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Three Squirrels Digital-First Strategy Striking Cord with China's Gen Z

  •   3 Dec 2019
  •    Jocelyn Sun
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    • By the time Alibaba's Single's Day 2019 rolled around, the share price of Three Squirrels (a significant player in China's snack food sector) had reached 63.33RMB. 331.4% higher than its IPO just several short months before.
    • Three Squirrels have three major pillars to its business strategy, which are: "digital-first" retail and marketing strategy, creation of IP, and harnessing holiday seasons to drive seasonal spikes in sales.
    • As part of its marketing campaigns, Three Squirrels releases both animated short movies (primarily for children) and short films (for adolescents and young adults). The most recent short film was titled "Little Peakedness," and depicted the "golden hours" of the lives of young Chinese. The film is just one of the many innovative marketing strategies the company has used to catapult itself to the forefront of China's snack industry.

    Three Squirrels: Riding Crest of Health Wave and China's Digital Economy

    Three Squirrels started in 2012. It was the first domestic snack food enterprise to prioritize a "digital-first" strategy. At present, it is the largest e-commerce orientated food enterprise in China. Its main business is nuts, dried meat, dried fruit, puffed snacks, and other categories of snack foods [1]. Its early adoption of an omnichannel digital retail and marketing paid dividends during the incipient stages of the company's launch. This strategy saw it secure the number one spot for snacks sales during Single's Day 2012, just several months after the company was launched. On Single's Day 2012, Three Squirrels sold the most nuts of all snack food retailers on Tmall, translating to sales of nearly 8 million RMB (approx. 1.2 million dollars) during the twenty-four hours. 

    Blitzscaling in China's Snack Food Industry

    Three squirrels scaled its business up exceptionally quickly and received initial injections of capital from firms such as IDG ($1.5 million), Capital Today ($6 million), and Frees Fund (300 million RMB).  On July 12, 2019, Three Squirrels successfully listed on the Hong Kong stock exchange. Its shares were A-rated, and its IPO was 14.68 yuan a share. In August of the same year, the company invested 10 million yuan [2] to commission an animation company to produce and release a cartoon series of Three Squirrels, named "Squirrel Town."

    The goal of the marketing strategy of Three Squirrels was to establish a positive, healthy, and happy brand image. On Aug 13, Three Squirrels closed at 42.41RMB/share. By Single's Day 2019, the company's share price had reached a staggering 63.33RMB, which is 331.4% higher than its IPO.

    Outstanding Single's Day Performance

    Three Squirrels is just one of 14 companies that managed to exceed a gross sales value exceeding one billion yuan during Single's Day, 2019. By 24:00 on Nov. 11, 2019, the omnichannel sales volume of Three Squirrels reached 1.05 billion RMB (approx. $150 million), translating to a year-on-year increase of 53.81% (its sales during Single's Day 2018 were 682 million yuan).

    Its sales through online channels exceeded 923 million RMB (approx. $132 million), breaking the Single's day sales record in China's food industry. Additionally, its sales through offline channels exceeded 126 million yuan (approx. 18 million dollars), translating to a year-on-year growth of 226%. Its food sales ranked first on Tmall, JD, Kaola, and other social e-commerce platforms.

    Combating the Post Single's Day Hangover

    Every year after Single's Day, there has been a predictable drop off in consumption, a phenomenon we can presumably attribute to a sort of post-Single's Day hangover. To combat this, Three Squirrels launched a film called "Little Peakedness"(小巅峰) to coincide with the hangover period and hopefully reinvigorate consumption. This heart-warming short film depicts the "golden hours" of the lives of China's Gen Z. Whether this short film was an effective cure to the post-Single's Day blues is unclear, but it certainly pulled on the heartstrings of China's most important consumer group. The short film received rave reviews and created quite the stir, resonating with China's Gen Z netizens and garnering vast amounts of comments, likes, and follows. To see the whole film, please click here (in Mandarin Chinese). 

    The warm reception was not surprising as young Chinese consumers attest to being attracted by and moved by emotionally resonant content. The combination of careful product placement and emotive content has been working for Three Squirrels and are active elements of the "Little Peakedness" short. In addition to gripping short movies, Three Squirrels also leverages KOLs and has amassed huge followings on both Weibo and Zhihu.

    The Three Squirrels Recipe for Success: Digital-First, Iconic IP, Holiday Season Promotions

    Compared with other leisure food brands such as BEStore (良品铺子) and Lyfen (来伊份), Three Squirrels has fewer offline marketing and brick-and-mortar retail channels. It focused exclusively on e-commerce channels for many years. It was not until 2016 that it began to set up offline retail stores [3]. In 2018, the revenue from offline channels accounted for only 10.76% of its total revenue.

    According to iResearch's prediction, online transactions in China will grow to 10.8 trillion RMB (approx. 1.54 trillion dollars) by 2020, and food categories are likely to benefit from this growth. Therefore, Three Squirrels, which mainly concentrates on online business, is expected to continue its current upward trajectory in the future.

    In addition to digital dominance, Three Squirrels also creates IP for its products, such as animated films, cartoon images, and engaging online computer programs. Three Squirrels use this IP in its advertising, copywriting, and graphic design, which is very appealing to younger consumers.

    Three Squirrels also heavily promotes its products during the holiday seasons [4]. In addition to "Single's Day," it also focuses on "double 12", New Year's Day, Spring Festival, and other holidays. Heavy marketing and promotion during these periods translate to cyclical and predictable spikes in sales and shareholder confidence. Going forward, we expect Three Squirrels to double down on the growth strategies which have seen it become China's most crucial snack company in just eight years. We also expect current growth trends to continue and predict further increases in the company's share value.

    Disclaimer: Images including video are from website and translated by ChemLinked.

    Reference Link

    [1] Three Squirrels Introduction
    [2] Three Squirrels Invests 10 Million RMB in Making Animated Film
    [3] Sina Finance
    [4] Marketing Strategy of Three Squirrels

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