Everything You Wanted to Know About the Chocolate Business in China

What is that makes a good China business book?

1. A detailed, refined case study comparison of a hand full of major players in a single industry over the course of almost 30 years; or
   
2. A rip-roaring romp through booze-fueled negotiations, shady backroom dealings, and outsized personalities.

The king of the latter is undoubtedly Mr. China. Haven't read it? Shame on you. Mr. China also takes on the mantle of greatness by offering several good lessons.

As for the former? Until Chocolate Fortunes by Lawrence Allen landed in my mailbox, I was unaware that such a staid book could make such a fascinating read. Mr. Allen meticulously describes the Big Five chocolate sellers' forays in China with attention to company goals both globally and in China, manufacturing, logistics, the products, marketing, and retailing. Mr. Allen has spent career in chocolate, and he knows his subjects.

The Big Five are Ferrero Rocher, Cadbury, Hershey, Nestle, and Mars. Fascinating absent the China angle are the profiles of these companies. I found myself deeply fascinated in the different approaches these companies took in their global development and in their internal structure. Mars and Nestle were particularly interesting, mostly because I simply was not aware of either how vast an empire each commands nor was I aware of how Mars' status as a private company translates into how privately it indeed conducts itself.

Chocolate is a very special product for several reasons. Chocolate requires a wholly refrigerated logistics chain to maintain flavor and consistency, and this is difficult enough to achieve in 2009. Chocolate consumers are very loyal, and once a company establishes itself as a preferred brand, customers are slow to switch. There was essentially no chocolate in China between the late '30s and the entrance of Ferrero Rocher into the market in 1982. It is estimated that 70% of chocolate purchases are on an impulse basis. The Chinese viewed chocolate as an exotic delicacy. Chocolate enjoyed virtually no regulatory oversight by the government. Mr. Allen writes that this unique combination made it so that the Big Five were given a level playing field, and the game would be decided by the application of the executives' "experience, management skills, and leadership capabilities."

If you know your chocolate brands and you've been to Shanghai, you probably know who the winner is. But I don't want to spoil it for everybody else. I'm not going to give any names, but here's how it all broke down and why:

1. One company prospered, and continues to prosper, by offering a single unique, decadent product designed to take advantage of the gift-giving tradition in China.
2. Another had big dreams, but made big mistakes in its agricultural and manufacturing side that led to poor quality. There was a slight rebound, but management shakeups spelled its doom.
3. A household name, and a reluctant player on the international stage, found that the Chinese instantly took to one if its most iconic chocolates. Management problems found another victim, though.
4. The biggest of the five found some success, but didn't follow up the success aggressively enough. Probably didn't matter too much because all of their market shares were in line with their global market shares, and they were raking in dough hand over foot, but there were some weird things going on in the boardroom with the confectionery business
   
5. The tenacious one seemingly did everything right. But it took them a long time to start realizing a profit, a luxury the others were without.

The opportunity to view management decisions in a relative vacuum is enlightening. Mr. Allen shows and evaluates how management decisions affect the viability of the whole business model. He also shows his readers certain management techniques that are particularly effective and particularly ineffective in China. His analysis of managing in China is that it is different, but he soberly explains the difference.

This book is highly informative, and reads at a good speed. Recommended if you want to know more about managing a global business or if you like chocolate, highly recommended if you want to know more about managing in China. The book is not without its flaws, though.

There are a lot of China cliches. I don't necessarily know if this makes me like the book more or less, but my high school English teacher said cliches are bad, so I'll just follow her advice on this one.

The other glaring problem is that Mr. Allen's story doesn't come through enough in the pages. He was a senior executive at both Hershey and Nestle, but we don't really learn much about him. More personal anecdotes would have made the book that much better.

If you want to learn something about managing in China, do yourself a favor and buy this book. Be forewarned, though: there is not even a slight reference to baijiu in its pages.