Okay, folks, gather ‘round, because today we’re diving into a story that’s both sweet and a little bittersweet, much like some of the treats we’re going to be talking about. For those of you who are just tuning into the fascinating world of Chinese consumer brands, let me introduce you to Hsu Fu Chi (徐福记), a name that, for many Chinese people, is synonymous with “New Year candy.” Imagine if, say, Mars, the giant behind M&M’s and Snickers, was practically the candy of Christmas in the US – that’s the kind of brand recognition we’re talking about here for Hsu Fu Chi in China, especially during the Spring Festival, or Chinese New Year, the most important holiday of the year.
Now, here’s the news that’s got people talking: Nestlé, the Swiss multinational food and drink processing behemoth, just announced that it’s taking full ownership of Hsu Fu Chi. Yes, you heard that right. They’re buying out the remaining 40% stake from the Hsu family, who founded this confectionery empire. This isn’t a new relationship; Nestlé had already acquired a 60% controlling stake way back in 2011 for a cool $1.7 billion. But this latest move signals a complete handover, marking the end of an era in some ways for this iconic Chinese brand.
For many Americans who haven’t spent time in China, Hsu Fu Chi might be a brand you’ve never heard of. But trust me, in China, it’s a household name. It’s like that familiar friend you see every year during the holidays, whether you actively seek them out or not. Think of it alongside other classic Chinese brands like Want Want (旺旺) with its雪饼 (snow crackers) or Master Kong (康师傅) instant noodles – brands that are deeply embedded in the collective memory, especially when it comes to childhood and festive occasions.
Recently, the term “徐福记成时代眼泪了吗” (Is Hsu Fu Chi becoming a tear of the times?) started trending on Chinese social media. “时代眼泪” is a poignant phrase, often used to describe things that were once incredibly popular and significant but are now fading into nostalgia. The trigger for this online discussion? Apparently, some sharp-eyed netizens noticed that the design of Hsu Fu Chi’s classic酥心糖 (crispy candy) wrappers bore a striking resemblance to the costumes worn by the main characters in the wildly popular historical drama Empresses in the Palace (甄嬛传). This sparked a wave of “memory-killing” comments, with people reminiscing about how much they loved Hsu Fu Chi candies as kids.
This timing is interesting. Just as people were wondering if Hsu Fu Chi was becoming a relic of the past, Nestlé drops this bombshell announcement of a full acquisition. It’s a bit of a plot twist, to be honest. Nestlé, as the world’s largest food and beverage company, has been facing some growth challenges lately. Their stock has been under pressure, and with a new CEO at the helm last year, they’ve been on a “slimming down” mission, divesting from non-core businesses. Many industry observers were actually expecting Hsu Fu Chi to be next on the chopping block, following the example of Yinlu (银鹭) porridge and peanut milk, another Chinese brand that Nestlé had previously sold back to its original founders.
But apparently, Nestlé has bigger plans for Hsu Fu Chi. It seems like Hsu Fu Chi isn’t ready to be relegated to the history books just yet. As a recent article on China-Venture (投中网) put it, “还不愿意被时代抛弃” – “still unwilling to be abandoned by the times.”
So, how did Hsu Fu Chi become such a big deal in the first place? Let’s rewind to the early 1990s. China was opening up, and Taiwanese businesses were flocking to the mainland to set up factories. Among them were the four Hsu brothers – Hsu Pu (徐镨), Hsu Cheng (徐乘), Hsu Hang (徐沆), and Hsu Geng (徐梗). They established a candy factory in Dongguan, Guangdong province, initially focusing on OEM (original equipment manufacturing) – basically, making candies for other brands. But by 1992, they decided to launch their own brand: Hsu Fu Chi.
Incredibly, it only took a few years for Hsu Fu Chi to become the undisputed “Candy King” of China. By 1997, their sales had already surpassed 100 million RMB (roughly $15 million USD at today’s exchange rate, but a much larger sum in terms of purchasing power back then). From 1998 onwards, Hsu Fu Chi candies consistently dominated the market, becoming the number one seller in their category nationwide. They were, in essence, the unchallenged champion of Chinese candy.
Hsu Fu Chi’s rise and its subsequent challenges are deeply intertwined with the Chinese New Year. Back in the early days of Hsu Fu Chi, China was just emerging from a planned economy. Candy was still considered a relatively luxurious item, especially during the New Year. It was a must-have for visiting family and friends and for entertaining guests. Sales during the Spring Festival could account for over 60% of a candy company’s annual revenue. Hsu Fu Chi’s early branding and sales strategies were almost entirely built around this crucial holiday.
Think about the shopping habits for New Year goods. People tend to buy a little bit of everything, rather than being super selective. Capitalizing on this, Hsu Fu Chi pioneered a sales model that combined branded counters with bulk candy sales. They set up dedicated Hsu Fu Chi counters in major department stores and supermarkets, allowing customers to pick and mix different types of candies and then pay by weight. This model, which was quite innovative at the time, has now become almost standard practice for small snack sales in China.
