As consumption upgrades and the new generation becomes the main consumer group, many existing brands will be replaced by emerging ones. Meanwhile, due to personalized and niche consumer demands and fragmented traffic, the entire consumer decision-making logic is changing, and the market share of leading brands will be gradually taken by numerous small and medium brands that cater to niche needs. Panda Capital continues to be optimistic about the new consumption field and has made systematic investments. We have invested in customized vitamin DTC brand LemonBox, light luxury eyewear platform Coterie, subscription-based weight management brand Dongchi, "0-oil puffed process, one fish crisp conquers the world" Snack Laboratory, comprehensive pet service and product retail brand Pet Home, and 90-year-old time-honored snack chain Jiuyuan Baozi... Today, I want to share a report by Zhang Lulu, Investment Vice President at Panda Capital, which compares "Qiaqia" and "Three Squirrels" in the snack food sector. In this research, you will see the following parts: 1. Small Snacks, Big Business – A Trillion-Yuan Market 2. Differentiation Comparison between Qiaqia and Three Squirrels 3. Inspiration for Entrepreneurs in the New Consumption Field -01- Small Snacks, Big Business – A Trillion-Yuan Market Frost & Sullivan defines leisure food as food consumed during leisure time, mainly including roasted nuts, braised snacks, candies and preserved fruits, bread and pastries, puffed food, and biscuits. Image source: Unsplash In 2020, the domestic leisure food market is expected to reach 1.3 trillion yuan; among which, bakery accounts for 24%, candy 12%, puffed food, braised products, and nuts and roasted seeds each 10%, and biscuits 7%. In terms of sales channels, offline channels still dominate, but online channels are growing rapidly, with e-commerce penetration reaching 14.3%. Source: Frost & Sullivan Figure: Leisure food industry scale and growth rate From the perspective of sub-industry compound growth and concentration, the candy market has high concentration but insufficient growth; puffed food is also a typical high-concentration market; the bakery and pastry market exceeds 200 billion yuan, with relatively fast compound growth and low concentration. In 2018, China's per capita leisure food consumption was 107 US dollars, accounting for 2.6% of per capita disposable income (28,228 yuan). Figure: Growth rate and concentration of sub-industries Source: Mob Research Institute, Euromonitor In the secondary market, we selected ten listed companies (Qiaqia Food, Laiyifen, Yanjin Shop, Ganyuan Food, Youyou Food, Haoxiangni, Huawen Food, Bestore, Three Squirrels, Miaokeland), and compared them from three dimensions: market value, sales, and net profit. We found that Three Squirrels has the largest GMV, with sales exceeding 10 billion yuan in 2019; Qiaqia has a high net profit level, reaching 600 million yuan in 2019, leading the industry. The next question is: why can Three Squirrels achieve GMV exceeding 10 billion, and how does Qiaqia maintain high net profit? We compared them from multiple dimensions such as channels, products, and marketing. -02- Differentiation Comparison between Qiaqia and Three Squirrels a) Channel: Qiaqia focuses on offline, Squirrels started with e-commerce From the channel perspective, we selected three typical brands (Qiaqia, Bestore, Three Squirrels) and found: Qiaqia adopts distribution and some KA direct operation models, with offline sales accounting for about 90%; Bestore is a brand chain store model, with offline sales accounting for 51% and online 49%; Three Squirrels started with e-commerce, with online sales accounting for 92% and offline only 8%. When studying Qiaqia's channel strategy, we found its channel layout as follows:

  1. Distribution: Since its establishment in 2001, Qiaqia has been deeply cultivating offline supermarket channels. Currently, it has about 1,000 distributors nationwide, with 1-2 in large cities and 1 in small and medium cities, covering about 300,000 to 400,000 terminal stores, focusing on channel sinking; the supermarket channel network is time-consuming and labor-intensive to build, with high barriers;
  2. Store-in-store: Plans to lay out 1,345 nut store-in-stores in major supermarkets in major cities such as Beijing, Shanghai, Guangzhou, and Shenzhen within 3 years, further expanding the depth and breadth of offline channels, while introducing professional nutritionists or nutrition consultants for interaction and education;
  3. New channels: Seeking breakthroughs through group buying, cross-industry cooperation, fruit channels, maternal and infant, cakes, etc. Squirrels has a strong online channel. We counted the online fan numbers of snack companies and found that Three Squirrels' Tmall store has over 40 million fans, and JD store has 27 million fans, both in an absolute leading position. This benefits from its continuous enhancement of brand and emotional connection. At the same time, nationwide brand influence may help Three Squirrels enter offline, but the replicability of its channel model remains to be verified. Figure: Comparison of online fan numbers of snack companies: Squirrels is absolutely leading Source: Public data compilation b) Category: Qiaqia follows a big single-product route, Squirrels explores diversification In expanding categories, Qiaqia follows a big single-product route. In 2015, it successfully launched a sunflower seed single product - Blue Bag Sunflower Seeds, and in 2017, it launched Daily Nuts. According to 2019 data, Blue Bag Sunflower Seeds sales reached 900 million yuan, and Daily Nuts reached 850 million yuan. We believe the reasons for Qiaqia's successful expansion into Daily Nuts are:
  4. The incremental market is large, the landscape is not yet settled, and there is no super strong product brand (unlike the potato chip market).
