---
title: "Three Squirrels: Walking a Difficult but Right Path"
description: "Three Squirrels has long faced growth challenges. In 2021, it achieved revenue of 9.77 billion yuan and net profit of 411 million yuan, up 36.43% year-on-year. However, in Q1 2022, revenue fell 15.85% to 3.089 billion yuan, and net profit dropped sharply. The company has announced a strategic transformation from e-commerce to omni-channel and from single brand to multi-brand, focusing on offline distribution and closing underperforming stores."
author: "田静"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2022-04-30"
language: "en"
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# Three Squirrels: Walking a Difficult but Right Path

> Three Squirrels has long faced growth challenges. In 2021, it achieved revenue of 9.77 billion yuan and net profit of 411 million yuan, up 36.43% year-on-year. However, in Q1 2022, revenue fell 15.85% to 3.089 billion yuan, and net profit dropped sharply. The company has announced a strategic transformation from e-commerce to omni-channel and from single brand to multi-brand, focusing on offline distribution and closing underperforming stores.

Three Squirrels' growth confusion has a long history.
Let's first look at Three Squirrels' corporate financial reports.
The report shows that in 2021, Three Squirrels achieved operating revenue of 9.77 billion yuan; net profit was 411 million yuan, a year-on-year increase of 36.43%. By category, in 2021, Three Squirrels' nut category revenue was 5.058 billion yuan, a year-on-year increase of 4.33%.
At the same time, the Q1 2022 financial report was also released.
In Q1 2022, revenue was 3.089 billion yuan, a year-on-year decrease of 15.85%; non-GAAP net profit was 119 million yuan, a year-on-year decrease of 57.37%.
From the 2021 financial report, Three Squirrels broke the previous phenomenon of "increasing revenue but not profit." But this year's Q1 revenue was somewhat unexpected.
Normally, Q1 includes the Spring Festival peak season and should be the most anticipated report among the four quarters. As a leisure snack company, the annual Spring Festival peak season and New Year goods festival also bring substantial revenue to Three Squirrels.
In Q1 2020, Three Squirrels' operating revenue was 3.412 billion yuan, accounting for 35% of total annual operating revenue; in Q1 2021, revenue was 3.671 billion yuan, a year-on-year increase of 7.59%, accounting for 38% of total annual operating revenue. But this year's Q1 only achieved 3.089 billion yuan in operating revenue, with both revenue and profit declining.
At the same time, Three Squirrels issued a strategic transformation and upgrade announcement: transforming from e-commerce to omni-channel, and from single brand to multi-brand. The company has fully suspended store expansion and is vigorously closing stores that do not align with long-term positioning or have poor performance. Next, it will focus on improving single-store profitability.
Clearly, Three Squirrels' anxiety has been put on the agenda.
******Three Squirrels' "Beginner's Luck"**
It can be said that Three Squirrels' rise to fame is extremely characteristic of "beginner's luck."
What is "beginner's luck"? It means that some people, when they first enter a casino, not only don't lose but win more money than they expected.
Of course, this kind of luck is not the norm; many beginners lose everything the first time they enter a casino.
Similarly, many entrepreneurs often encounter many problems and troubles when they first start a business, which can be said to be the norm. So for those who succeed immediately at the start, they must be wary of this "beginner's luck."
From a spatial perspective, the good fortune of having the right time, place, and people naturally has a characteristic of rapid dilution.
From a temporal perspective, luck is a time concept. When a person or a company falls into difficulty, we say that fortune is unfavorable, meaning that what works at a certain moment will gradually be diluted over time.
At this point, companies need to possess a kind of "ironic ability" to correctly treat "beginner's luck," otherwise they will "succeed by Xiao He, fail by Xiao He."
Like Three Squirrels, the lifespan of internet-famous companies is generally short, ranging from half a year to two or three years, but Three Squirrels has been popular for quite a long time.
Founded in 2012, it quickly became popular online in 2013. Its luck was very good; at that time, Taobao Mall was separated from Taobao and renamed Tmall, so there was a strong incentive to support a batch of Taobao brands, and Three Squirrels was selected as a representative of the first-generation Taobao brands.
