Three squirrels walked out of the ICU: the harder the price cut, the more stable the life
After the national snack brand "Three Squirrels" announced its financial report, many people were surprised:
On the one hand, the company achieved revenue of 7.115 billion yuan last year, a year-on-year decrease of 2.45%.
On the other hand, the net profit attributable to the parent company was 220 million yuan, a year-on-year increase of 69.85%.
To put it simply, you sell less but earn more.
What is the reasoning behind this?
Speaking of the turnaround of the three squirrels, I have to mention its founder Zhang Liaoyuan.
Unlike entrepreneurs from Tsinghua University and Peking University, Zhang Liaoyuan went to social university, and began to leave his hometown at the age of 19, hiding from the city management to set up stalls, secretly selling CDs, and serving drinks in nightclubs at night.
The rich accumulation of favors has taught him how to deal with people at the bottom.
In 2003, Zhang Liaoyuan, who was already 27 years old, changed careers again and became a walnut salesman of Ningguo Zhan's Food Company, responsible for sales in the Wuhu market.
From the beginning of talking about the entrance fee in a small supermarket, Zhang Liaoyuan showed an amazing talent for sales.
Ordinary salesmen often have to eat kickbacks, and then find ways to be greedy for procurement fees, and give some gifts to customers and leaders.
Zhang Liaoyuan is different, although he has not gone to school, but he realized very early that he should establish a set of "clean government" system, standardize the sales activities of salesmen, and practice it, make a good purchase and sales account, and infected the local large supermarket chains, so that the company's goods are on the shelves of large supermarkets.
This is what the management of Ningguo Zhan's Food Company never expected, how can you sell a stall, and you still have a "sense of luxury"?
Later, Zhang Liaoyuan became the company's marketing director all the way, and made the sales of Zhan's products in major cities in Anhui soar.
In 2010, when Taobao e-commerce began to rise, Zhang Liaoyuan keenly seized the business opportunity and created a brand of "Shell Shell Fruit", wanting to sell Zhan's goods from Internet channels.
Helplessly, Zhan's internal management can be described as a dog and fly camp, with many related households, Zhang Liaoyuan couldn't stretch his hands and feet, and chose to resign in a fit of anger.
In 2012, Zhang Liaoyuan rented a small house of 70 square meters in Wuhu, where he was deeply cultivated, and recruited four employees, one fried goods, one clerk, and two went to the market.
At the same time, he found inspiration in the title of the book "The Three Musketeers" that his son read, and named his company: Three Squirrels.
With the development of Internet e-commerce, Zhang Liaoyuan was the first to eat this batch of dividends, and the company was in 2012
"Double Eleven" sold 7.66 million yuan in one day and won 100,000 orders.
By 2013, the revenue of the three squirrels exceeded 300 million.
Since then, the performance has doubled every year, and by 2016, the annual sales exceeded 5 billion.
The entrepreneurial success of the three squirrels is inseparable from the right time, place and people.
Tianshi is to seize the tuyere of the e-commerce era and swim in the blue ocean.
Geographical advantage is the low-price strategy of Three Squirrels - due to the low sales cost of online channels, Three Squirrels' products are generally about 30% cheaper than offline competitors.
Harmony is Zhang Liaoyuan's original values, do not eat kickbacks, do not give gifts, and act according to the charter.
For example, in order to maintain the relationship with three squirrels, a supplier sent a WeChat red envelope of 1 yuan to the salesman, and the salesman immediately reported to the company, and then the supplier was suspended from cooperation for 2 months.
In 2015, Zhang Liaoyuan also established the "Squirrel ICAC" in the company, the plot of the Hong Kong movie, which is a yearning for us, but Zhang Liaoyuan turned it into the reality of the small universe of three squirrels.
In 2017, Zhang Liaoyuan planned to go public, and at the annual meeting, Zhang Liaoyuan proposed that all male department bosses shave their heads, which means "starting from scratch".
At that time, BESTORE and Yanjin Shop, as latecomers, had begun to imitate the model of the three squirrels and had a larger scale of financing.
In a scuffle, the three squirrels fought a price war, if you sell for 50, I will sell for 40, and if you get 8% off, I will get 7% off.
Two years later, in a red sea, the three squirrels exchanged the price of declining profit margins year by year for tens of billions of revenues, and successfully landed on the GEM of the Shenzhen Stock Exchange, becoming the "first stock of Internet snacks".
After the listing, the stock price of the three squirrels also rose for many days, and investors followed suit.
But soon, the situation changed......
In the first year after listing, under the influence of the virus, the revenue of the three squirrels suddenly decreased by 2 billion, and the net profit plummeted by 69%.
