---
title: "Three Squirrels Races Toward IPO: Who Will Be the Flying Pig in the 2 Trillion Yuan Snack Food Market?"
description: "Founder Zhang Liaoyuan is taking Three Squirrels, just five years old, to an IPO. Financial data shows that in 2016, Three Squirrels achieved revenue of 4.423 billion yuan, a year-on-year increase of 116.47%, and net profit of 237 million yuan, a surge of 2535%. Such results are enough to astonish many peers in the industry, but they also hide multiple risks. With these impressive results, Three Squirrels filed its IPO prospectus with the Shenzhen Stock Exchange on April 21, planning to issue no less than 4 million shares on the ChiNext board."
author: "New Distribution"
publisher: "New Distribution"
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published: "2017-04-28"
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# Three Squirrels Races Toward IPO: Who Will Be the Flying Pig in the 2 Trillion Yuan Snack Food Market?

> Founder Zhang Liaoyuan is taking Three Squirrels, just five years old, to an IPO. Financial data shows that in 2016, Three Squirrels achieved revenue of 4.423 billion yuan, a year-on-year increase of 116.47%, and net profit of 237 million yuan, a surge of 2535%. Such results are enough to astonish many peers in the industry, but they also hide multiple risks. With these impressive results, Three Squirrels filed its IPO prospectus with the Shenzhen Stock Exchange on April 21, planning to issue no less than 4 million shares on the ChiNext board.

Founder Zhang Liaoyuan is taking Three Squirrels, just five years old, to an IPO.
Financial data shows that in 2016, Three Squirrels achieved revenue of 4.423 billion yuan, a year-on-year increase of 116.47%, and net profit of 237 million yuan, a surge of 2535%.
Such results are enough to astonish many peers in the industry, but they also hide multiple risks.
With these impressive results, Three Squirrels filed its IPO prospectus with the Shenzhen Stock Exchange on April 21, planning to issue no less than 40 million shares on the ChiNext board, accounting for 10% of the total share capital after issuance. The prospectus also shows that the company plans to use the raised funds to invest in three projects: marketing network, supply chain upgrade, and logistics and packaging system upgrade, with a total amount of approximately 1.44 billion yuan.
**1**
**Against the backdrop of consumption upgrading, snack foods have successfully stood at the forefront**
The news that snack food brand Three Squirrels plans to go public has sparked heated discussion. In recent years, China's snack food industry has developed rapidly, and more and more snack food brands have begun to come to the forefront, using the Internet+ and product placements in popular variety shows and TV dramas to attract widespread attention.
Such high-speed growth and continuous innovation in the snack food industry undoubtedly indicate that snack foods have successfully stood at the forefront, with immeasurable prospects.
The popularity of snack foods among consumers is inseparable from the improvement of people's living standards, consumption upgrading, and the accelerated pace of life and work. This has led to an increasing demand for safe, diverse, personalized, and convenient snack foods. In recent years, China's snack food industry has been closely linked to agricultural resources, gradually forming categories dominated by regional characteristics, which better aligns with current consumer habits and tastes.
According to data, there are currently hundreds of thousands of snack food enterprises in China, with industry sales revenue and compound growth rate exceeding 20%, and annual sales have exceeded one trillion yuan. Following this trend, it is expected that by 2020, China's snack food industry sales may exceed 2 trillion yuan.
In this regard, it is expected that in the next 5 to 10 years, the main business revenue of snack foods will account for more than one-fifth of the total revenue of the food industry, which means there will be a potential market demand of several trillion yuan, providing business opportunities and market foundations for the development of snack food industry enterprises, technological innovation, resource integration, and consumer services.
However, it should be noted that despite the rapid development of China's snack food industry, there is still a certain gap compared with developed countries such as Japan, South Korea, and the United States. This gap is not only reflected in market consumption volume but also in the standardization and industrialization of the entire industry.
It is reported that the per capita annual consumption of snack foods in China is only about 25 grams, while in developed countries it is as high as 3000 grams. This gap is obviously large, indicating that there is still huge room for development in China's snack food industry, but it also means that there are problems in the current industry development that limit the market.
Specifically, first, China's snack food enterprises are small and scattered, with low industry thresholds; second, enterprises have a wide variety of products but fail to form brand effects, resulting in weak market competitiveness; third, enterprises lack innovation and R&D capabilities, products gradually become homogeneous, and market price wars are fierce.
All signs indicate that the snack food industry will usher in a brand war. In the future, enterprises can only survive by establishing brand awareness, creating distinctive and differentiated products with higher nutritional and health value.
This is also a trend for the industry's development. With consumer upgrading, channel personalization, and intensified market competition, competition among enterprises has shifted from past technology and price competition to brand competition.
**2**
**Integration of snack food retail and e-commerce models**
Under the general trend of vigorous development of the e-commerce industry, with increasing policy and capital support, and the continuous development of information technology and logistics infrastructure, the integration of the food industry and e-commerce models continues to deepen. From the development history, according to Analysys International research, the development of China's food e-commerce industry has gone through the exploration period from 2005 to 2009, the start-up period from 2009 to 2012, and is currently in the development and maturity period. In this process, consumers gradually recognized the e-commerce model and cultivated new online consumption habits, and some representative food e-commerce enterprises also rose rapidly.
Innovation and uniqueness of business models
**Three Squirrels' most important killer feature: cute marketing. 'Dear' is Taobao's, but 'Master' is Three Squirrels'.** Online, the core brand 'Three Squirrels' and the deeply ingrained three squirrel images 'Squirrel Xiaoku', 'Squirrel Xiaomei', and 'Squirrel Xiaojian' have become the most representative labels of Three Squirrels. IP-ization and personification have become the most distinctive tags of Three Squirrels. It breaks the simple buying and selling relationship between customer service and masters by serving consumers in a purely personalized way.
