China’s booming online snack sales put the shine on food producers

China’s online nut sales are on fire, as the rise of millennial consumers and the increasingly powerful role of e-commerce are driving a boom in the online market for the snack considered as healthy and nutritious, with big online snack retailers standing to gain.

During a five-day sales promotion from January 17, Alibaba’s retail e-commerce platforms recorded sales of 2.1 billion items, with nuts contributing nearly 50 per cent to the total sales volumes of food.

Three Squirrels, one of China’s biggest online suppliers of nuts, sold 500 million yuan of nuts during the five days, with pine nuts and pistachios as the two best sellers.

“Nuts are currently the most popular snack among the Chinese, as they are perceived as nutritious and healthy for your heart and brain, ” said Chen Mengyao, an analyst for Citic Securities. “As people get richer, they want to eat healthier.”

Total sales of nuts in China reached 50 billion yuan in 2014, with sales of name-brand products exceeding 10 billion yuan for the first time ever, according to a recent research report by Sinolink Securities.

The average sales price of nuts, including walnuts, pistachios, pine nuts, macadamia, and almonds, have increased at an annual rate of 4 per cent in the past four years, reaching 112 yuan per kilogram by the end of 2014, the securities firm said.

“The shifting dining habits of Chinese consumers will continue to boost the demand of nuts”, said Liu Zhihua, an analyst for Sinolink Securities, “we expect the total sales of nuts to increase by 10 per cent annually in the next few years.”

In particular, millennial consumers, who are tech-savvy and value personalised experiences, played a big role in the surge of sales for high-end nut products.

The so-called “post-’80s” and “post-’90s” generations, who were born in the 1980s or 1990s, emerged as the dominant consumer group in online retailing during the Lunar New Year holiday, contributing 81 per cent of total orders on Alibaba’s e-commerce platforms from January 17 to January 21, according to statistics from Alibaba.

Baicaowei, an online nuts retailer, launched several highly-priced holiday gift packs months before the Lunar New Year holiday, such as “Grandma’s Hearth” and “Little Pal’s Firecrackers”. The gift packs target the “post-’80s” and “post-’90s” generations with distinctive package designs aimed at evoking childhood memories.

“We have achieved a major breakthrough in selling emotional trigger products,” Wang Qiang, the chief operating officer of Baicaowei, said in a recent report by the state-controlled Beijing News, “One of those nut gift packs sold more than 700 million pieces within the two months before the Lunar New Year holiday.”

During the five-day holiday, Baicaowei sold 300 million yuan worth of nut gift packs, with 63 per cent of the buyers between the ages of 18 to 29, he added.

In the meantime, Three Squirrels, which also posted high sales during the holiday period, benefited from its advertising campaigns and product placement in TV and popular movies, such as Kung Fu Panda 3, The Mermaid, and From Vegas to Macau 3. The brand is “highly recognised by mainstream consumers”, analysts from Citic Securities said in a research note.

“Millennials have gradually become the mainstream consumers for snack food,” said Hu Yanchao, an analyst for Zhongtai Securities, “they are more social and value-driven and like personalised and customised experiences”.

“We are strongly bullish on the online nuts sector in 2016, and we believe leading brands with online channels could particularly benefit from the trend, ” analysts from Citici Securities said.

The firm gave a “Buy” rating for the Shenzhen-listed shares of snack food supplier Haoxiangni Jujube, which acquired Baicaowei earlier this month.

Haoxiangni currently has more than 1,400 shops nationwide, while Baicaowei has had over 130 million online customers on Alibaba’s T-mall and other e-commerce platforms.

“With Baicaowei’s online channels, Haoxiangni should achieve revenue growth of 60 to 100 per cent in 2016,” Citic said.

In addition, the firm recommends the Shenzhen-traded shares of leading nut producer Chacha Food, which delved into e-commerce in July 2015, racking up 100 million yuan in online revenue in six months.

“In our view, Chacha Food’s brand reputation and advantages in channels and capital will likely boost its e-commerce business,” Citic said.

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