Three Squirrels to develop shopper-specific products to battle China’s sagging nut snacks market

By Douglas Yu contact

- Last updated on GMT

Three Squirrels' CEO Liaoyuan Zhang speaks at the 8th International Macadamia Symposium held in Yunnan Province. Pic: China Candy
Three Squirrels' CEO Liaoyuan Zhang speaks at the 8th International Macadamia Symposium held in Yunnan Province. Pic: China Candy
China’s e-commerce snack giant plans to target specific shoppers, including pregnant women, athletes and seniors, with customized products to battle the slowdown of the domestic nut snacks market.

During the recent 8th​ International Macadamia Symposium held in Yunnan Province (October 14-20), CEO Liaoyuan Zhang noted the Chinese nut snacks industry is facing both challenges and opportunities as consumer behavior is changing rapidly.

According to Zhang, the total sales of nut snacks across all e-commerce channels posted 16bn RMB ($2.31bn) last year in China, to which Three Squirrels alone contributed 4bn RMB ($577m).

“From January to August, 2018, Three Squirrels posted 3.8bn RMB ($548m) in sales, while Be&Cherry and Liangpin Puzi (the two largest Chinese nut snack producers after Three Squirrels) posted 2.4bn RMB ($346m) and 1.8bn RMB ($260m).

“These companies grew 7%, 31% and 24% in sales year-over-year, with their market shares accounting for 11%, 7% and 5% respectively,” ​he added.

Four new opportunities

These numbers indicated a “significant slowdown”​ of the overall nut snacks market value especially from the beginning of 2018, Zhang noted, adding the category grew exponentially between 2012 and 2017.

He said: “This is not good news for us… but the downshift has brought four main changes to the industry, which can be an opportunity for manufacturers moving forward.

The consumption volume of ‘highly selected and high quality’ nuts is growing at 20%​; consumers are demanding more nutritional benefits from their ‘everyday nut products’ – a category that accounts for 20% of all nut snacks on e-commerce, growing 200% year-over-year; freshness is paramount; and a growing amount of personalized snacks targeting specific shoppers, such as children, athletes and pregnant women.”

However, it remains a challenge for Three Squirrels to fully utilize data about consumers’ preferences for tastes, nut types and packaging in order to customize its products.

“Every time we sell a bag of nuts, it sends the consumer data to our manufacturing end. We are hoping to eventually send the information all the way to our nut growers – that way, it can form a complete traceability,”​ said Zhang.

Cross-category innovations

Three Squirrels noted nuts overall is a multi-billion RMB category, thus every targeted demographic can generate ‘enormous profit.’

In the near future, the company will launch nuts packaged in small jars for high-end consumers, as well as partnering with confectioners and bakeries to develop cross-category products.

“Bakery in China, especially, has entered a high-growth period. The combination of baked goods and nuts can create an ‘exploding’ category,”​ said Zhang.

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