---
title: "Eyeing High Margins, Three Squirrels Dips into Beverages"
description: "Three Squirrels, a snack giant, is entering the beverage market with high-margin products like spring water and sparkling water, set to launch by the end of June. Despite the potential, industry experts are skeptical due to intense competition and the company's lack of experience in the sector."
author: "郭秀娟 王晓"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2021-06-24"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/eyeing-high-margins-three-squirrels-dips-into-beverages-19c532fc/"
markdown: "https://xinjignxiao.com/en/articles/eyeing-high-margins-three-squirrels-dips-into-beverages-19c532fc.md"
original_source: "https://mp.weixin.qq.com/s/V7QADxUrVcqHlG1YlRSnGQ"
translation: "https://xinjignxiao.com/zh/articles/%E7%9C%BC%E7%BA%A2%E9%AB%98%E6%AF%9B%E5%88%A9-%E4%B8%89%E5%8F%AA%E6%9D%BE%E9%BC%A0-%E8%A1%A5%E6%B0%B4-19c532fc.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/eyeing-high-margins-three-squirrels-dips-into-beverages-19c532fc/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# Eyeing High Margins, Three Squirrels Dips into Beverages

> Three Squirrels, a snack giant, is entering the beverage market with high-margin products like spring water and sparkling water, set to launch by the end of June. Despite the potential, industry experts are skeptical due to intense competition and the company's lack of experience in the sector.

**Scan the QR code in the image to register**
"One yuan for six mao profit" – the high margins in the beverage market have attracted snack giant Three Squirrels.
On June 21, a Three Squirrels representative told Beijing Business Today, "The company is advancing plans for beverage products, including spring water and sparkling water, expected to launch by the end of June."
With its original snack business facing revenue growth hurdles, it's understandable that Three Squirrels wants to boost performance through the high-margin beverage business. However, industry observers seem pessimistic about this move.
"Although beverage products have high profit margins, the industry is highly concentrated and competitive. It will be very difficult for Three Squirrels, which lacks any water source or operational experience, to carve out a share from giants like Nongfu Spring, C'estbon, and Nestlé on a national scale."
**OEM Model for Water**
Three Squirrels plans to apply its familiar OEM model to the drinking water business.
According to the Three Squirrels representative, "The spring water and sparkling water will be produced through OEM, serving as a supplement to offline consumption scenarios, not a major focus."
Data shows that Three Squirrels officially listed on the ChiNext board in July 2019 as the "first internet-famous snack stock," with its main business covering 400 leisure snack products including nuts, dried meat, dried fruit, and puffed snacks.
Among these, nuts are the most competitive category for the Three Squirrels brand. In 2020, Three Squirrels' nut sales reached 4.85 billion yuan, with daily nuts sales exceeding 1 billion yuan.
"As a retail giant, Three Squirrels entered the beverage industry mainly attracted by its high margins," said Zhu Danpeng, a Chinese food industry analyst.
Nongfu Spring's prospectus revealed the huge profits in the beverage industry. The prospectus showed that in 2019, Nongfu Spring's overall gross margin was as high as 55.4%, with the largest segment, drinking water, having a gross margin of 60.2%. This means that for every 1 yuan of sales revenue from mineral water, Nongfu Spring earns about 0.6 yuan in gross profit.
In comparison, Three Squirrels' gross margin is less than half of Nongfu Spring's. Data shows that from 2016 to 2020, Three Squirrels' gross margin continued to decline: 30.2%, 28.92%, 28.25%, 27.8%, and 23.9%.
Three Squirrels is not the only one coveting the high profits of the beverage industry. Since Nongfu Spring's listing, the capitalization of the beverage industry has quietly begun. In November 2020, Jilin Forest Industry announced its renaming to Quanyangquan, and the stock rose for six consecutive days, including three limit-up days, reaching a high not seen since July 2015. A month later, Juneyao Health, the "first lactic acid bacteria stock," also announced its entry into the mineral water business, establishing a wholly-owned subsidiary, Shanghai Juneyao Natural Mineral Water Co., Ltd.
**Seeking to Solve Snack Business Woes**
"Besides being tempted by the high margins of beverage products, Three Squirrels' original snack business is facing development bottlenecks and limited revenue growth space, which is another main reason for its move into beverages," Zhu Danpeng said.
From a performance perspective, Three Squirrels' snack business is indeed struggling. Last year, it saw its first revenue decline since listing. According to financial reports, in 2020, Three Squirrels' revenue fell 3.72% to 9.794 billion yuan.
Affected by the performance decline, the second and third largest shareholders of Three Squirrels began to reduce their holdings and cash out, causing the stock price to plummet. Data shows that Three Squirrels' stock price reached a high of 91.34 yuan per share in May 2020, then fell sharply, hitting a low of 39.25 yuan per share in December 2020, a drop of over 57%.
In the view of Shen Meng, director of Chanson Capital, it is not easy for Three Squirrels to use beverage products to alleviate its difficulties in the snack track. On one hand, Three Squirrels lacks advantages in water sources and brand marketing in the beverage business; on the other hand, the beverage industry is highly competitive with many giants, making it difficult for Three Squirrels to gain a share.
Relevant data shows that after more than 20 years of competition in the beverage industry, six major brands – Nongfu Spring, C'estbon, C'estbon, Master Kong, Ice Dew, and Wahaha – occupy about 80% of the market share.
New beverage brands such as Quanyangquan, Juneyao Health, and Genki Forest are also continuously grabbing market share.
"Beverage products have relatively high gross margins, but their sales channels are mainly offline, which does not match Three Squirrels' online focus," Zhu Danpeng said. Additionally, in terms of product types, the spring water launched by Three Squirrels is somewhat similar to Nongfu Spring's products, and in the sparkling water market, brands like Genki Forest have already launched products, making it difficult to achieve innovation.
**In the long run, it should be difficult for Three Squirrels' beverage products to make waves in this field.**
It is worth mentioning that this is not the first time Three Squirrels has expanded beyond leisure snacks to seek new performance growth. In 2020, Three Squirrels successively launched four brands – Tiegongji, Xiaolulanlan, Yanglegexiaomaohai, and Xixiaoque – targeting instant food, infant food, pet food, and custom wedding gifts, respectively.
However, as of the end of 2020, Three Squirrels' new brands were still in a loss-making state, contributing revenue of 76.1117 million yuan and a net loss of 40.4279 million yuan.
Source: Beijing Business Today, Authors: Guo Xiujuan, Wang Xiao


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671