On China's version of Valentine's Day, big international chocolate makers like Hershey are not feeling the love.
Hunger for the dark delicacy in the world's second-largest economy has hit a soft spot as the government cracks down on bribery gifts and a meltdown in the stock market has made consumers nervous.
Smaller, local chocolate makers appear to be making slight gains, but the big multinationals are struggling to match recent growth rates in a crowded marketplace.
The Chinese market is "a challenging one and we're certainly finding that out," the chief financial officer of Hershey Co said on a recent conference call.
Earlier this month, the US-based confectionery giant said sales of its Shanghai Golden Monkey chocolates would fall to less than half the US$200 million (S$280 million) it initially expected this year.
President Xi Jinping's two-year corruption crackdown has already hurt sales of cars and other luxuries.
On top of that, the country's benchmark Shanghai SE Composite Index has collapsed 27 per cent since mid-June, rattling consumers' confidence and their willingness to splurge on sweets. "People used to buy expensive chocolate as gifts, but now they no longer do it, so the consumption falls," said Zhao Yanping, deputy secretary-general of the China Association of Bakery & Confectionery Industry.
That means that Thursday's Qi Xi Festival, celebrating the mythological meeting of thwarted lovers, and usually marked by the exchange of chocolates and other gifts, may be a damp squib.
Cocoa market suffers
The shortfall in demand is hurting the global bulk cocoa market, threatening to leave big processors like Olam International Ltd and Cargill with idle capacity after a years-long build up based on booming Asian demand.
Cocoa grinding, a key indicator of demand, fell 12 per cent in Asia in the second quarter to 142,345 tonnes. It sunk to three-year lows in the fourth quarter of last year. "If their growth rates are going to drop dramatically or even flatline, then we're going to have massive overcapacity,"said Shawn Hackett, president of Hackett Financial Advisors in Florida, a futures brokerage and research firm specialising in agricultural commodities.
The popularity of chocolate has surged in China over the last decade as a growing middle and upper-class consume more western goods day-to-day and as treats on holidays like Qi Xi.
China, home to roughly 20 per cent of the world's people, consumed just 0.2 kilograms (7 ounces) of chocolate per person in 2014, compared with 2.2 kg (4.85 pounds) in the United States, according to data from market research firm Euromonitor International.
That massive deficit gives the confectionery industry confidence that it has the potential for long-term growth in China. But the near-term outlook is not as robust.
In total, China is expected to consume 220,700 tonnes of chocolate this year, or an increase of 6.3 per cent on last year. That is on a par with recent annual growth rates, but there are concerns that those rates are not sustainable.
Taking on tao
A further problem for international competitors is growing competition.
Locally-produced 'tao' brands like Amovo or Bouquet are taking off, with 17 per cent of consumers saying they had bought them. "These small players are getting more popular online," said Xu Ruyi, head of research at Mintel China.
Hershey has cited growing competition as one of the reasons for its lagging sales.
Rival US company Mars Inc, which leads the Chinese market, declined to comment, and third-place Ferrero SpA of Italy did not respond to requests for comment.
No. 4 Nestle SA of Switzerland, which sells a wide array of foods in China, said last week that its confectionery segment contributed to overall growth in China despite a"difficult" economic situation.
Revving up sales may not be easy in the short term. Past growth was built partly on expanding sales to new consumers in second- and third-tier cities in China, but now those places are saturated and chocolate makers must convince Chinese consumers simply to eat more, said Xu at Mintel.
That may be an uphill battle, even for lovers. Zhu Wenqing, a 23-year-old student in Beijing, said she does not eat as much chocolate as before: "I don't want to gain too much weight."