Tuyere financial reporter Zhao Chong
Recently, Three Squirrels released its 2023 annual report, the company achieved revenue of 7.115 billion yuan last year, a year-on-year decrease of 2.45%, and a net profit attributable to the parent company of 220 million yuan, a year-on-year increase of 69.85%.
It should be noted that the company's net profit attributable to the parent company last year increased by 69.85% in the context of a low base in 2022, and the actual net profit level only recovered to about half of that in 2021. In the past year, "high-end cost performance" has often been mentioned by the three squirrels, but in the face of the current situation of declining revenue for four consecutive years, can high-end cost performance really become the antidote to the three squirrels?
Revenue fell for four consecutive years
Founded in 2012 and listed on the Shenzhen Stock Exchange in 2019, Three Squirrels was once known as the "No. 1 National Snack Stock". According to the financial report, in 2023, Three Squirrels will achieve operating income of 7.115 billion yuan, a year-on-year decrease of 2.45%, a net profit attributable to the parent company of 220 million yuan, a year-on-year increase of 69.85%, and a net profit of 102 million yuan, a year-on-year increase of 148.72%.
Judging from this financial report, the operating conditions of the three squirrels are not optimistic - although the net profit has increased significantly, the main reason is that the net profit in 2022 is too low, and in terms of revenue, the revenue of the three squirrels has declined for the fourth consecutive year this year.
According to the financial report data of previous years, from 2020 to 2023, the annual revenue of the three squirrels will be 9.794 billion yuan, 9.770 billion yuan, 7.293 billion yuan, and 7.115 billion yuan respectively, a year-on-year decrease of 3.72%, 0.24%, 25.35%, and 2.45% respectively.
In terms of quarters, in the second quarter of 2023, the three squirrels recorded a net loss of 38.0848 million yuan, and a net profit of 192 million yuan, 16.0094 million yuan, and 50.1628 million yuan in the first, third, and fourth quarters of 2023, respectively.
Behind the increase in profits but not in increasing income, the secret is "province": the financial report shows that the overall cost of the three squirrels decreased by about 441 million yuan last year.
Among them, sales expenses decreased by 19.27% year-on-year to 1.238 billion yuan, management expenses decreased by 19.76% year-on-year to 227 million yuan, and employee compensation decreased by 20.16% year-on-year to 1.845 billion yuan. Among the sales expenses, its promotion fees and platform fees decreased by 20.53% year-on-year to 778 million yuan.
However, even if the "cost reduction" is so hard, the profits of the three squirrels in 2023 will only recover to about half of the peak in 2021 (410 million yuan).
On the sales side, in 2023, the sales volume of Three Squirrels Snack Food will be 68,500 tons, down 11.98% from 2022. In fact, this is the result of the company's initiative to reduce prices. At the beginning of 2023, Three Squirrels determined the "high-end cost-effective" strategy, saying that it would promote operational improvement and supply chain upgrading, build "all categories + all channels" operating capabilities, and improve quality and price reduction on this basis. Three Squirrels also said in the performance forecast that the main reason for the increase in net profit in 2023 is the "high-end cost-effective" strategy.
The price reduction of products has also affected the company's gross profit margin, which has reached a new low: in 2023, the gross profit margin of Three Squirrels fell by 3.41 percentage points to 23.33%, while in 2021, the company's gross profit margin was still above 29%.
Zhu Danpeng, an analyst of China's food industry, said in an interview with a financial reporter that the increase in profits of the three squirrels in 2023 is the result of reducing costs and increasing efficiency. By optimizing the entire SKU in a large area, the company implements low-cost operation, energy saving and efficiency improvement, open source and cost reduction, etc., and carries out large-scale cost control, so the profit effect is prominent. However, in the case of increasingly fierce competition in the snack industry, the Three Squirrels system needs to continue to upgrade, innovate and iterate.
Is the model of high reliance on e-commerce traffic coming to an end?
