domestic food company), has reached a sale of 600 million USD in 2006.

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    On the one hand, consumers in China have been found to have

    strong preferences for foreign brandsboth FDI and imported

    ones (Sin, Ho and So, 2000).

    Higher quality ,authenticity(Li, Fu and Murray, 1997)

    Social and symbolic

    values (Valentines,individualism)(Li, Li and Kambele, 2012).

    On the other hand, foreign brandsface the challenge of consumer

    patriotism.

    Chinese united, buy domestic!!

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    The literature suggests that brand information may affect

    consumer preferences:

    Information about food products may shape the tastingexperience of consumers (Deliza and MacFie, 1996).

    Among the various information cues, brands have been

    found to influence consumer choice (Allison and Uhl, 1964;

    Aaker, 1992; Keller, 1993; de Chernatony and McDonald, 1998)

    In developing economies, brands of new products from

    developed countries can be powerful sources of

    information (Carpenter and Nakamoto, 1989; Zhang, 1996)

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    More importantly, how different aspects of branding

    affect the preferences of consumers?

    Experimental studies on brand information mostlysimply compare consumer preferences of knowing and

    not knowing the brand of product (without much

    discussion on the different aspects of branding) (McClure

    et al. 2004; Wansink et al., 2000).

    Those that do look at different aspects typically rely

    on case studies or focus group analysis (e.g. Delong et al.,

    2004; Chao, Whrer and Werani, 2005).

    We need more empirical evidence.

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    Goal of the study

    Test how different types of information that are associated with

    different brands affect the tastes and preferences of consumers.

    Two Objectives: First, we test if thepreferences towards each brand change

    when consumers are informed about the brands* (non-blind

    condition) from the case when consumers are blind about the

    brands (blind condition).*Brands are defined by distinguishing among source of

    chocolate (imported or produced locally), nationality of

    producer (foreign or domestic) and types of chocolate (milk

    chocolate or truffle).

    Second, we explore if knowing the brands also affects the

    pair-wise rankings*of brands.*Pair-wise rankings are used to reveal whether one brand is

    preferred over another brand (in order the test directly how the

    different information affects preferences).

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    Approach: we conducted a chocolate

    tasting experiment in Beijing.

    Beijing Municipality

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    We recruited participants from the Olympic Forest Park and

    Renmin University in Beijing.

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    We recruited a total of 234 participants to be included in the

    experiment.

    =234

    d l di id d h i i i

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    We randomly divided the 234 participants into two

    groups.

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    Two Identical Groups

    35

    Tell her

    the

    brands

    Do not

    tell her

    thebrands

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    W d f b d f h l t i th i t

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    We used four brands of chocolate in the experiment.

    Foreign-Branded Milk Chocolate/Producedin China (represented by Dove from Mars)

    Imported Truffles(represented by Belgian truffles)

    Imported Milk Chocolate

    (represented by Cte d'Or)

    Domestic Milk Chocolate(represented by LeConte)

    Th th b d f ilk h l t h i il b i

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    The three brands of milk chocolate have similar basic

    ingredients (in terms of percentage of cocoa mass,

    cocoa butter, milk etc.).

    However, interviews after the experiment suggest thatdomestic brand has an unpleasant taste of milk that the

    foreign brands (FDI & imported) do not have, while the

    imported brand is a bit too sweet despite of the strong

    and nice flavor of cocoa.

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    Truffles are more different, and

    more exotic to Chinese consumers.

    Truffles contain more creamand they are dusted in cocoa

    powder (using different

    production technology from milk

    chocolate). Truffles have a different

    texture (softer) and taste (bitter

    coat made of cocoa powder).

    It is advertised as one of the most

    prestigious types of chocolate in

    China.

    In the experiment, there is only one difference between

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    YES: Information about

    the chocolate brands

    Taste the

    chocolate samples

    Rank the

    chocolate samples

    Taste the

    chocolate samples

    Rank the

    chocolate samples

    Short survey Short survey

    Non-blind Group Blind Group

    In the experiment, there is only one difference between

    the two groups:The non-blind participants received information about the

    brands before tasting; while the blind participants did not.

    NO: Information about

    the chocolate brands

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    On the plate for the non-blind group, there were stickers

    on the edge indicating the chocolate brands. The non-

    blind participants were instructed to read the stickers

    before tasting.

    Blind Group Non-blind Group

    Brand names on stickers:

    LeConte (Domestic Brand)Dove (Foreign Branded/Produced in China)

    Cote dOr (Imported from Belgium)

    Truffle (Imported from Belgium)

    No brand information

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    YES: Information about

    the chocolate brands

    Taste the

    chocolate samples

    Rank the

    chocolate samples

    Taste the

    chocolate samples

    Rank the

    chocolate samples

    Short survey Short survey

    Participants of both groups were then asked to taste the

    chocolate samples from the plate.

    Non-blind Group Blind Group

    NO: Information about

    the chocolate brands

    P ti i t ld t th h l t l i

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    Participants could not see the chocolate samples in

    either group.(The chocolate samples were served on a white paper plate with the

    chocolates covered)

    Af i h i i k d k h

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    YES: Information aboutthe chocolate brands

    Taste the

    chocolate samples

    Rank the

    chocolate samples

    Taste the

    chocolate samples

    Rank the

    chocolate samples

    Short survey Short survey

    After tasting, the participants were asked to rank the

    chocolate samples from the best tasting to the worst

    tasting.

