Ferrero International SA, the world's third-largest chocolate maker, expects to create 500 to 700 jobs next year in Hangzhou after launching its first East Asian factory, the biggest investment ever, in the capital of Zhejiang province.
Giovanni Ferrero, the family-owned company's chief executive, said China now represents one of the world's most promising markets for chocolate.
The new plant, its 21st worldwide, he said, would allow it to deliver fresher products to Chinese and other Asian consumers.
"We are investing $300 million in Hangzhou, the biggest investment we have ever made. The shift from 'sold in China' to 'made in China' will be a turning point in the next five-year plan," he said.
The manufacturer of a range of products including the popular Nutella chocolate spread and Kinder Surprise brands, Luxembourg-based Ferrero currently claims an commanding 24 percent of the Chinese chocolate confectionery market, employing 300 staff in the country, according to The Nielsen Co, the global marketing research firm.
But the domestic chocolate market is still seen as having significant room for growth, with consumption falling well behind the global average.
Consumers here eat 40-70 grams of chocolate annually per capita, compared with 4.3 kilograms in the United States and 9 kg in Switzerland, the highest in the world, according to research company Euromonitor International.
Zhang Hongming, the mayor of Hangzhou, said the city offers rich potential to foreign investors such as the famous chocolatier, as does the wider Yangtze River Delta area and the Asian market.
Jason Yu, general manager of Kantar Worldpanel China, a market research firm, said establishing local production means foreign brands such as Ferrero can create and launch products that are more appealing and relevant to Chinese consumers rather than relying on imports.
"Chocolate is not a native category in China, so substantial market-development efforts are still required to build relevance to everyday life.
"Families have previously bought chocolate for indulgence and enjoyment. It is important now to grow the product's penetration and introduce more usage occasions," Yu said.
Ferrero marketing of its flagship ball-shaped chocolates typically targets middle-class shoppers, who can afford quality products and who have strong aspiration for Western lifestyles, said Yu.
"We see strong growth momentum in third-to-fifth-tier cities, indicating huge white space to grow business if a brand is closer to consumers in those cities.
"They usually buy Ferrero chocolate for gifts, during wedding occasions and holidays, he said.
"The competition for gifts is fierce. Foreign chocolate brands are not just competing with one another, but also with other players for gifting occasions, for example premium wine, biscuits and snacks.
Bert Alfonso, the president of US confectionary industry giant Hershey's International Inc, forecast at the Consumer Analyst Group of New York conference earlier this year that chocolate sales in China are expected to expand to $4.3 billion by 2019, about 60 percent increase from $2.7 billion in 2014, lifted by strong demand from the growing urban population.