China Law Blog

Just finished the book, Chocolate Fortunes, by Lawrence L. Allen. It's a very good book.

The book is about the competition between Hershey's, Mars, Ferraro Rocher, Nestle and Cadbury for the Chinese consumer. But it is really more about is what it takes to succeed in the consumer products business in China. And lest anyone ever thought China consumer sales would be easy, Chocolate Fortunes thoroughly dispels that notion while explaining exactly what it does take to succeed or fail in China. Lawrence Allen was himself an executive with both Hershey and Nestle and he clearly knows whereof he speaks in describing who among the Chocolate titans did well and why.

For anyone who is thinking of going into consumer products or food or retail in China (and who out there is willing to ignore 1.3 billion customers?) this book is a must read.

Based on my firm's experience in handling the legal aspects for all sorts of businesses going into China, I see the legal side of China consumer products/retail as relatively straightforward. But the "making money side of retail in China is no mean feat. For the most part, our manufacturing clients go into China, start making a product and then start making a profit relatively quickly. Our service sector clients go into China, get an office, and then start making money relatively quickly. Now I know it has to be more difficult than that, but from my perspective as a lawyer, it does seem that the call I get from these clients 3-6 months after we have set them all up usually involves them telling me how well things are going and how well they expect things to keep going.

Not so on the consumer products and retail side. Issues like where to sell in China, distribution, and marketing (all of which Chocolate Fortunes extensively discusses) are intensely complicated and can be fraught with peril. And then there is the issue of costs. Getting good retail space (either through renting one's own store or through distribution through existing stores can be shockingly high in China. We have had a number of very well funded clients decide to test out retail concept in a second tier city like Qingdao or Suzhou after finding out how much it would cost to do so in Shanghai or Beijing. Indeed, these days, places like Qingdao and Suzhou are not really bargains either. And my 3-6 month calls from our retail/consumer goods clients who are seeking to sell into china usually involve them muttering about how they had no idea "gaining traction" in China would be so difficult.

What are you seeing out there?

UPDATE: Just saw Experience Not Logic's excellent post-review on this book, "Everything You Wanted to Know About the Chocolate Business in China."