Sales will continue to grow as major companies roll out new products with long-lasting flavors in a highly competitive market
Wallace Chung looked as if he had just stepped off a movie set. Dressed in an electric blue jacket with matching white shirt, trousers and shoes, the Hong Kong actor and recording artist was ready to meet his adoring audience to talk about his latest venture-chewing gum.
Picked to promote the new Trident brand, Chung posed for pictures and smiled at his fans as part of a major promotional campaign launched by the world's leading snack maker Mondelez International Inc.
The splashy event at the Orange Hall in the glitzy Taikooli of Sanlitun area of Beijing last month pulled in an army of photographers to capture Chung's every move.
"This confectionary category has big investment potential, which will lead to the introduction of a string of new brands," Jason Yu, general manager with the research company Kantar Worldpanel China, said.
"By inviting Chung, who is a successful, professional actor, Trident is targeting a new group of consumers, who are mostly white-collar workers or family-oriented."
Last year, the chewing gum market in China, the second-largest behind the United States, was worth 18.85 billion yuan ($3.03 billion), a research report released by Mintel Group Ltd, a market intelligence agency based in the United Kingdom, highlighted.
About 125,000 metric tons of gum was sold, retailing at between 2.5 yuan and 16.9 yuan.
Globally, the sector was worth $24.7 billion in 2014, Euromonitor, a privately owned market intelligence firm based in the UK, reported.
Projected growth of 32 percent to $32.5 billion is expected during the next five years.
In China, gum sales grew 10 percent last year compared to 2013 and they are expected to expand by 6 percent annually by 2020.
Here, Mondelez had just 5.5 percent of the market with its Stride brand in 2014.
The leading player was Confectionery China Ltd, part of Mars Inc, with its Extra, Double Mint and Five products taking 67 percent of sales, according to Kantar.
In a move to turnaround its gum business, Mondelez decided to launch its 60-year-old Trident brand in China.
Yuan Dongqing, vice-president of Mondelez for confectionary products in the Asia Pacific region, is convinced that innovation is the key to success, with an assortment of flavors and packaging.
"Like chocolate, our gum sales are a tale of two cities," Irene Rosenfeld, CEO of Mondelez, said. "Developed markets continue to be down, but in developing markets gum sales were up, particularly in China."
Between 2009 and 2014, chewing gum sales mirrored the growth in the Chinese confectionery industry with a 90 percent increase, according to a Mintel report.
But that could slow significantly in the future, rival research company Kantar pointed out, as gum starts to lose "its appeal".
One key area for expansion has been sugar-free gum, the Mintel report highlighted. This part of the industry saw growth rates as high as 25 percent in 2011 before slowing to 13 percent in 2012 as consumers switched to the healthier option.
"Sugar-free gum is on my regular shopping list, as it can relieve work pressure," Stephanie Wang, 28, who is employed in the fashion industry in Beijing, said.
"But sugary kinds make me worry about putting on weight."
Chewing gum with long-lasting flavors is also proving popular. In the Mintel report, which also involved a survey of 3,000 Internet users, 37 percent said they bought gum for the long-lasting taste.
The survey was carried out online to explore consumer attitudes toward sugar and gum.
"Fieldwork was conducted last September in four tier-one cities-Shanghai, Beijing, Guangzhou and Chengdu," the report said.
Tier-two and tier-three cities such as Jinan, Linyi, Nantong, Hefei, Shantou and Changsha were also included in the survey.
Around 30 percent of those polled preferred to pay more for low, or sugar-free gum, and 28 percent for products containing additional health benefits, such as vitamins.
"The number of new products that claim to be low or have no sugar has greatly increased," the report added. "We have already seen 75 percent of new products make this claim."
But "claims" that gum can solve bad breath problems jumped in the first half of last year, Mintel reported, with 15 percent of all new brands highlighting the issue.
This has gone down well with consumers.
"Hygiene is just as important as the way you dress," Jeff Yao, 30, a marketing manager at the consumer product company in Shanghai, said.
"A dashing smile and fresh breath will make you very welcome among your clients and friends."
Tougher smoking laws in China could also boost gum sales among men.
About 24.2 percent of the population in China are regular smokers, according to a report published by the Journal of the American Medical Association.
The World Health Organization estimated in 2010 that about 53 percent of Chinese men smoked.
The ban on public smoking here, as part of a wider campaign to reduce the social and healthcare costs, is expected to be a bonus for the chewing gum industry.
"It's a business culture in China where you hand over cigarettes to you clients," Ryan Qian, who has smoked for 12 years but also uses gum, said. "Now I hope they give me some chewing gums instead."
Overseas brands face tough competition
Foreign confectionary and food companies are facing stiff competition from major domestic players.
Stephen Maher, president of Mondelez China, a subsidiary of the multinational confectionery, food and beverage conglomerate based in the United States, plans to increase market share by promoting key brands.
Mondelez International Inc includes leading products from Kraft Foods and has major global brands such as Oreo and Chips Ahoy biscuits, Cadbury chocolate and Ritz savory snacks.
But its biggest rivals here are Chinese companies such as the sprawling conglomerate, Bright Food Group.
According to research jointly published by consultancy firms Bain & Co and Kantar Worldpanel last year, domestic companies dominated the confectionary and snack business.
They held market share in 18 out of 26 categories, including biscuits, chocolates, chewing gum and juice, which accounted for about 70 percent of the market value.
Foreign brands edged ahead in only eight categories including tissue paper, beer and hair conditioner.
"It's interesting to see how they are coping with changing Chinese consumer aspirations for healthy and less sugary products, while at the same time competing against local brands," Jason Yu, general manager with the research company Kantar Worldpanel China, said.
Last year, Yu pointed out, that mushroom biscuits rolled out by a Chinese pharmaceutical company, Jiangzhong Group Co Ltd, caught foreign brands off guard. The firm picked up 2 percent market share from international brands.
As sales of core products show signs of stagnating, Maher aims to revitalize the company's products such as Oreo and Chips Ahoy biscuits, and boost sales. Increased investment in the Chinese market is planned as well as improving and streamlining distribution to stores.
"Using global good practices and applying them to the market in China, as well improving manufacturing efficiency, will help us expand," Maher said.
In an era where an increasing number of consumers shop online, Maher believes the challenge is to tap into that market by using innovative ideas and techniques.
Online sales of fast moving consumer goods are set to grow rapidly in China this year, reaching $130 billion by the end of 2025, according to a report published by Kantar.
"We need to have the courage to let more junior people find solutions," Maher said. "The beautiful thing is what we solve here in China is something we can really bring to the rest of the world."
