The three squirrels who had announced that "Wandian ran wildly" stepped on the "sharp brakes".
On the evening of April 23, the three squirrels of the "first share of net red snacks" disclosed the 2021 annual report and the first quarter report of 2022.
According to the financial report, as of the end of December 2021, the offline stores of the three squirrels were only 1205. The number of stores today is very different from the goal that founder Zhang Liaoyuan once had.
During the "New Year Festival" in 2019, Zhang Liaoyuan announced that by 2020, three squirrels will open 1,000 offline stores, and within 5 years, that is, 2022, 10,000 offline stores will be opened.
Three years later, the three squirrels are only one-tenth of the completion of the "Ten Thousand Stores Plan". The mistakes in the past store opening strategy also directly affected the financial data of the three squirrels.
Its annual report shows that in Q1 2022, the revenue of the three squirrels was 3.089 billion yuan, down 15.85% year-on-year; the net profit attributable to the mother was 161 million yuan, down 48.75% year-on-year. In the whole year of 2021, the three squirrels achieved revenue of 9.77 billion yuan, down 0.24% year-on-year.
Three Squirrels 2022 Q1 Financial Data, Picture from Shenzhen Stock Exchange
Judging from the latest financial report, the revenue scale of the three squirrels is far from reaching the previous goal. Zhang Liaoyuan, the founder of the three squirrels, had set a goal of achieving a scale of 100 billion by 2030, and the overall revenue of the three squirrels in 2021 was less than 10 billion, and in the context of its overall scale reduction, this goal is also difficult to achieve.
Revenue declined, net profit slashed, what exactly happened to the three squirrels?
The dilemma of the channel
The decline in revenue of the three squirrels is mainly due to the problem of its channel expansion.
As the first generation of "Tao brand", three squirrels once relied on "traffic to start", and the scale of revenue is highly dependent on e-commerce platforms, in 2014, three squirrels in Tmall Jingdong and other three-party e-commerce platform sales exceeded 90% of its total revenue.
Even in 2021, the e-commerce sales of the three squirrels will still account for more than 50% of the total revenue. According to the financial report, at the end of 2021, the sales of the three squirrels on Tmall were 2.956 billion yuan, and the sales in Jingdong were 2.408 billion yuan.
However, the sales of the three squirrels, which are highly dependent on e-commerce, have declined significantly. In 2021, the sales of three squirrels on Tmall fell by more than 20% year-on-year, and sales in JD.com fell by more than 10% year-on-year.
The recurrence of the epidemic has led to great pressure on the national logistics system, and the highly uncertain logistics and transportation time has affected the delivery of brand products to a certain extent, and has also prevented brands from converting single quantities into sales in a short period of time.
In addition, the decline in online sales is also related to the shrinking brand matrix of the three squirrels. Three squirrels accepted the financial network Sankei once said that in addition to the baby and child food brand Fawn Blue, several other sub-brands have been cut. Judging from the data given in the financial report, in addition to the deer blue and blue, which mainly focuses on children's snacks, it has obtained certain sales, and its sales in 2021 are 490 million yuan, and the sales contributed by other sub-brands account for a very small proportion.
More importantly, the three squirrels emphasized in the financial report that "the original main channel traffic has declined seriously, the traffic cost has increased, and the three squirrels can only reduce the drainage in the station and increase advertising investment." ”
Increasing advertising investment has led to a sharp increase in the cost of three squirrels. In 2021, the sales cost of the three squirrels exceeded 2 billion yuan, an increase of up to 21% year-on-year, and its sales expenses included promotion fees and platform service fees (new platforms), and in 2022Q1, in order to do a good job in the Promotion of the New Year Festival, the three squirrels also made hundreds of millions of yuan of investment in elevator media.
However, the large number of launches did not reverse the decline in sales of the three squirrels. Three squirrels mentioned in the financial report that 40 days before the Spring Festival on February 1, 2022, the three squirrels had made a large number of promotional activities. For example, its sales in Q1 2021 were the highest in the four fiscal quarters of the year, reaching 3.6 billion, Q2 and Q3 were off-season, and Q4 (including the double eleven promotion) in the same year was only 2.7 billion yuan. However, in Q1 2022, the revenue of the three squirrels was only 3 billion yuan, down 16% from the same period last year.
Three squirrels in the four quarters of 2021 main financial indicators, picture from the Shenzhen Stock Exchange
In fact, in recent years, the three squirrels have realized the drawbacks of high dependence on a single channel, and have also tried to turn from light to heavy and look for increments offline. The transformation strategy of the three squirrels has its basis: According to reports from sullivan and other institutions, the main channel of China's snack consumer market has always been offline, accounting for more than 80%.
