9780814414323

Foreword	p. ix
Acknowledgments	p. xii
Introduction: One Country, Three Centuries	p. 1
China and Chocolate: East Meets West	p. 9
China's Road from Communism to Market Socialism	p. 12
The Evolution of the Global Chocolate Industry	p. 20
Chinese and Chocolate: A Foreign and Exotic Curiosity	p. 22
The Size of China's Chocolate Prize	p. 28
Selling Chocolate	p. 31
Selling Chocolate in China	p. 33
Ferrero Rocher: Accidental Hero	p. 40
Ferrero's Journey Along the Modern-Day Silk Road to China	p. 44
China's Emancipated Consumers	p. 46
Establishing a Route-to-Market in China	p. 49
Ferrero's Struggle with Local Copycats	p. 56
Did Ferrero Succeed in China?	p. 62
Cadbury: One Billion Consumers	p. 70
A Brief History of Cadbury Chocolate	p. 71
Cadbury China	p. 73
Cadbury's China Morass	p. 76
Attempting to Turn the Tide	p. 85
The Battle for Chocolate Bars	p. 88
The Final Blow: A Breakdown of Leadership	p. 91
Hershey: Back to Basics	p. 95
The Hershey Company	p. 96
Hershey's International Business	p. 98
Hershey China	p. 103
The First Season: 1995-1996	p. 113
The Second Season: 1996-1997	p. 120
The Third, Fourth, and Fifth Seasons: 1997-2000	p. 126
The Sixth Season: 2000-2001	p. 134
Under New Management	p. 138
Epitaph	p. 140
Nestle: China's Chocolate War Sideshow	p. 141
A Brief History of Nestle	p. 143
Nestle's Arrival in China	p. 145
The Birth of Nestle China	p. 151
Sweating the Assets and Reducing KitKat's Cost	p. 156
The Launch of Nestle Wafer	p. 159
In the Shadow of Nestle Wafer	p. 165
Nestle Could Have Been a Contender	p. 171
The Last Word on Nestle, Chocolate, and China	p. 174
Mars: A Well-Regulated Militia	p. 176
A Brief History of the Mars Candy Company	p. 179
Mars's International Expansion	p. 182
Mars's China Market Entry	p. 183
Mars Versus Its Big Five Chocolate Competitors	p. 190
Mars's Commitment to Market Leadership	p. 193
Going the Distance: China's 10K Chocolate Race	p. 201
The State of the Chocolate Market: 2008	p. 203
The Threat from Local Competitors	p. 213
Managing China's Multitier Market Going Forward	p. 220
Notes	p. 225
Index	p. 238
Table of Contents provided by Ingram. All Rights Reserved.

<html><head></head><body>Introduction: One Country, Three Centuries China’s breathtaking transformation from a command to a market-socialist economy over the past twenty-five years has turned some 300 million of its 1.3 billion people into ravenous consumers of everything from candy to cars. And until twenty-five years ago, almost none of them had ever eaten a piece of chocolate. They were, to coin a phrase, ‘‘chocolate virgins,’’ their taste for chocolate ready to be shaped by whichever chocolate company came roaring into the country with a winning combination of quality, marketing savvy, and manufacturing and distribution acumen. In short, China was the next great frontier, a market of almost limitless potential to be conquered in a war between the world’s leading chocolate companies for the hearts, minds, and taste buds—and ultimately the wallets— of China’s consumers. To the victor of the chocolate wars would go the spoils of over a billion potential customers for generations to come. Despite China’s radical transformation over the past quarter century, from economic basket case to economic powerhouse, it is still a work in progress. Figuratively speaking, in China today there are fewer than 50 million people living in the twenty-first century, about 300 million living in various stages of the twentieth century, and nearly a billion people living in the latter part of the nineteenth century. Nevertheless, China’s economic renaissance over the past two and a half decades has been nothing short of astonishing, especially considering the havoc wreaked by the failed economic, social, and cultural experiments of the 1950s, 1960s, and 1970s—and the brutality with which they were carried out. This period would, however, prove to be the dark hour before the dawn of China’s emergence, under Deng Xiaoping,1 into the global economy, a process begun in the late 1970s. And while China’s transformation is unprecedented, so too was the establishment of foreign businesses within a major country undergoing a complete economic and social transformation from a centrally planned economy to a market-socialist economy. * * * For seven years, between 1998 and 2006, I was a foot soldier in the ‘‘chocolate war,’’ first as an executive with Hershey, and later Nestle´, two of the world’s largest manufacturers of chocolate; as such, I was on the front lines of a battle for the hearts, minds, and taste buds of more than a quarter billion people constituting China’s new consumer class. This book is the story of the five global titans of chocolate— Ferrero, Cadbury, Hershey, Nestle´, and Mars—that bat- tled to capture a once-in-a-lifetime opportunity to establish their brands with one-fifth of the world’s population. It is also the inside story of East meeting West through the introduction into China, a xenophobic land of austerity and deprivation, of an icon of the Western world’s decadence and selfindulgence: chocolate. When I first arrived in China in the 1980s, I was a newly minted MBA; a twenty-something, ‘‘me-generation’’ American looking for adventure and riches in this vast economic frontier. The country was then in the early, experimental phase of its social and economic transformation, and trying to do business there meant wading endlessly through the detritus of vestigial government organs and policies while attempting to find purchase on its ever-changing economic and regulatory landscape. A high tolerance for ambiguity was essential. Two early experiences exemplify the Alice in Wonderland nature of doing business there at the time, and it is a tale of two cities: Beijing, the belly of China’s centrally planned communist beast; and Shenzhen, the tip of the spear of China’s economic reforms. During my final semester of graduate school at the Thunderbird School of Global Management, I co-founded Transnational Trade Services, a general trading company with glamorous headquarters in my Arizona dorm room. My most promising client was an American antiques buyer, and shortly after graduation I traveled to China together with my classmate and Chinese business partner, Li Jianmin, to find a source for Chinese antiques. Upon arriving in Beijing we went to meet a former associate of Li’s, a branch manager of a state-owned trading company, to see whether he could help us locate and export antiques. His office was located in an unimpressive, sootcovered one-story government building; it was not exactly an auspicious beginning, and our fortunes didn’t improve from there. Though we were greeted politely, through Li’s trustworthy translation and my basic Mandarin Chinese, it quickly became clear that this gentleman was a midlevel, lifelong bureaucrat comfortably ensconced in a large bureaucracy. As we talked, I became increasingly mindful of the portrait of Chairman Mao,2 literally and figuratively looking over his shoulder. Throughout our discussion he was consistently oblique and noncommittal. The business we were proposing would be new to him and his department, he said, and would require approvals from many different people in many different agencies. This would be difficult and would take time. Finding the antiques we were looking for would also be a time-consuming process, and even with the approvals and the goods in hand, export procedures would be cumbersome. Where we saw opportunity he saw barriers. Perhaps, we thought, we would make more progress over a meal, and we invited our host to lunch. By the time we left the building for a nearby restaurant, we had nearly a dozen of his colleagues in tow. It seemed he’d invited nearly everyone in his office. Far too much food and too many bottles of wine were ordered, and when we parted my lunch guests were loaded down with doggie bags full of food and wine, a bounty they would share with grateful families that evening. As I reflected on what had gone wrong, I realized that, for many in China, it must be difficult and risky to break with old habits. This gentleman had nothing to gain from meeting with us—other than a free lunch with enough left over for his family. If something went wrong, he would have a problem on his hands. If he did nothing, he would still get his government pay, housing, and benefits. Why take a chance? I clearly had a lot to learn about doing business in China. </body></html>

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Chocolate Fortunes

081441432X

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