But perhaps the most brilliant move was the “新年糖” (New Year Candy) concept. Xu Cheng, the second of the Hsu brothers, recognized that while buying candies for New Year was a national tradition, there wasn’t yet a truly national candy brand associated with it. He launched a range of 40 different flavors of candies specifically marketed as “New Year Candy.” In the context of the New Year’s goods market at the time, this was a game-changer.
Of course, Hsu Fu Chi also invested heavily in TV advertising during the New Year season. Anyone who grew up in China in the 90s and 2000s will remember the ubiquitous Hsu Fu Chi commercials on TV during the Spring Festival. These ads, often featuring festive themes and catchy jingles, further cemented Hsu Fu Chi’s association with the holiday.
The result? Hsu Fu Chi not only successfully captured the “New Year Candy” mindshare but also continuously reinforced this association over the next three decades. Meanwhile, China’s economy was booming, candy consumption was on the rise, and Hsu Fu Chi was perfectly positioned to ride this wave of growth. They were, as the Chinese saying goes, “躺在金山上赚钱” – making money while lying on a gold mountain.
Hsu Fu Chi went public on the Singapore Stock Exchange in 2006. That year, their revenue reached 2 billion RMB, with 1 billion RMB coming from candy sales alone. The company continued its rapid growth, and by 2010, their revenue had soared to 4.3 billion RMB, with a net profit of 600 million RMB. Hsu Fu Chi had built a strong brand moat, and their candy business maintained a gross profit margin of around 45%.
It was in 2011 that the then-unstoppable Hsu Fu Chi caught the eye of Nestlé. Nestlé acquired 60% of Hsu Fu Chi for 3.5 billion Singapore dollars, valuing the entire company at around 3.5 billion Singapore dollars (approximately $2.85 billion USD). After the acquisition, Hsu Fu Chi was delisted from the Singapore exchange. At the time, market analysts widely believed that with Nestlé’s global resources and Hsu Fu Chi’s household brand recognition in China, this mega-merger would have a “disruptive impact” on the domestic candy market, propelling Hsu Fu Chi to even greater heights.
However, after being controlled by Nestlé, Hsu Fu Chi gradually began to lose its luster. Over the past few years, there has been a growing chorus of voices online lamenting Hsu Fu Chi’s decline. Headlines like “Candy Giant Abandoned by the Times,” “Candy King Struggles to Reclaim Peak,” and “Why Hsu Fu Chi is Abandoned by Gen Z” have become increasingly common.
But here’s a surprising fact: Hsu Fu Chi hasn’t actually lost its “Candy King” crown, at least not in terms of market share in traditional retail channels. Nielsen retail research data from 2024 shows that in hypermarkets and supermarket channels, Hsu Fu Chi still holds the top position in bulk candy sales, with a market share exceeding 30%. Hsu Fu Chi remains synonymous with New Year Candy for many consumers.
So, why the perception that Hsu Fu Chi is being “abandoned by the times”? The most likely reason is that candy itself is slowly fading from people’s daily lives. On one hand, the “New Year flavor” is diminishing. The tradition of buying special goods specifically for the New Year is becoming less prevalent. On the other hand, even when people do buy New Year goods, the demand for candy is significantly lower than before. As an article from Jincaidāo Channel (金错刀频道) points out, fewer people are choosing candy as a New Year gift nowadays.
Candy’s position in the modern New Year shopping list is somewhat awkward. In terms of perceived value as gifts, it pales in comparison to cigarettes, alcohol, or tea. In terms of practicality, with health concerns on the rise, candy is often seen as something “old people shouldn’t eat and kids aren’t allowed to eat.” It’s often considered less desirable than healthier snacks like nuts and fruits.
This trend is clearly reflected in the data. According to Nielsen data, sales of traditional New Year candy in China declined by an average of 11.6% annually between 2019 and 2023. And it’s not just during the Spring Festival; candy consumption is declining in other scenarios as well.
Wedding banquets, another significant consumption occasion for candy (喜糖 – “happiness candy”), are also seeing changes. From 2014 to 2024, the number of marriages in China plummeted from over 13 million couples to below 7 million, a nearly 50% decrease. Simultaneously, wedding candy packaging has become increasingly elaborate, but the quantity of candy given out is shrinking – often just a symbolic gesture.
Overall, the Chinese candy market, after years of rapid growth, has hit a ceiling. According to Foodaily data, from 2016 to 2020, the total market size of the Chinese candy market grew at an average annual rate of only 2%, and even experienced negative growth for the first time in 2015. Data from Guanyan Tianxia shows that China’s candy production reached 3.52 million tons in 2016, decreased to 3.31 million tons in 2017, and further declined to 2.88 million tons in 2018. Meanwhile, per capita candy consumption in China has been slowly decreasing for the past decade. In 2014, per capita annual candy consumption in China was 1410 grams, which dropped to 1280 grams by 2019.
When the entire industry is facing a downturn, how could Hsu Fu Chi, as the industry leader, remain unaffected? In recent years, there has been constant speculation that Nestlé might abandon Hsu Fu Chi. Given Nestlé’s track record, this speculation seemed plausible. Nestlé’s acquisition of Hsu Fu Chi in 2011 was part of a broader strategy to expand its presence in the Chinese market. Under this strategy, Nestlé launched a series of acquisitions in China. In the same year as the Hsu Fu Chi deal, Nestlé also acquired Yinlu, another well-known Chinese food company. The year before, Nestlé had acquired the Yunnan Dashan bottled water brand.
