Introduction: Under fierce competition, the real contest is in supply chains.
Author: Gou Gou | Reviewer: Wang Qiang | Layout: He Wen
Three Squirrels has made new moves in continuous supply chain construction! On July 6, the joint venture company Olam Squirrel Foods (Wuhu) Co., Ltd., established by Three Squirrels and Olam Group, was officially inaugurated in Wuwei, Anhui. Both parties are committed to combining international operations, product processing and manufacturing, and omni-channel advantages to provide consumers with higher-quality products and services, with production expected to start in August. Three Squirrels' founder Zhang Liaoyuan stated that the current domestic market is recovering and upgrading, and the consumer distribution sector is undergoing profound changes. The two sides have great potential in optimizing product structures, shortening intermediate links, continuously improving quality, and meeting diverse needs.
Two Major Nut Companies "Join Hands"
It is understood that Olam Group, ranked 406th in the Fortune Global 500 in 2022, is a globally leading integrated supply chain manager and processor of agricultural products and food ingredients, with nuts as one of its main businesses. Through its 18 business platforms, it supplies various products to over 20,000 customers, with a value chain covering more than 70 countries and regions worldwide.
Those familiar with the industry know that Three Squirrels has long been dedicated to the nut category. According to its 2022 financial report, nuts accounted for 56% of Three Squirrels' total revenue. In the past two years, Three Squirrels has reduced SKUs and strengthened its single-product operation logic. Since 2022, the company has successively invested in four demonstration factories for nut categories. Data shows that since the self-owned factories began production, the cost per box of daily nuts has decreased by about 8%, and the yield rate of macadamia nuts has significantly improved. The establishment of this joint venture will undoubtedly bring more benefits to Three Squirrels in terms of supply chain.
Zhang Liaoyuan emphasized that the two sides will work closely together, adhere to the "high-end cost-performance" strategy, deepen supply chain and omni-channel operation capabilities, contribute to the prosperity of the nut industry, and make nuts and healthy foods accessible to the public.
What Does This Mean for Three Squirrels?
During the internet boom, Three Squirrels dominated the online leisure snack market as a traffic "overlord." However, as traditional e-commerce traffic has been eroded by emerging channels, Three Squirrels must adapt to market changes and make choices. It chose the more difficult path: building its own factories and supply chain. For the company, transitioning from a pure online e-commerce model to an offline asset-heavy model is a tough battle.
Why is Three Squirrels doing this? It is related to its overall development strategy and its main product, nuts:
- Nuts are raw-material-oriented consumer products; to achieve better quality and lower prices, it must enter the raw material and production stages.
- Three Squirrels has scale advantages in the nut category, which can lead to cost savings.
- The company hopes to deepen the nut industry chain through independent manufacturing, deeply integrate primary, secondary, and tertiary industries, and achieve supply chain competitiveness in core items.
Additionally, in expanding offline markets, a mature supply chain system can help quickly catch up with other companies. In recent years, the rise of offline channels such as discount stores and community stores has met consumers' demands for cost-effective and personalized snacks. Three Squirrels aims to provide consumers with higher-quality, better-priced hard discount products, focusing on optimizing the entire chain from single-product operations, quality, goods, and products, to integrated improvements from operations to products to logistics and even R&D.
Under fierce competition, the real contest is in supply chains.
In Strategic Transformation, Continuously Deepening Supply Chain
In April 2022, Three Squirrels issued the "Important Announcement on Comprehensively Promoting Strategic Transformation and Upgrading Towards High-Quality Development," marking the end of its e-commerce-centric entrepreneurial era and the beginning of a mature era centered on nut supply chains and omni-channel, multi-brand layout. In a recent research activity, Three Squirrels observed that family consumption scenarios based on community units, offering high-quality and cost-effective snack products, are about to become a new round of demand and continue to be mainstream.
In response, the company is planning and designing a community snack store model around the "high-end cost-performance" strategy, leveraging its advantages in "national brand, core category self-owned supply chain, and multi-category expansion experience" to create a new store format.
Thus, deepening supply chain construction will be an important agenda for Three Squirrels. By building its supply chain, it can achieve:
- Cost reduction and efficiency improvement;
- Expansion of offline markets;
- High-quality, high-standard development goals.
Currently, Three Squirrels is in an adjustment period. Reflected in performance, in the first quarter of 2023, revenue fell short of expectations due to proactive optimization of offline stores and low-efficiency wholesale channels, and insufficient production capacity for core nut gift items due to external environmental factors. However, on the other hand, due to high-quality adjustments, product gross margins continued to improve and costs decreased, resulting in an 18% increase in profit during the reporting period. Additionally, the company mentioned that through measures to promote supply chain upgrades and operational improvements, particularly using quality channels to drive supply chain transformation, the decline in revenue has narrowed month by month. This indicates that Three Squirrels' strategic plan is beginning to show results.
Following the establishment of Olam Squirrel Foods (Wuhu) Co., Ltd. with Olam Group, what sparks will fly, and what new moves will Three Squirrels make? Let's wait and see.