Recently, as school started, being often away from home and rarely taking care of the kids, I thought of buying some snacks online and sending them over as a gesture. Perhaps due to professional habit, I have a considerable interest in brands, always seeking to find their differences, advantages, and disadvantages between products. Thus, while selecting snack brands, I became extremely interested in one brand again. In the blink of an eye, Three Squirrels has been established for 7 years. After learning more, this former Taobao brand is no longer just a "Taobao brand": its channels are fully expanding, continuously going down-market, and it is not limited to a single category of nuts. Looking at the data, its development speed is also astonishing. From the first financial report after Three Squirrels' recent listing, I pulled several sets of data: 1. During the reporting period, Three Squirrels achieved revenue of 4.511 billion yuan, a year-on-year increase of 39.58%; net profit of 266 million yuan, a year-on-year increase of 27.94%. 2. Revenue from self-operated brand nut products was 2.195 billion yuan, accounting for 48.95% of main business; non-nut categories achieved revenue of 2.289 billion yuan, accounting for 51.05%. 3. Online channels remain the main force. During the reporting period, third-party online revenue was 3.998 billion yuan, accounting for 88.62%, with gross merchandise volume (GMV) of 4.806 billion yuan. 4. Among offline channels, the feed store's sales per square meter was 17,500 yuan, with revenue of 214 million yuan, up 91.16% from the previous period, and net profit of 15.657 million yuan, up 72.09% year-on-year. Alliance stores had sales per square meter of 20,900 yuan, with revenue of 58.9969 million yuan. 5. Self-operated APP revenue reached 41.2763 million yuan, with registered users reaching 1.6666 million and average order value of 132.71 yuan. From the data, it can be seen that this company is indeed performing impressively. Moreover, beyond breaking the sales bottleneck of a single category, the development potential of offline channels is also promising. However, one point is worth noting: After listing, Three Squirrels, in order to tap into greater value space, is gradually transforming from an e-commerce brand to a digital supply chain platform enterprise. From this point alone, besides leisure snack products, what other strengths are hidden behind Three Squirrels? "You think Three Squirrels is a snack company? Actually, it's not!" When chatting with a friend from Three Squirrels, he said this, and I was somewhat surprised. However, in the financial report, I found the official complete definition of Three Squirrels: Three Squirrels is a manufacturing-oriented, self-branded, multi-format retailer. "Manufacturing-oriented" indicates that Three Squirrels is not just a brand owner, but through supply chain investment and supply chain finance, it produces food with cost advantages. "Multi-format" is crucial, indicating that besides retail business, Squirrel Home also has other business units such as animation. From the Three Squirrels official website: On the product side, it involves food series (including nuts, dried fruits, dates, and beverages), merchandise series (including plush toys, personalized jackets, trendy hoodies, T-shirts, and hats), cross-border collaboration series (such as Big Fish & Begonia gift boxes, Transformers collaboration models, and other IP collaborations, as well as custom products like Jinli gift boxes and Cocoa Song), animation series (Three Squirrels animated series, Jianmeng Three Kingdoms, etc.), and collaborations with film, television, and variety shows. On the channel side, it mainly focuses on the layout of "one main, two wings, three sides," covering online channels, Squirrel Feed Stores, Squirrel Small Stores, social e-commerce, new distribution, and Squirrel Town. After 7 years of development, Three Squirrels has gradually matured on both product and channel fronts, and will next improve its omni-channel and full-category layout. At the same time, efforts on the supply chain side will help Three Squirrels form an industrial closed loop and deepen its brand value. And "by mastering big data, digitally transforming and empowering the traditional supply chain" has become Three Squirrels' new corporate positioning. Establish a more complete quality control and management system in key links such as raw material supply, food safety testing, product repackaging, storage, transportation, and product circulation, achieving supply chain front-loading and high organizational efficiency, further improving the production efficiency of the food industry, creating user-perceivable value, and building the core capability of "creating products + creating experiences." At the same time, to support the offline strategy, Three Squirrels also launched