    Non-blind Group Blind Group

    NO: Information aboutthe chocolate brands

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    Results

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    Th I t d Milk Ch l t i k d hi h b

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    The Imported Milk Chocolate is ranked higher by

    participants that were in the non-blind condition

    than those in the blind condition. The difference

    is significant at 10% level.

    0.35 0.35

    0.39

    0.23

    0

    0.05

    0.1

    0.15

    0.2

    0.25

    0.3

    0.35

    0.4

    0.45

    Rank as best tasting

    chocolate

    Rank as worst tasting

    chocolate

    Percentageofranking

    Non-blind Non-blindBlind Blind

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    In summary the ranking of Chinese Domestic Milk

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    In summary, the ranking of Chinese Domestic MilkChocolate is lower for the non-blind participants than blindparticipants; In contrast, the ranking of Imported Truffles ishigher for the non-blind participants.

    0.22

    0.4

    0.17

    0.55

    0

    0.1

    0.2

    0.3

    0.4

    0.5

    0.6

    Rank as best

    tasting

    chocolate

    Rank as worst

    tasting

    chocolate

    Pe

    rcentageofran

    king

    Non-

    blindBlind Non-

    blindBlind

    0.2

    0.370.34

    0.23

    00.05

    0.1

    0.15

    0.2

    0.250.3

    0.35

    0.4

    Rank as best

    tasting

    chocolate

    Rank as worst

    tasting

    chocolate

    Pe

    rcentageofran

    king

    BlindNon-

    blindBlind

    Non-

    blind

    Chinese Domestic Milk

    ChocolateImported Truffle

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    As mentioned before, our goal of study is to test how

    different types of information of brands affect the

    tastes and preferences of consumers.

    However, it is not clear so far that whether there is preference

    change towards foreign-branded milk chocolate/produced in China

    relative to other brands.

    It is not clear either that whether there is any significant

    difference between the two imported brands. Are truffles more

    likely to be preferred over milk chocolate when participants are

    informed?

    Therefore, we conduct pair-wise comparisons to answer

    these questions.

    In doing so we examine whether the brand information changed

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    In doing so, we examine whether the brand information changed

    the probability that one brand of chocolate was ranked higher

    than another brand. We compare four pairs of chocolate brands:

    We estimate the model:

    Brand B is ranked higher than brand A (1=yes; 0=no)

    = Condition (1=non-blind; 0=blind) + Control variables (includingparticipant characteristics, experiment location and tasting order of each chocolate)

    Chocolate brand A Chocolate brand B

    1 Chinese Domestic Milk

    Chocolate

    Foreign Branded Milk

    Chocolate/Produced in China

    2 Chinese Domestic Milk

    Chocolate

    Imported Milk Chocolate

    3 Foreign Branded Milk

    Chocolate/Produced in China

    Imported Milk Chocolate

    4 Imported Milk Chocolate Imported Truffles

    The pair-wise comparisons demonstrated a higher

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    Foreign Branded Milk

    Chocolate/Producedin China > Chinese

    Domestic Milk

    Chocolate (1=yes;

    0=no)

    Imported Milk

    Chocolate >Chinese

    Domestic Milk

    Chocolate

    (1=yes; 0=no)

    Imported Milk

    Chocolate >

    Foreign BrandedMilk

    Chocolate/Produce

    d in China (1=yes;

    0=no)

    Imported

    Truffles >Imported Milk

    Chocolate

    (1=yes; 0=no)

    (1) (2) (3) (4)

    [1] Condition(1=non-blind

    condition;

    0=blind

    condition)

    0.08 0.11* 0.11* 0.28**

    (0.06) (0.06) (0.07) (0.13)

    [2]

    Control

    variablesa Yes Yes Yes Yes

    The pair-wise comparisons demonstrated a higher

    preference of Chinese consumers toward imported brands.

    The Imported Milk Chocolate was more likely to be

    preferred in the non-blind condition than the blind condition

    over both the Chinese Domestic Milk Chocolate and the Foreign

    Branded Milk Chocolate/Produced in China by 11%.

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    Conclusion

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    Conclusion

    Brand information does influence Chinese consumers

    preferences for chocolate.

    Chinese consumers have higher preferences for the

    imported brands (Imported Milk Chocolate and Imported Truffle)

    than the domestic brand (Chinese Domestic Milk Chocolate).

    They also have higher preferences for the imported brandsthan the foreign brand which is produced in China (Foreign

    Branded Milk Chocolate/Produced in China) when they are

    informed about the brands.

    As discussed in the introduction, the reason for the higherpreference for the imported brands is likely to be the image of

    authenticity, high quality or the social and symbolic value that

    Chinese consumers associate with the brands.

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    The number of Chinachocolate fans are

    growing, year by year.

    The growth hasaccelerated in recent

    years.

    Growth potentialis huge.

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    Who will get the largest bite of the chocolate market? FDI Imported Domestic?

    What type of chocolate will consumers like in the future? Can preferences be changed? What form of branding will be successful?

    More experiments need to be conducted to

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    More experiments need to be conducted tounderstand the mind and belly of todays and

    tomorrows chocolate consumer