Investors are wondering: Is it a financial fraud before?
In 2022, BESTORE will come from behind, topping the leading position of the three squirrels, and branches will open all over major shopping malls.
BESTORE is heavy on the line, the assets are heavy, the three squirrels are heavy on the line, the assets are light, and the BESTORE is more expensive.
Why did the BESTORE get up?
This is inseparable from the trend of "consumption upgrading" that emerged in 2017, housing prices are rising, and people feel that they have money and can consume high, and they should engage in something "advanced".
The three squirrels also started the "price increase mode" in the process.
But then everyone knows that the consumption cycle has changed, and the three squirrels ushered in a plummeting sales.
Source: iiMedia Consulting
The rapid rise and rapid cooling of new consumption are embedded in the Internet cycle.
In 2023, BESTORE will be the first to shout: price reduction!
A few days later, the three squirrels responded quickly and immediately announced a price cut.
But it is also a price reduction, and the three squirrels are more handy.
Because the marketing essence of the three squirrels is the IP marketing + foundry model, to put it bluntly, it is an "OEM" business.
But "OEM" is also a dead hole for the three squirrels.
Once there are more food safety accidents and the brand stinks, this model will not work.
After all, the snack industry does not have a wide moat, and it is easy to be copied.
Therefore, simple price reductions are not enough to save the company from crisis.
I still remember a summary when I summarized Pinduoduo's marketing experience: the biggest dividend in this era is price reduction.
But the core of the price reduction lies in the low cost!
Zhang Liaoyuan once reflected: "The original 30 yuan product, consumers originally wanted to buy it, but the other party sold it for 27 yuan, so we sold it for 26 yuan, and in the end it became a situation of killing 1,000 enemies and injuring 800 people, fighting a price war for the sake of fighting a price war." ”
The price war is not a simple price reduction, only by reducing the cost can we achieve a real price reduction.
The self-rescue process of the three squirrels is a process of cost reduction.
1. The three squirrels began to build their own factories and control the production chain in their own hands, so as to reduce the price difference between suppliers.
More importantly, it can control the quality and not be pit by any supplier.
In terms of the number of dealers, the number of dealers of the three squirrels decreased by 105 last year, and the cumulative number was 1,062 by the end of the year.
Drawing: China Business Intelligence Network
2. Reduce marketing expenses.
During the period from 2016 to 2018, the Internet advertising of the three squirrels was overwhelming, and the marketing expenses actually increased from 124 million to 145 million, almost half of the net profit.
The bulk of this expenditure is, on the one hand, for third-party sales platforms such as Tmall, JD.com, and Vipshop, and on the other hand, for product packaging.
First of all, in order to save these two big heads, the three squirrels have opened up a new battlefield for live broadcast e-commerce such as Douyin, Kuaishou, and video accounts.
Secondly, the three squirrels began to build their own nut packaging factory, using highly automated equipment to reduce packaging costs.
In 2023, Three Squirrels will have an operating income of 4.951 billion yuan on third-party e-commerce platforms, accounting for 69.59% of the total revenue.
Among them, Douyin contributed 1.204 billion in revenue.
In addition, in the logistics, procurement, and sales links, the three squirrels have also achieved cost reduction and efficiency increase.
For example, last year, the sales expense ratio of the three squirrels was only 17.39%, the lowest in the past five years.
In offline stores, the three squirrels can also be chopped.
As of the end of the 2023 reporting period, there are only 266 original stores left in Three Squirrels, and the company has a total of nearly 800 net closed food stores and alliance stores in two years.
The company said on the investor platform that in the future, the alliance store will gradually be optimized and upgraded to a community snack store.
To translate it as: in order to save rent, the store should be made smaller, more down-to-earth, and closer to residential areas.
Looking back on the success of the three squirrels and saving the decline, the core point is actually this: price reduction.
The most direct way for the three squirrels to suppress a group of competitors is to fight a price war that Lao Tzu cuts meat more ruthlessly than you.
It's just that there are also "upgrades" for price reductions.
The upgrade of the three squirrels is to pursue "low profits" and change to the pursuit of "low costs", thus enjoying the dividends of the era of consumption downgrade.
Today, many companies are facing the same dilemma as the three squirrels, and how to reduce prices and increase efficiency is a problem that requires deep thinking.
Lower expectations, reduce desires, and on the premise of adhering to the essence of the product, take away the non-essential inputs, and take away the inputs that consumers don't care about.
You will be able to survive this cold winter, and even usher in your own era, an era that is more conducive to the "hard-working".