  5. Product differentiation positioning: emphasizing freshness, mastering key preservation technology, and direct sourcing of overseas raw materials in season; yellow packaging and large logo have strong visual impact.
  6. Sufficient marketing efforts: focusing on Focus Media advertising + content marketing + offline marketing activities, keeping pace with the times.
  7. Deep channel barriers: strong synergy with sunflower seed channels, offline advantages overwhelming Wolong (Wolong has over 300 distributors and 5,000 stores).
  8. The industry span is relatively small, and user mindshare can be reused. Stones from other mountains can polish jade. Qiaqia's big single-product strategy can give us inspiration:
  9. Offline shelves are limited, so strong product power is necessary, focusing on creating big single products and shaping strong user mindshare.
  10. Strong channels are essential for building big single products.
  11. First-mover or differentiation strategies can help companies gain a foothold in segmented markets.
  12. Micro-innovation is easily attacked by giants (with channel advantages) in a dimensionality reduction.
  13. Building multiple categories is the necessary path for sustained growth; some ideas for expansion: 1) conform to consumption trends; 2) strong synergy with original products (technology, channels, marketing, consumption scenarios, etc.) On the supply chain side, Qiaqia builds competitiveness by deeply cultivating the supply chain, matching its big single-product strategy. Since nut production is monopolized by foreign countries and import taxes are high, if domestic manufacturers stay in the processing stage, profits are very thin; Qiaqia cooperates with scientific research institutions to overcome planting difficulties, and from 2013-2014, established subsidiaries to build tree nut raw material bases in Baise, Guangxi, Chizhou, Anhui, Hefei, Anhui, etc.; In 2017, the company's productive biological assets reached 27.6316 million yuan. However, the nut planting industry requires large investment and long cultivation cycles, and it is expected that Qiaqia cannot get rid of import dependence in the short to medium term; In 2018, Qiaqia transferred Nut Pie to its controlling shareholder. Qiaqia believes that only by deepening the industry chain can it be competitive, and innovation can go deep into the seed level, not just packaging and marketing. Three Squirrels, on the other hand, attempts to seek a higher ceiling by exploring a multi-brand development path. In 2019, nuts accounted for nearly half, moving towards a diversified snack enterprise. This also reflects its increasingly mature Tmall-based play. Three Squirrels explores multi-brands based on core capabilities, creating full-scenario solutions for families. c) Gross Margin Comparison: Qiaqia sees simultaneous volume and profit growth, Squirrels' profit rate declines instead of rising In terms of gross margin, Qiaqia shows a trend of simultaneous volume and profit growth. Currently, the gross margin for nuts is about 27%, and for sunflower seeds around 33-35%. The main reason is that sunflower seeds already have economies of scale, with automation improvements and labor cost advantages; most nut raw materials are imported, with tariff costs; nuts have also been improving automation levels in recent years, gradually increasing gross margin, with current net profit levels at 1-3%. Figure: Qiaqia sees simultaneous volume and profit growth, with obvious economies of scale Source: Company financial reports In the past two years, Qiaqia wants to make the small yellow bag the number one in the segmented market, with high brand investment and high new product entry fees; after the scale of nuts expands, fixed costs can be diluted, and the company expects net profit margin to reach 3-5%; later, if brand power improves and raw material costs decrease due to scale, gross margin will further improve. In contrast, Three Squirrels' nut volume grows rapidly, but profit rate declines instead of rising. The reason is that during price wars, costs are relatively rigid, making it passive. Squirrels and Qiaqia have different category positioning for nuts; for Squirrels, nuts are a traffic-driving category. Figure: Squirrels' nut volume grows rapidly, but profit rate declines instead of rising Source: Company financial reports We analyzed Three Squirrels' quarterly