the East China Ground Network Action. In East China, it took the lead in comprehensive offline layout. The project is based in Wuwei Park, Anhui, with a logistics hub as the foundation, simultaneously building alliance factories and embedding a quality inspection system. After completion, the project will deeply penetrate East China, and feed stores and Squirrel Alliance Small Stores in the region will share the regional logistics center distribution network. Writing this, at least I have clarified two major questions about Three Squirrels: "What does it sell? (Not just nuts)" and "How does it sell? (Not just online)". Next, let's delve deeper into this company from its development path: Regarding the rise of Three Squirrels' founder Zhang Liaoyuan, there is much online, so I won't elaborate here. In January 2012, Taobao Mall was officially renamed "Tmall", marking the beginning of the quality era. In February 2012, Three Squirrels, with "nuts" as its biggest selling point, firmly grasped Tmall's traffic dividend and quickly entered the public eye. Three Squirrels' Double 11 data over 6 years shows, from the first day sales of 7.66 million in 2012 to 682 million in 2018, this reflects not only strong online growth but also the huge potential of quality consumption demand in this category. Xu Xin of Capital Today once mentioned in a public speech that China's huge opportunity now is actually the opportunity of categories. This is also one of the core reasons she bet on Three Squirrels. If the Internet era before 2010 was more about platform opportunities, then after that, it was about opportunities in sub-categories. "Give me 10 million, and I can definitely create a nationally renowned e-commerce brand." Before the brand was founded, Three Squirrels founder Zhang Liaoyuan made this determination with Li Feng, a former partner at IDG Capital. After that, Three Squirrels received $1.5 million in angel funding. Igor Ansoff, the father of strategic management, proposed the "Ansoff Matrix," which is still used by many entrepreneurs today. It mentions that when you enter an existing old market, you should focus on product development, seeking new opportunities through new products with differentiated competition. Ansoff Matrix Zhang Liaoyuan achieved two points: First, he focused on the "nuts" sub-category to enter the existing leisure snack market, and later "nuts" became widely known because of Three Squirrels; Second, through the IP creation of the personified image of "Three Squirrels," in the era of high traffic costs, he reduced communication costs with users and formed a certain stickiness with "masters" (customers). Now, the leisure snack track still looks attractive. Public data shows that in 2018, Three Squirrels, at 6 years old, had annual revenue of about 7 billion yuan; 15-year-old Be & Cheery had 4.95 billion yuan; and 19-year-old Lai Yifen was lower at only 3.891 billion yuan. Therefore, breaking the 10 billion mark has become one of Three Squirrels' important goals this year. In addition, according to data from the China Food Industry Association, in 2019, the annual output value of China's leisure food industry will reach 2 trillion yuan, with an average annual compound growth rate exceeding 17% since 2015, showing stable growth. From 2007 to 2017, the average annual compound growth rate of nuts and roasted seeds was 15.7%. China Commercial Industry Research Institute stated that the continuous growth in China's leisure food sales has also driven the rapid expansion of the leisure food market scale. According to statistics, the scale of China's leisure food market grew from 362.5 billion yuan in 2012 to 484.9 billion yuan in 2017, with an average annual compound growth rate of 6%. According to statistics from the China Commercial Industry Research Institute, in 2018, the scale of China's leisure food market exceeded 500 billion yuan, and by 2019, it is expected to reach 543.9 billion yuan. Data source: Compiled by China Commercial Industry Research Institute Three Squirrels, Liangpin Shop, Be & Cheery, and Lai Yifen basically represent the top tier in China's leisure snack market. Last year, the combined annual revenue of these four companies was less than 24 billion yuan. In the face of the entire market size, the leading enterprises account for less than 5% of the overall market. Clearly, this track still has huge room for exploration in the future. However, factors such as low entry barriers and high homogeneity in the leisure snack industry have led to intense competition. Leisure snack companies urgently need to break the deadlock through differentiation. The "entertainment strategy" was proposed by Zhang Liaoyuan at the 2016 World E-commerce Conference, and this is also an advantage of Three Squirrels over other leisure snack companies. It must be said that Three Squirrels uses the