Can you learn from Three Squirrels?

Zebra Consumer Ren Jianxin

91.83%, 60.80%, 71.93%.

These are the achievements of Three Squirrels this year, corresponding to the company's Q1 revenue and net profit growth attributable to the parent company, as well as the stock price increase over the past two months.

With the steady advancement of the "premium affordability" strategy, Three Squirrels has achieved significant growth in both revenue and profit for three consecutive quarters.

This year, Three Squirrels has set a clear annual goal—returning to the 10-billion-yuan mark and strengthening its position nationwide. The Q1 revenue of 3.646 billion yuan has laid a solid foundation for achieving the annual target.

The Full Return of Three Squirrels

In 2012, relying on an internet connection and a few e-commerce platforms, Three Squirrels sold billions of snacks to users across the country in just a few years. Back then, Three Squirrels was the most dazzling "squirrel" on Taobao.

2019 was undoubtedly the most glorious year for Three Squirrels. On its 7th anniversary, the company successfully listed on the ChiNext board, becoming the "first stock of national snacks." In the same year, its annual revenue exceeded 10 billion yuan, "far ahead" in the domestic snack industry.

However, the year after its IPO, the company began to decline, hitting rock bottom in 2022.

But starting from Q3 2023, the company's revenue began to rebound, with performance recovering significantly. In Q3 and Q4 2023, revenue increased by 38.56% and 29.18% year-on-year, respectively, contributing over 1 billion yuan in incremental revenue. Annual revenue remained flat compared to the previous year, while net profit attributable to the parent company surged by 69.85%.

This year, Three Squirrels has shown even stronger growth momentum. On the evening of the 16th, the company disclosed its Q1 2024 report, achieving revenue of 3.646 billion yuan and net profit attributable to the parent company of 308 million yuan, up 91.83% and 60.80% year-on-year, respectively.

Three consecutive quarters of significant growth in revenue and profit; investors have clearly sensed the upward trend. From February to April this year, the stock price surged over 70% in just two months.

The remarkable performance of Three Squirrels stems from its deep understanding of the snack industry and market changes, along with timely strategic adjustments.

On the 17th, Three Squirrels founder and CEO Zhang Liaoyuan delivered a keynote speech at the 17th China Nut & Dried Fruit Food Exhibition, resonating with attendees.

After three years of special external conditions, all industries were hoping for stimulus or revenge spending. But revenge spending never came—only changes did. Users tightened their wallets, brand recognition declined, and price hikes were no longer accepted.

While many, including experts, believed China was experiencing consumption downgrading, Zhang Liaoyuan interpreted this change as an upgrade in rational consumption.

Based on this understanding and the company's own experience, Three Squirrels concluded that in today's era, brands are not for premium pricing but for eliminating premiums—this is the value of private labels.

Since late 2022, under Zhang Liaoyuan's leadership, Three Squirrels has raised the banner of "premium affordability" and embarked on a comprehensive transformation.

Squeezing Out Excess Costs Across the Entire Chain

"Premium" and "affordability" are inherently contradictory. Achieving brand and product premiumization while attracting users with price advantages seems almost impossible. Without balancing these and ensuring profitability, "premium affordability" would remain just a slogan.

So, how did Three Squirrels do it?

After over a decade of development, Three Squirrels has built advantages in branding, scale, and supply chain, especially in nuts, where it has become a top-of-mind brand. These are the foundations.

Meanwhile, improvements in China's transportation efficiency, lower logistics costs, and AI-driven digital transformation have made significant cost compression possible.

During the era of shelf e-commerce, Three Squirrels connected producers directly with users through private labels, shortening the sales chain and winning users with affordability.

The "premium affordability" strategy follows the same logic. By innovating and leveraging advanced tools, the company restructures the entire chain, compressing links and squeezing out excess costs in supply and distribution, ultimately making price advantages tangible for users.

To this end, Three Squirrels took the first step by closing hundreds of directly operated and franchised stores. These stores had high rents and renovation costs, driving up product prices and no longer meeting market demands.

While closing traditional stores, the company upgraded its private-label community snack stores in June 2023. Leveraging its core nut brand and full-category supply chain, it directly sources from high-quality factories, eliminating middlemen and brand premiums to offer high quality at low prices. By competing on price across all segments, it achieves "premium affordability."

So far, Three Squirrels has opened nearly 200 community snack stores, expanding smoothly in Anhui, Jiangsu, and Zhejiang, with plans for further growth.

Cost-cutting efforts extend beyond the company to the entire production-to-distribution chain. For example, after products reach distributors' warehouses, what is the most cost-effective way to reach retail outlets? Traditionally, this wasn't the brand's concern. Now, Three Squirrels collaborates with distributors to analyze cost structures for optimal solutions. These detailed efforts aim for total cost leadership and ultimate price advantages.

Can Competitors Keep Up?

Three Squirrels believes "premium affordability" is a universal industry lesson learned from its darkest times.

But this isn't something other brands can easily replicate.

For instance, in nuts—a category Three Squirrels has dominated for over a decade—it has built a robust supply chain with global direct sourcing for premium raw materials. It has also partnered with domestic suppliers to establish nut production bases in Yunnan, Guangxi, Northeast China, Anhui, Jiangsu, and Xinjiang, gradually localizing high-quality nut cultivation.

Bulk purchasing, global sourcing, and local material substitution create absolute cost advantages at the source.

Moreover, in nuts, its core strength, Three Squirrels has entered self-manufacturing, squeezing out production premiums.

Its "Dou+N" omni-channel strategy, under the premium affordability approach, fosters hit products. Rising sales further compress supply chain costs.

With national brand influence, core category dominance, and omni-channel capabilities, full-category supply chain development follows naturally.

In 2023, Three Squirrels had 13 products with sales exceeding 100 million yuan, 14 in the 50-million-yuan range, and 87 in the 10-million-yuan range.

The result? Three Squirrels' hit products are priced lower than competitors', yet the company remains profitable.

How can others compete or learn?

For 2024, Three Squirrels aims to return to the 10-billion-yuan mark and strengthen nationwide. The Q1 revenue of 3.646 billion yuan has set a strong foundation.

The "premium affordability" strategy is only a year old, and user perception is still shallow. As it deepens, the market's imagination will expand.