Snack giant Three Squirrels has finally turned the corner.

The financial report shows that in the first three quarters of this year, Three Squirrels achieved revenue and net profit of 7.169 billion yuan and 341 million yuan, respectively, representing year-on-year growth of 56.46% and 101.15%. In the third quarter alone, Three Squirrels achieved revenue and net profit of 2.095 billion yuan and 51.5324 million yuan, respectively, with year-on-year growth of 24.03% and 221.89%.

Additionally, Three Squirrels has boldly announced its entry into the bulk snack retail channel.

Alongside the financial report, Three Squirrels also announced plans to acquire control or related business and assets of Hunan Ai Snacks Technology Co., Ltd. for up to 200 million yuan. According to media reports, Ai Snacks, as a bulk snack retail giant, has already opened over 1,800 stores in provinces like Sichuan.

Previously, Kanjian Finance had repeatedly tracked and analyzed Three Squirrels. This year, with the support of the "D+N" omni-channel strategy, Three Squirrels' performance began to recover. However, whether it was the earlier e-commerce platforms like Taobao and JD.com or this year's aggressive expansion into Douyin, it is evident that Three Squirrels still cannot escape the "shackles" of traffic. But with its bold entry into the bulk snack retail channel, the situation is starting to change—if successful, Three Squirrels will no longer have to rely solely on online channels to "make a living."

Expanding Offline Channels

In fact, even before acquiring Ai Snacks, Three Squirrels had been expanding its offline channels.

Looking back, as early as 2019, with the e-commerce boom nearing its end, Three Squirrels chose to accelerate its offline store expansion to reduce reliance on online platforms.

According to records, during the 2019 "Chinese New Year Shopping Festival," founder Zhang Liaoyuan announced an ambitious expansion plan to open 1,000 offline stores by 2020 and 10,000 offline stores within five years.

However, Three Squirrels' offline expansion did not go smoothly. Initially, its offline stores were divided into "Feeding Stores" and "Alliance Stores." By 2020, Three Squirrels had 171 Feeding Stores and 872 Alliance Stores, barely meeting the "1,000 offline stores by 2020" target. But due to special circumstances, its offline stores began to incur losses, eventually leading to large-scale closures.

According to financial reports, Three Squirrels' offline store revenue in 2021 was 1.609 billion yuan. However, by the first half of 2024, due to the closure of most Feeding and Alliance Stores, offline revenue totaled only 230 million yuan.

With the "collapse" of its offline expansion, Three Squirrels adjusted its strategy in recent years—besides imitating bulk snack stores to open community snack shops, it also placed its flagship nut products in all stores of Snack Busy and Zhao Yiming. This shift marked a transition from self-operated stores to partnerships with bulk snack retailers. However, based on first-half revenue, the results of entering Snack Busy and Zhao Yiming were not significant.

Despite the lackluster results, Three Squirrels had no choice but to "double down" on offline channels, as mentioned earlier—whether it was earlier e-commerce platforms like Taobao and JD.com, this year's aggressive push into Douyin, or future emerging online platforms, Three Squirrels' business model remained unchanged. Even if platforms evolve, Three Squirrels remains parasitic on them, unable to break free from the shackles of traffic.

Now, with its performance gradually recovering, Three Squirrels is once again expanding its offline channels—recently, the company announced that its wholly-owned subsidiary, Anhui One Thing Venture Capital Co., Ltd., plans to acquire control or related business and assets of Hunan Ai Snacks Technology Co., Ltd. for up to 200 million yuan. Public records show that Ai Snacks has already opened over 1,800 stores in provinces like Sichuan, with a goal of reaching 3,000 stores in three years.

For Three Squirrels, expanding offline business during a recovery is indeed a good move. But the question remains—in the fiercely competitive bulk snack market, what are Three Squirrels' chances of success?

What Are the Odds of Success?

For Three Squirrels, entering the bulk snack market now is not an ideal choice.

The main reason is that after two years of rapid growth, the bulk snack industry's boom period is nearing its end.

According to the "2023 China Bulk Snack Industry Blue Paper," the number of bulk snack stores nationwide grew from 2,500 in 2021 to 25,000 (estimated, 23,000 as of October 2023), a 1,000% increase. By 2025, the number is projected to reach 30,000, meaning about 5,000 new stores in 2024—a clear slowdown in growth.

Once an industry stops growing rapidly, it enters a phase of competition for market share, intensifying rivalry. However, the bulk snack industry is dominated by a single player—in November 2023, the two largest brands, Snack Busy and Zhao Yiming Snacks, merged to form the Snack Busy Group, with a combined 6,500 stores at the time. By February this year, the number had grown to 7,500, making it the industry leader.

In comparison, Ai Snacks has opened over 1,800 stores in provinces like Sichuan, with a goal of 3,000 stores in three years. While sizable, it still pales in comparison to the Snack Busy Group.

Moreover, a large-scale entry into bulk snack retail could further pressure Three Squirrels' already low profit margins. As of Q3 this year, Three Squirrels' gross margin was 25.44%, and net margin was 4.76%. In contrast, Yanjin Shop, the most successful in bulk snack retail, reported a gross margin of 31.84% and net margin of 12.83% for the same period.

Overall, with the industry's boom period over, expanding offline may help Three Squirrels' operations, but entering the bulk snack market now is fraught with uncertainty. Perhaps due to concerns about its prospects, while Three Squirrels' stock price has rebounded and performance is recovering, major shareholders familiar with its operations have been reducing their stakes—media reports indicate that since July 2020, three companies under IDG and Today Capital have cashed out over 4 billion yuan. According to East Money Choice, from July 2020 to October 8, 2024, these three companies collectively cashed out approximately 4.14 billion yuan.

Additionally, the stock price surged and then fell the day after the announcement, indicating weak investor confidence in Three Squirrels.