In the 2012 "Double 11" shopping festival, it achieved a daily sales record of 7.66 million yuan. Then in January 2013, monthly sales exceeded 22 million yuan. Because there were not many similar companies at the time, Three Squirrels was quickly recognized as the number one online food store. Then in 2014, annual sales exceeded 1 billion yuan.
It can be seen that the growth rate was rapid. At that time, "internet celebrity" was not yet a derogatory term. Three Squirrels, daring to bet on traffic, ran all the way, with financing, listing, and revenue rising, becoming the first e-commerce snack stock with a market value of 22 billion yuan, successfully listed in 2019.
At that time, in the face of the 600 billion yuan snack market, a "3+2" pattern emerged. The "3" referred to Three Squirrels, Bestore, and Be & Cheery, three players focusing on online sales; the "2" referred to Lai Yifen and Yanjin Shop, two brands mainly operating offline stores.
Although the three online players started later, they benefited from the rapid development of internet e-commerce dividends, and even had a trend of sweeping away the traditional offline predecessors. Three Squirrels was the most representative of the "3," and its name was often prefixed with industry leader.
However, water can carry a boat, but it can also overturn it. The online traffic dividend has already "passed a thousand sails," and Three Squirrels, which once started with e-commerce, is urgently trying to escape the "shackles" brought by e-commerce.
At the same time, in the parallel space of Three Squirrels, other brand stories have already unfolded, and even begun to intersect...
******Three Squirrels' "Crossroads"**
The industry in which Three Squirrels operates has a large potential and existing market, especially as a company that started online; it cannot monopolize the offline market. Gradually, during the unfolding of its success story, other parallel success stories emerged. Among them, two are most famous: one is Chacha (Qiaqia) and the other is Bestore.
Compared with Three Squirrels, these two companies have an obvious difference: they both extended from offline to online, meaning their offline stores are the main body. Strictly speaking, they are not internet companies, but traditional companies that gradually transformed into enterprises with internet characteristics.
In 2019, Chacha's net profit was 600 million yuan, Bestore's was 340 million yuan, while Three Squirrels' profit was only 240 million yuan, but overall sales, Three Squirrels was the highest. So, the most obvious problem is that Three Squirrels "increases revenue but not profit."
Since then, Three Squirrels' "beginner's luck" has been diluted, and it has begun to fall from the altar of online traffic.
Some say Three Squirrels is like a seasoned e-commerce worker. Indeed, in Three Squirrels' sales, the contribution rate of e-commerce channels was once as high as 97%. If it wanted to find a second channel, it might have lost the ability to open new channels.
Besides your ability, there are also time costs and opportunity costs. Your competitors may occupy other optional paths while you are indulging in this path.
In 2017, Chacha launched its daily nuts product, the Little Yellow Bag. Within more than a year, the product's cumulative revenue reached 400 million yuan. After several years of development, in 2021, nut products generated 1.366 billion yuan in revenue, accounting for 22.83% of total revenue, a year-on-year increase of 43.82% compared with 2020.
In 2018, Be & Cheery launched its daily nuts product, and a senior executive claimed that the product achieved cumulative revenue of 100 million yuan within two months.
The nut track is becoming increasingly fierce. Let's take Chacha as an example. What is the difference between it and Three Squirrels?
Divided by platform attributes, Chacha belongs to the **product-based brand** type. It usually quickly opens the market through a differentiated product and gradually expands categories.
As we all know, sunflower seeds are Chacha's first major product. Due to the natural high repurchase rate of sunflower seeds, Chacha's brand is frequently recognized by consumers through multiple purchases. From the perspective of offline channel distributors, Chacha, relying on the ultra-long life cycle of sunflower seeds, has established a stable cooperative relationship with distributors for many years. Based on a solid offline channel, Chacha's Little Yellow Bag has already won at the starting line in offline sales.
Three Squirrels, on the other hand, belongs to the **channel-based brand** type. It achieves rapid scale expansion through multiple categories and multiple SKUs. Over time, without the support of a major product, diversified products will excessively consume consumer mindshare.