However, in hindsight, these acquisitions haven’t been entirely successful. In 2020, Nestlé sold Yinlu’s core businesses (peanut milk and canned porridge) back to the Chen Qingshui family, Yinlu’s original founders. In the same year, Nestlé also bundled its Chinese bottled water business, including Yunnan Dashan, and sold it to Tsingtao Brewery.
For a multinational corporation like Nestlé, mergers and acquisitions are commonplace. When a purchased brand underperforms expectations, selling it off is a normal business decision. However, after selling Yinlu, Nestlé didn’t dispose of Hsu Fu Chi. Instead, they doubled down, increasing their investment and completing a full acquisition. What was the rationale behind this decision?
The answer might be that Hsu Fu Chi is now Nestlé’s best Chinese snack brand. In the acquisition announcement, Nestlé stated that since joining the Nestlé family, Hsu Fu Chi has gradually transformed into a “National Classic Snack Brand,” deeply integrated into everyday consumption scenarios. Furthermore, Nestlé hopes to leverage Hsu Fu Chi’s existing strengths, particularly its robust distribution network, to develop its snack and candy business in China.
Snacks and candies are related but represent vastly different market trends. While candy has become a “sunset industry,” the snack industry in China is booming, driven by rising incomes and younger generations’ increasing focus on “treating themselves well.”
It might sound counterintuitive, but while candy consumption is declining, overall sugar consumption in China is actually increasing. Data from the China Sugar Association shows that in 2024, China’s cumulative sugar sales reached 2.4994 million tons, a year-on-year increase of as much as 47%. However, people today consume sugar in much more diverse forms, from chocolates and ice cream to jellies, cookies, pastries, and milk tea – all of which are arguably more appealing than just plain candy.
Take chocolate, for example. Data from the China Research and Development Pu Hua Research Institute shows that the Chinese chocolate market size reached $15 billion USD in 2024, a year-on-year increase of 8%, making it one of the fastest-growing markets globally. Among new chocolate consumers, young people born after 1995 account for nearly 30%.
Looking beyond sweet snacks, categories like nuts and seeds, preserved plums, dried fruits, and braised foods are all experiencing sales growth. As traditional candy declines, China’s leisure snack industry is thriving, giving rise to numerous emerging snack brands like Bestore (良品铺子), LYFEN (来伊份), and Three Squirrels (三只松鼠).
Data from the Qianzhan Industry Research Institute indicates that China’s leisure food industry achieved a compound annual growth rate of 12.3% from 2011 to 2018, with a market size exceeding 1 trillion RMB in 2018. Qianzhan predicts that the compound annual growth rate of China’s leisure food industry market size will remain at around 10% from 2023 to 2028, reaching approximately 2.6 trillion RMB by 2028.
Faced with a Chinese snack market worth trillions of RMB, Nestlé is understandably reluctant to give up. And for Nestlé to gain a foothold in the Chinese snack market, Hsu Fu Chi is their best bet. Hsu Fu Chi boasts both household brand recognition and an unparalleled channel advantage. After more than three decades of cultivation, Hsu Fu Chi’s counters are ubiquitous, even in third- and fourth-tier cities and rural towns across China.
Peng Chuangang, Sales General Manager of Hsu Fu Chi International Group, revealed at a FMCG (Fast Moving Consumer Goods) industry conference in 2024 that Hsu Fu Chi aimed to achieve channel coverage of 2 million outlets in 2024, with a target of 2.6 million in 2025. Such a sales network is something that Nestlé, and indeed most other domestic snack brands, would struggle to build in a short period.
With its new positioning as a “National Classic Snack Brand,” Hsu Fu Chi might indeed have a chance to revitalize itself. In fact, even before being acquired by Nestlé, Hsu Fu Chi was already pushing for diversification, moving beyond its “New Year Candy” image. In 2010, about half of Hsu Fu Chi’s revenue came from candies, while the other half came from biscuits, pastries, and Sachima (沙琪玛, a traditional Chinese pastry). After the acquisition, Hsu Fu Chi’s revenue data has not been publicly disclosed. However, it’s evident that Hsu Fu Chi has been vigorously expanding its product categories in recent years. New products like nut gift boxes for the New Year, coconut jelly, and functional candies and pastries with zero sugar or added health benefits have all appeared on Hsu Fu Chi’s shelves.
Of course, Hsu Fu Chi’s challenge lies in the fact that its brand is so deeply ingrained in the Spring Festival in consumers’ minds. Building brand recognition and consumer desire outside of the New Year context might not be an easy task. But with Nestlé’s backing and a strategic shift towards the broader snack market, Hsu Fu Chi is certainly not giving up on staying relevant in the ever-evolving Chinese consumer landscape. It’s a journey of transformation that is far from over, and one that many in China will be watching with keen interest. As China Entrepreneur magazine notes, Hsu Fu Chi’s future remains in a period of continuous transformation.
评论