positive, healthy, and happy animated characters "Squirrel Xiaoku", "Squirrel Xiaomei", and "Squirrel Xiaojian" as its brand image, which has high recognition and leaves a deep impression on consumers. Secondly, Three Squirrels uses IP to promote diversified brand development, leveraging diversified channels such as animation, merchandise, and offline feed stores to bring closer distance with consumers, enabling consumers to establish a three-dimensional impression of the Three Squirrels brand and enhancing their perception and loyalty. Currently, the entertainment strategy and the transformation to a supply chain platform enterprise constitute important measures for Three Squirrels' differentiated development in the leisure snack industry. Liangpin Shop, on the other hand, is focusing on the high-end market, tapping into the potential of the middle class; Be & Cheery is currently focusing on health themes and returning offline. China's manufacturing opportunities are at hand, and many traditional fixed mindsets urgently need to be broken. Once, Gree's Dong Mingzhu asked Xiaomi's Lei Jun why he didn't build his own factory and how product quality would be guaranteed in the future. Lei Jun replied that precisely because Xiaomi does not have its own factory, it can use the world's best factories. Similarly, when Three Squirrels also does not have its own factories, mostly using OEM and ODM, and is questioned, Xiaomi's success is the best evidence. Li Feng of Frees Fund mentioned in a recent article: The food production end is fully sufficient or even surplus. What we lack is not redoing supply and production; what is truly scarce is connecting user needs with high-quality supply to create new products. This again explains why Three Squirrels is strategically deploying its transformation to a supply chain platform. The traditional fixed concept that self-built factories equal quality assurance urgently needs to change in the new era of rapid iteration. In the industry chain, Three Squirrels not only extends its reach to the upstream manufacturing end but also continuously deepens IP creation at the front end. When entering the company's official website, the first image that hits users is this picture, which gives users the illusion that Three Squirrels is an animation production company rather than a retailer. Image source: Company official website In the Squirrel World, the concept of "Squirrel Town" is a cross-border themed entertainment complex integrating industry, culture, tourism, and commerce, with three major functional areas: Squirrel Planet Hall, Forest Fantasy Land, and Squirrel Happy Street, to meet the all-around needs of "masters" for play, fun, food, shopping, and entertainment. However, when seeing "Squirrel Town," I can't help but associate it with the "Xiaomi Ecosystem" to some extent—both are innovations for the all-around needs of a group of people. In comparison, these two companies actually have certain similarities: 1. Both entered the Internet with a single category as a breakthrough, and formed a strong user mindset in that category. Three Squirrels captured consumer mindset with nuts; Xiaomi won over a large number of users with extremely cost-effective phones. 2. Three Squirrels' nuts and Xiaomi's smartphones are tools used to attract traffic (acquire customers), and then drive incremental growth in other businesses within the ecosystem. Their cases tell us that customer acquisition methods are not necessarily costs; they can also be profits. 3. From "user first" back to "product-centric." In terms of user needs, Xiaomi captured the essence of mass demand—high cost-performance. Once this matures, all that needs to be done is to continuously develop new products around cost-performance. Three Squirrels is also the same. The nut category has already occupied a large market share. Currently, it is expanding into all categories, deepening personalized products around health, entertainment, etc., thereby enhancing the IP value of "Three Squirrels." Art comes from life. Regarding the Squirrel Kingdom concept of Three Squirrels, some models can be seen in their two-season animated series "Three Squirrels." Three Squirrels is a big IP, and Xiaomi is also an IP. Therefore, whether at the front end or the back end of the industry chain, the innovations made by both sides are also key to their ability to stand out in the wave of the Internet. The only difference is the categories involved. In the theory of industrial Internet, there is a viewpoint: All previous categories are worth redoing once. Xiaomi disrupted the traditional mobile phone category, Huitongda innovated traditional agriculture, Dasouche transformed the used car industry, and Three Squirrels changed the way traditional snacks are played. What's next? Source: Bullet Finance (ID: wwhygc) Tips will be paid 400-2000 yuan upon adoption.