Compared with peers such as BESTORE, Laiyifen, and Qiaqia Food, Three Squirrels started with an e-commerce model in the early years, and abandoned offline channels since its inception, which also laid hidden dangers for its future development.
As a well-known "Tao brand", Three Squirrels was founded less than a year ago, and it became an instant hit in 2012's Double 11, winning the sales championship of Tmall nut snacks with sales of nearly 8 million. Subsequently, it took less than 7 years for Three Squirrels to become the first leisure snack brand in China with a revenue of more than 10 billion yuan.
However, as Internet e-commerce has reached its peak, the three squirrels parasitic on Internet e-commerce have also seen bottlenecks. Some people say that over-reliance on e-commerce is the "first sin" of the three squirrels' declining revenue, which is not a lie.
According to the annual report, the operating income of the third-party e-commerce platform of Three Squirrels was 4.951 billion yuan, accounting for 69.59% of the total revenue. However, the revenue of the three squirrels on traditional e-commerce platforms continued to decline. The revenue of the Tmall platform was 1.738 billion yuan, down 12.22% year-on-year, and the revenue of the JD platform was 1.197 billion yuan, down 30.53% year-on-year. The performance of the new e-commerce platform represented by Douyin was more eye-catching, with revenue of 1.204 billion yuan, a year-on-year increase of 118.51%. Based on the growth trend of the Douyin channel, in 2024, the three squirrels plan to strengthen the omni-channel with "Douyin + N" synergy as the core.
"Abandoned" by the capital market
In recent years, with the fading of e-commerce dividends, offline channels have become an important channel for the layout of many snack brands. According to Euromonitor data, the offline channel of snack food accounted for more than 80% of the total in 2022, and is still the main channel for snack food sales in China.
The three squirrels also turned their attention to the offline, but there were many twists and turns. The annual report shows that in 2023, the offline sales revenue of Three Squirrels will decline by 13.63% year-on-year to 2.163 billion yuan, and the revenue will decline.
When it was listed in 2019, Three Squirrels launched the "Ten Thousand Store Plan": in the next five years, Three Squirrels will open 10,000 offline stores across the country. However, by the end of 2023, Three Squirrels had 149 community snack shops, compared to 266 original stores.
Judging by the actions of capital, capital is not good for the three squirrels. ON MARCH 21, THREE SQUIRRELS ANNOUNCED THAT LT GROWTH INVESTMENT IX (HK) LIMITED, A SHAREHOLDER HOLDING MORE THAN 5% OF THE COMPANY'S SHARES, PLANS TO REDUCE ITS STAKE IN NO MORE THAN 1.8% OF THE COMPANY'S CURRENT TOTAL SHARE CAPITAL. PREVIOUSLY, LT GROWTH INVESTMENT IX (HK) LIMITED HAS REDUCED ITS HOLDINGS SEVERAL TIMES, AND AS OF THIS REDUCTION, LT GROWTH INVESTMENT IX (HK) LIMITED'S SHAREHOLDING RATIO WAS 6.54%, A DECREASE OF NEARLY 10% COMPARED WITH 2019.
Coincidentally, the three squirrels' former second largest shareholders, two institutions under IDG, NICE, and its concerted actor GAO have also carried out as many as six rounds of reductions in the past few years, reducing their shareholding from the initial 24.83% to 5.02%. Its second and third largest shareholders took turns to reduce their holdings in 9 rounds, with a cumulative cash of about 3.7 billion yuan.
With the primary market being abandoned by capital, the three squirrels also "fell endlessly" in the secondary market. As of the close of trading on April 3, the share price of Three Squirrels closed at 23.4 yuan per share, with a total market value of 9.38 billion. Although the stock price has rebounded recently, compared with the highest point of 90.71 yuan / share, the share price of the three squirrels has still fallen by more than 70%, and the market value has shrunk by more than 26 billion.
On April 7, the financial reporter of the outlet sent an interview letter to the three squirrels on the annual report and follow-up layout, but did not receive a reply as of press time.