sales and found that only the first quarter is profitable throughout the year, indicating a poor profit model. Three Squirrels believes that it is still in the stage of running around and full competition, where scale and market share are far more important than profit. Figure: Squirrels is only profitable in the first quarter of the year Source: Company financial reports At the same time, Three Squirrels has set digitalization as its strategy for the next ten years. This digitalization goal is not only reflected in the business chain from supply chain to operations mid-platform to store terminals, but also in its hope to achieve digitalization at the management and organizational levels. We believe that the real practice of digitalization requires much exploration, but every step forward will greatly improve operational and management efficiency, especially for a company like Three Squirrels with large sales volume and reliance on refined operations, the potential returns will be huge. d) ROE Level Analysis: Manufacturing vs. Platform From the ROE level analysis, we compared Three Squirrels, Bestore, and Qiaqia Food, and found that Three Squirrels and Bestore are more platform-based enterprises, while Qiaqia Food is more manufacturing-based. The core competitiveness of platform-based enterprises lies in their supply chain efficiency, digitalization, and refined management, all for efficiency improvement:
  1. Bestore and Squirrels have total asset turnover ratios between 2-3, while Qiaqia is around 1;
  2. Bestore's inventory turnover ratio is absolutely leading (4-6 vs 2-3). Figure: ROE fluctuations mainly come from changes in net profit margin Source: Company financial reports Figure: Bestore's inventory turnover ratio leads the industry Source: Company financial reports Vertically, we believe that the main driver of ROE fluctuations for each company comes from changes in net profit margin; after listing, Three Squirrels and Bestore saw increases in monetary funds and undistributed profits, with equity multipliers declining significantly, and are expected to remain stable thereafter; Qiaqia Food's total asset turnover and equity multiplier remain stable, with profitability improvement driving ROE upward. e) Cost Structure & Sales Expense Differentiation Comparison From the cost structure dimension, the comparison shows that Qiaqia's gross profit is stable with an upward trend, and net profit is high; Three Squirrels has low management expenses, but gross profit declines, and net profit needs improvement. Figure: Qiaqia's gross profit is stable with an upward trend, and net profit is high Source: Company financial reports Figure: Squirrels has low management expenses, but gross profit declines, and net profit needs improvement Source: Company financial reports Specifically looking at sales expenses, Qiaqia's sales expenses are dominated by advertising and promotions, accounting for 7.58% in 2019; Three Squirrels' sales expenses are dominated by freight and platform promotion service fees, with freight accounting for 6.79% and platform promotion fees 6.49% in 2019. Figure: Qiaqia's sales expenses are dominated by advertising and promotions Source: Company financial reports Figure: Squirrels' sales expenses are dominated by freight and platform promotion service fees Source: Company financial reports f) Company Positioning: Squirrels is a retail enterprise, Qiaqia is a brand enterprise -03- Inspiration: Building Differentiated Competitiveness is Key We believe that as competition in leisure snacks intensifies, each company must build its own differentiated competitiveness based on its relative advantages. The most important thing is to answer one question well: Have we created unique value for users? For startups, they often have limited resources, and channel advantages cannot compete with giants. Their breakthrough point may lie in more keenly insight into users' new needs and providing innovative solutions, first occupying the mindshare of a segmented category. At the same time, this entry point should preferably have sufficient extensibility for continuous iteration. We believe that if the new solutions provided by new brands can resonate with users' growing needs, then the possibility of continuous leveling up will be much greater. Source: Panda Capital (ID: pandavc), Author: Zhang Lulu Tips will be paid 400-2000 yuan once adopted.