In 2021, there are more than 1,000 offline stores for the three squirrels, of which 140 are directly operated stores, accounting for less than 20%, but the revenue reaches 818 million yuan, and the top ten stores are all directly operated stores.
The number of alliance stores is the largest, reaching 925, but the sales are only 749 million yuan, although the year-on-year increase reached 63%, but from the absolute value of single store sales, only about one-tenth of the direct stores. This shows that the efficiency of the alliance store is poor, which is that its management and site selection problems are very large. In addition, the authorized revenue of nearly 1,000 alliance stores is only 0.36 billion yuan, which has not yet formed a scale effect, and the revenue that can be contributed is very limited.
36Kr has learned that the selection criteria for the manager of the three squirrels is to abandon the traditional franchise system in the past, and the store manager strictly controls young people aged 25 to 35, 50% of whom are college graduates or above, and encourages college students to start a business, which means that they have little experience in offline operation. In addition, the regional teams are mostly "light rod commanders" and need time to learn how to supervise the store managers of offline stores.
In addition to opening direct stores and alliance stores, in October 2021, the three squirrels created their own distribution system - "new distribution", which mainly includes regional distribution (mainly large KA), platform distribution (Meituan Preferred, Retail Pass, etc.), and new channels (group purchase and gifts). By the end of 2021, the revenue of the business reached 1.609 billion yuan, an increase of 38.16% year-on-year, accounting for 16.47% of the total revenue, with rapid growth in the short term, but this business took the route of small profits and high sales, and the gross profit was low, only 24%, which was not conducive to the brand building of the three squirrels.
Another paradox is that in the case of fixed growth in the broader market, the three squirrels opened a large number of offline stores, which will undoubtedly have an impact on online sales. The key lies in how the brand can open up online and offline, give different functions to different scenes, and create two plates of online and offline goods. However, this problem, not only the three squirrels have not been solved, but also still give most brands a headache.
Making money is the last word
Realizing that the feasibility of the "Wandian Plan" is not high and the performance has not improved with the rapid expansion strategy, the three squirrels turn the horse's head.
On the night of the release of the financial report, the three squirrels simultaneously issued the "Important Announcement on Comprehensively Promoting Strategic Transformation and Upgrading and Moving Toward High-quality Development" on the Shenzhen Stock Exchange, indicating that they would make strategic adjustments to the store system.
The three squirrels admit that there are problems in the development model of large-scale and extensive stores in the past, so they have completely suspended store expansion, and vigorously shut down stores that do not conform to long-term positioning and poor performance, and the next step will focus on improving the profitability of single stores and focusing on the high-quality development of high-quality stores.
The three squirrels are largely meant to "stop the loss" by contraction.
In Q1 2022, in addition to the net profit, the cash flow performance of the three squirrels was also not good. The operating cash inflows of the three squirrels are negative, and their current total cash income mainly comes from investment activities, and this part of the income is also declining.
In addition, the cost of various parts is still rising, in addition to sales costs, rental costs, affected by the epidemic, the cost of upstream raw materials is also soaring at a high speed. In order to reduce the impact of rising source costs, the three squirrels will continue to invest in the construction of the base.
Income is decreasing, costs are rising, and the three squirrels have to make more reasonable and restrained store opening plans. According to a number of media reports, three squirrel franchisees generally need to prepare 350,000-450,000 yuan of start-up funds. These include 40,000 brand technical service fees, 100,000 first purchase costs, and 2,000 yuan per square meter of decoration costs. Under such conditions, the gross profit margin of the store can reach 45%.
However, from the financial report, the offline gross profit margin disclosed by the three squirrels in 2021 is actually only 26.81%. On the one hand, offline rent and property costs continue to rise to squeeze profits, on the other hand, the offline store of the three squirrels still needs to make changes in products and other aspects, otherwise it is difficult to retain consumers.
In addition, cutting out sub-brands with low revenue contribution and low gross profit is also a remedy. The three squirrels also mentioned in the "Announcement" that they will refocus on the nut category and consolidate the original strong category, which means that its ability to diversify its layout is still immature. In fact, although mother and baby, pet food, and local specialty foods are all hot tracks, they all have their own barriers and limitations, and not all companies can get a piece of the pie.
But that doesn't mean the three squirrels will stop investing in the new brand. The three squirrels mentioned in the financial report that they will continue to incubate subdivided single-product brands and establish a multi-brand matrix with fawn blue as an independent brand division. The three squirrels want to seize the big wave of health and take advantage of the trend to launch more sub-brands in related segments.