Top > Business > 2007 > February > 2007-02-01

Hershey`s and Lotte Plan to Take China Together

The American candy and snack manufacturer Hershey`s, marketer of the Kisses, Reese`s and Hershey`s brands, and the South Korean Confectionary, Lotte will begin a joint venture to manufacture $80 million worth of chocolate in China, in an attempt to penetrate the colossal market.

The joint venture will start in April, and both companies` products are to reach the displays of Chinese retailers by August. The Chinese chocolate market is estimated to be worth approximately $600 million, and is expected to double each year pending the economy sustains its growth rate. 50% of the market is currently controlled by the Mars Corporation. 51% of the joint venture will be owned by Lotte, and the remaining 49% will be owned by Hershey`s. Industry experts say the venture is suited to both companies` expansion plans. According to the agreement between the companies, Hershey`s intends to manufacture chocolate Lotte`s factory in Shanghai, and sell them in China and surrounding countries, including Japan. Lotte will use Hershey`s distribution mechanism to market its chewing gum in the United States.

Hershey`s performance has been hurt in recent years following high prices and fierce competition in the US market, yet has been reluctant to open a factory outside the United States, until now. "Through this alliance, we hope to grab in advance a portion of the Chinese chocolate market, which is expected to grow quickly in line with (China`s) expanding economy," The companies said in a joint announcement.