Three Squirrels adheres to an IP-ized and personified brand strategy, changing the rigid characteristics of most consumer brands, and shaping a distinct brand image in all aspects, so that consumers can fully feel the brand culture of 'conveying love and happiness' while purchasing the company's products. Based on the 'Three Squirrels' anime image that is highly compatible with nuts and snacks, it enriches the brand connotation and enhances brand awareness through diversified brand-building methods such as animation, picture books, and peripheral products.
Three Squirrels also opens offline experience stores to create a leisure and entertainment atmosphere highly related to the brand image, showcase brand culture, and enhance consumers' perception of the 'Three Squirrels' brand. At the same time, refined customer service throughout pre-sale, in-sale, and after-sale, as well as the corporate culture of 'treating customers as masters', maximizes the closeness between the company and consumers, providing consumers with the best customer experience.
Model innovation: not producing snacks, vigorously building IP
In fact, Three Squirrels itself does not produce snacks; suppliers, processing plants, sales platforms, and logistics express companies are all its partners.
In other words, on the production side, Three Squirrels only intervenes through 'quality inspection' and 'quality control', with warehouses but no factories in the offline link; on the sales side, Taobao, Tmall, and JD.com are already ready-made 'merchant-consumer' linking platforms, and after sales, logistics express companies deliver the goods.
**3**
**Opportunities and challenges in the snack food market**
Opportunities in the snack food market: rapid growth in market size
Snack foods are typical fast-moving consumer goods, directly facing end consumers downstream. Consumer preferences and purchasing power have a direct impact on the snack food retail industry, so it is necessary to promptly understand changing consumer needs and respond quickly in product and service strategies.
In recent years, China's online shopping market has developed rapidly, and the market size has increased rapidly, but at the same time, the number of market participants is also increasing. More and more own-brand or third-party brand e-commerce companies have emerged in the snack food field, and some traditional snack food production and offline retail enterprises have also begun to expand Internet sales channels, further increasing the intensity of market competition.
In addition, the upgrading of consumption structure promotes continuous changes in the snack food industry and also gives rise to more new market opportunities. For example, consumers' demand for healthy eating is increasing, and more and more consumers are beginning to pay attention to the nutritional content and health attributes of food. They also pay more attention to function and quality when choosing snack foods, which creates opportunities for the development of sub-categories such as nuts, dried fruits, and dried fruit.
According to the analysis report 'China Snack Food Industry Production and Sales Demand and Investment Strategic Planning Analysis Report' released by the Prospective Industry Research Institute, in the next 5 years, the growth rate of the snack food industry is expected to maintain double digits. It is estimated that by 2021, China's snack food industry sales revenue will reach 1,759.6 billion yuan.
Forecast of sales revenue of China's snack food industry from 2016 to 2021 (unit: 100 million yuan)
At the same time, as the snack food market continues to grow, corporate brand awareness will gradually increase, product categories will become richer, and will develop towards low-calorie, low-fat, low-sugar health directions, and continue to tap the potential of the mid-to-high-end market.
Since China's snack food enterprises are mostly concentrated in the low-end market, the mid-to-high-end market has not been fully developed. The success of Three Squirrels confirms that the mid-to-high-end market has considerable potential. Therefore, in the future, the mid-to-high-end market will be further opened up, and the potential of the snack food industry will be accelerated through innovative flavors and the establishment of new brands.
Challenges faced by distributors: channel construction must be strong and broad
At present, the domestic snack food retail formats mainly include national food retail chain enterprises, regional food retail chain enterprises, large supermarkets, local supermarkets, food retail stores (convenience stores), specialty stores, etc., generally showing the characteristics of diversified retail formats. There are also significant differences between the sales formats in second- and third-tier cities and those in first-tier developed cities.
The retail formats of snack foods in first-tier developed cities mainly show: diversified competition, with relatively high concentration. National, large-scale chain enterprises and large supermarkets occupy a large share of snack food sales, and develop at a faster pace.
Second- and third-tier cities show: coexistence of diversification, with low concentration. Regional food retail chain enterprises and large supermarkets occupy a larger market share and develop relatively faster. It can be foreseen that in the next few years, second- and third-tier cities will become a new growth point for snack food retail. In order to better occupy the main sales channels in second- and third-tier cities, enterprises should actively expand multiple sales channels and strengthen control over channels to achieve extensive coverage of target markets.
**First, extensive and multi-channel sales.** Snack foods are a typical fast-moving consumer goods industry, and consumers have high requirements for convenient purchase. The importance of 'affordable, available, and happy to buy' is increasingly prominent, which requires manufacturers to promote 'large-channel sales', carry out extensive channel coverage, and promote multi-channel distribution. They should implement multiple channels simultaneously, covering traditional distribution channels, KA channels, and special channels such as stations, to increase product market coverage and sales volume through multi-channel sales.
**Second, strengthen terminal channel construction.** The terminal construction of snack foods and the enterprise's ability to control channels are particularly important. At present, excellent snack food manufacturers implement 'channel control' policies, pay attention to supporting distributors and controlling sub-distributors, strengthen in-depth management of channels, and 'channel intensive cultivation' is deeply rooted. At this time, efforts should focus on terminals, paying attention to personalized placement and standardized display of products to increase product sales.
The upgrading of consumption structure continuously promotes the development of the snack food industry towards a more mature and efficient direction. It is foreseeable that enterprises with better product services, higher brand awareness, better reputation and credibility, and stronger innovation capabilities will stand out among similar enterprises, and have stronger core competitiveness and risk resistance in the fiercely competitive Internet era.
**This article is compiled and published by <New Distribution>**
**Reference source: Three Squirrels IPO prospectus**
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