Chocolate Legend Le Conte Attempts Revival After Years of Melting Profits

(Beijing) — After rising then falling over the past three decades, once-renowned Chinese chocolatier Le Conte resumed production this year, returning to a market long dominated by foreign brands.

The loss-making Le Conte — previously owned by the state-run China National Cereals, Oils and Foodstuffs Corp. (COFCO) — halted production in April 2016 and was then sold to private confectionery-maker Hollygee Food Co. Ltd. eight months later.

“The production line was partly restarted this April and will fully resume in July,” a Hollygee employee told Caixin.

Some of the snacks produced in April this year are now available on Alibaba’s online marketplace Taobao, where several store-owners confirmed to Caixin that supplies resumed two months ago.

“Le Conte will accept orders from distributors very soon,” a Taobao shop-owner, who asked to speak anonymously, told Caixin. The Hollygee employee said production might restart in July.

The move reflects a notable return of the legendary brand, which launched its first product in 1991 and became the most famous home-grown chocolate brand. But its popularity fluctuated.

In March 2013, 52% of consumers surveyed by consultancy Mintel said they had bought Le Conte chocolate within the previous six months. By January 2015, the rate had dropped to 2%.

The confectionery segment of China Foods Ltd., COFCO’s Hong Kong-listed arm, which owned Le Conte, has seen losses since 2006. COFCO made an internal transfer of Le Conte to a property subsidiary for 600 million yuan ($88 million) in January 2016, in a bid to remove it from public financial records. When Hollygee bought the loss-making assets later that year, it paid only one-third of that price.

The declining valuation of Le Conte mirrors its fall in China’s chocolate market relative to outside competitors.

In 2005, Le Conte and other confectionery products of China Foods were second in terms of market share in China, at 13.2%, according to the company. But in 2015, nine of the top ten chocolate brands were foreign names, while the only Chinese firm, Jiangsu Liangfeng Food, commanded a paltry 0.9% market share, according to Mintel.

Nevertheless, Hollygee still counts on the value of the brand, which “carries the sentiment of a whole generation,” it said in a post on its official account on Tencent’s popular social network app WeChat.

“Hollygee has many products targeting weddings or celebratory occasions,” said Laurel Gu, director of food and drink at Mintel. “As up to 52% of consumers buy chocolate as a gift for special occasions, Le Conte would fit well with Hollygee’s company strategy and can diversify its product lines.”

But the classic brand faces new challenges. After double-digit growth from 2010 to 2014, chocolate sales in China dropped in 2015 and 2016, according to Mintel.

Moreover, other competitors have expanded their reach. One such company is the Hershey Company, whose joint venture with South Korea’s Lotte Group in Shanghai was suspended in March but is now “in operations as normal” and “very committed to the long-term potential of the China market,” a Hershey’s spokesperson told Caixin.

But Gu from Mintel still has faith in the Chinese brand.

“Compared to other chocolate brands, Le Conte’s products tend to be less expensive,” Gu said. “Le Conte can focus on lower tier cities or rural areas, where international brands have more difficulty reaching.”

Contact reporter Coco Feng (renkefeng@caixin.com)