Bestore also belongs to the channel-based brand type, but it adopts retail tactics and an OEM model to outsource production for asset-light operations, characterized by high turnover, omni-channel, and multiple categories.
So, when Three Squirrels turned around to lay out offline, it had already been overtaken by Chacha.
With traffic hitting a ceiling above, Bestore and Be & Cheery pressing forward, and Chacha overtaking from below, Three Squirrels' "crossroads" is becoming crowded.
******Three Squirrels' Offline "Basic Plate"**
Indeed, Three Squirrels' key action now is to **reshape the offline basic plate.**
On April 23, 2022, Three Squirrels issued an important announcement about comprehensively promoting strategic transformation and upgrading towards high-quality development. The announcement stated that Three Squirrels will promote the transformation and upgrading of the company's development philosophy, development path, and development model.
It is worth mentioning that the upgrade of the development model clearly mentions transforming from e-commerce to omni-channel, from single brand to multi-brand, and reconstructing brand power, channel power, and product power.
The main content is: Three Squirrels fully suspends store expansion and vigorously closes stores that do not align with long-term positioning or have poor performance; starting from focusing on nuts and building a multi-brand model, the main brand will continue to reduce SKUs, incubate sub-brands for specific products, and gradually stop selling categories that do not conform to brand recognition, have insufficient single-product scale, weak profitability, or insufficient core competitiveness.
Clearly, Three Squirrels is **narrowing its online business and focusing on offline development channels.**
Specific actions: In 2021, Three Squirrels opened 12 new investment stores and closed 43, with a cumulative total of 140 at the end of the period, achieving operating revenue of 818 million yuan, a year-on-year decrease of 6.39%, accounting for 8.37% of total revenue. Alliance stores opened 341 new and closed 288, with a cumulative total of 925 at the end of the period, achieving operating revenue of 749 million yuan, a year-on-year increase of 63.3%, accounting for 7.67% of total revenue.
In 2021, a distribution division was established, and new distribution achieved operating revenue of 1.609 billion yuan, a year-on-year increase of 38.16%, accounting for 16.47% of total revenue.
In addition, Three Squirrels' financial report shows that regional distribution was a new business in 2021, officially starting merchant recruitment in October, basically completing the first batch of distributor recruitment and product matching in November, and officially distributing to national distribution terminals in December. During the reporting period, regional distribution business achieved operating revenue of 437 million yuan, with a gross margin of 24.41%. Three Squirrels stated that regional distribution will be the main model for future offline expansion.
From this perspective, **"regional dominance"** is Three Squirrels' goal, and then it will expand based on that.
In terms of brand, Three Squirrels has begun to **"focus on nuts."** In 2021, Three Squirrels founder Zhang Liaoyuan mentioned at the Tianjin Autumn Sugar Fair that Three Squirrels should return to its brand attributes. Nuts are Three Squirrels' strongest advantage. Make it a powerful single product, form a brand logic in consumers' minds, and Three Squirrels equals nuts.
It can be seen that Three Squirrels is determined: **say goodbye to the traffic business and instead deeply cultivate the brand business.** Specifically, Three Squirrels is building its basic plate through strategic adjustments in channels and brands.
How important is the basic plate?
Returning to Three Squirrels, contracting the front, focusing on nuts, not only e-commerce but also entering offline distribution—this process is the "ironic ability" we mentioned earlier. But if Three Squirrels had started building its basic plate and laying out offline during the heyday of online traffic, with the keen perception of "the duck knows the warmth of the spring river first," rather than the dull perception of "boiling a frog in warm water" now, perhaps the road would be easier now.
However, three years ago, Three Squirrels had already shown the phenomenon of "increasing revenue but not profit." Perhaps it had already realized that its resources, processes, and values were convenient methods, and it needed to cross the river and abandon the raft. But it is difficult to switch paths because the power of habits and karma is extremely huge. Even if it wants to transform, it may end up going back to the old path.
From this year's strategic transformation, Three Squirrels' determination is already obvious. How much further Three Squirrels needs to go on this difficult but right path, we will wait and see.
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