The sugar confectionery market in China is facing slowing growth and high fragmentation. Companies need to better differentiate their brands and target specific consumer groups. Moving online sales channels could help companies reach more consumers and reduce costs. The market remains highly fragmented, making it difficult for companies to achieve significant market share. Companies will need to focus on wider product ranges, higher-end products, and efficiencies of scale to compete effectively in this environment. Targeting specific consumer groups like women and children with customized products could help segments survive in the competitive market.

1. EXECUTIVE SUMMARY
CHINA
December 2014
SUGAR CONFECTIONERY
MATTHEW CRABBE
Director of Research, APAC
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.

2. 1
SUGAR CONFECTIONERY
Executive Summary
December 2014
The market
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. (See Figure 1)
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
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. (See Figure 2)
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.
FIGURE 1: TOTAL SUGAR CONFECTIONERY AND CHEWING GUM HISTORICAL AND FORECAST MARKET VALUE, 2009-19
SOURCE: NBS/COMPANY INFORMATION/MINTEL ESTIMATIONS

3. 2
SUGAR CONFECTIONERY
Executive Summary
December 2014
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
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.

4. 3
SUGAR CONFECTIONERY
Executive Summary
December 2014
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
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.
(See Figure 3)
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
* eg jerky, pork scratching, dried fish slices
SOURCE: QQSURVEY/MINTEL

5. 4
SUGAR CONFECTIONERY
Executive Summary
December 2014
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
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. (See Figure 4)
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
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. (See Figure 5)
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.
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?”
Base: 3,000 internet users aged 20-49
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
SOURCE: QQSURVEY/MINTEL
SOURCE: QQSURVEY/MINTEL

6. 5
SUGAR CONFECTIONERY
Executive Summary
December 2014
Occasion of sugar confectionery gifting
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. (See Figure 6)
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
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. (See Figure 7)
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
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. (See Figure 8)
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
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.”
Base: 2,917 internet users aged 20-49 who have purchased sugar/gum confectionery in
the last 6 months
SOURCE: QQSURVEY/MINTEL
SOURCE: QQSURVEY/MINTEL

7. 6
SUGAR CONFECTIONERY
Executive Summary
December 2014
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
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. (See Figure 9)
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.
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.”
Base: 2,917 internet users aged 20-49 who have purchased sugar/gum confectionery in
the last 6 months
FIGURE 9: STATEMENTS ABOUT SUGAR CONFECTIONERY, SEPTEMBER 2014
“Thinking about sugar confectionery, which of the following statements, if any, do you agree with?”
Base: 3,000 internet users aged 20-49
SOURCE: QQSURVEY/MINTEL
^ based on 2,917 internet users aged 20-49 who have purchased sugar/gum confectionery in the last 6 months
SOURCE: QQSURVEY/MINTEL

8. PUBLISHED BY
Mintel Group Ltd
www.mintel.com
email: info@mintel.com
HELP DESK
UK +44 (0)20 7778 7155
US +1 (312) 932 0600
Australia +61 (0)2 82848100
Japan +81 (3) 5456 5605
China +86 (21) 63866609
Singapore +65 (0)6 818 9850
TERMS AND CONDITIONS OF USE
Any use and/or copying of this document is subject
to Mintel‘s standard terms and conditions, which are
available at http://www.mintel.com/terms.
If you have any questions regarding usage of this
document please contact your Account Manager or call
your local helpdesk.
© 2014 Mintel Group Ltd. All rights reserved. Confidential to Mintel.
HELP DESK
UK +44 (0)20 7778 7155
US +1 (312) 932 0600
Australia +61 (0)2 8284 8100
Japan +81 (3) 5456 5605
China +86 (21) 6386 6609
Singapore +65 (0)6 818 9850
TERMS AND CONDITIONS OF USE
Any use and/or copying of this document is subject
to Mintel‘s standard terms and conditions, which are
available at http://www.mintel.com/terms.
If you have any questions regarding usage of this
document please contact your Account Manager or call
your local helpdesk.
PUBLISHED BY
Mintel Group Ltd
www.mintel.com
email: info@mintel.com
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.