Author丨Nei Sanjun
Editor丨Tangerine
"All that is lost will come back in another way", this is the sentence that Zhang Liaoyuan and the team felt the most throughout last year. In the end, this sentence was implemented at the beginning of this year into a specific goal - to return to 10 billion by 2024. When the three squirrels first proposed to return to the goal of 10 billion yuan in the annual report in March, the outside world paid attention to it but also accompanied by a trace of doubt: the economic environment has not improved significantly, the consumer market is still in a situation of oversupply, where does the increase of the three squirrels come from?
However, the revenue in the first quarter exceeded 3.6 billion, a year-on-year increase of nearly doubled, and the net profit also maintained a growth of more than 60%, allowing the outside world to see the growth potential of the three squirrels and the effect of the release of the high-end cost-effective strategy. After the peak season, how will Three Squirrels maintain sustainable growth? How will it further deepen its high-end cost-effective strategy in 2024? Why should we put distribution business as a top priority this year? With these questions, we chatted with Zhang Liaoyuan, CEO of Three Squirrels, at the 17th China Nuts and Dried Foods Exhibition.
Revenue doubled in the first quarter, what did the three squirrels do right?
"The nut industry is in an era of structural innovation, which is not a single point and a single chain, but through the change of the whole chain and the superposition of all factors to drive consumption, so that everyone can afford to eat nuts and buy them everywhere. On April 17, Zhang Liaoyuan, CEO of Three Squirrels, shared his views on the industry when he made an opening report at the 17th China Nuts and Dried Foods Exhibition. And this view is based on the current change in the relationship between supply and demand, and consumers are becoming more and more rational consumption choices.
In Zhang Liaoyuan's view, the current imbalance between supply and demand has brought about the involution of the industry, and at the same time, it has also forced the reform of the supply side and the channel side, and finally realized the structural innovation of the entire industry. Zhang Liaoyuan's cognition is reflected in the adjustment of the three squirrels' business decisions, which is to fully implement the "high-end cost-effective" strategy. "The 'high-end cost-effective' strategy has allowed us to get out of the 'darkest moment' and return to 10 billion in 2024. At the exchange meeting, Zhang Liaoyuan once again reiterated this year's goal of 10 billion, and showed full confidence.
The day before the 17th China Nuts and Dried Foods Exhibition, the first quarter performance report of three squirrels was disclosed. According to the financial report, in the first quarter of 2024, Three Squirrels achieved revenue of 3.646 billion yuan, a year-on-year increase of 91.83%, a net profit attributable to the parent company of 308 million yuan, a year-on-year increase of 60.80%, and a non-net profit of 263 million yuan, a year-on-year increase of 92.84%. Several major operating figures have recorded the highest growth rate in history. In fact, in the third and fourth quarters of last year, the performance of the three squirrels showed a trend of contrarian growth, with a total contribution of more than 1 billion yuan in the third and fourth quarters.
In the financial report, the three squirrels attributed the outstanding performance in the first quarter to a series of changes under the traction of the general strategy of "high-end cost performance".
The first quarter of each year is the peak season for nut consumption, and unlike previous years, this year's New Year's Festival until the entire first quarter, because of the high-end cost performance, the nut gift box and daily sales of the three squirrels have entered more Chinese families.
"In the minds of ordinary people, nuts have always been relatively expensive, but squirrel through the practice of high-end cost-effective strategy, the price has been lowered, and consumers can buy a more expensive product in the past under the same demand and the same price. In the process of communicating with Nei Sanjun, Zhang Liaoyuan said that after the price of the nut gift box of the three squirrels fell this year, during the New Year's Festival, it even stole part of the market of many milk, puffed food and other gift boxes. As a result, in the face of declining aggregate demand, the sales of nut gift boxes for Three Squirrels have increased significantly.
According to the data, during the New Year Festival, the overall revenue of the three squirrels in various channels increased by more than 60% year-on-year. From January to March, the sales volume of only 5 nut gift boxes, including Zhen Zhen Nut Gift, Zhen Zhen Long Yao Li, Ding Zi Style, Ding Jin Model, and Luxury Diamond Model, exceeded 2 million boxes.
In addition to the strong performance during the New Year Festival, another highlight of the performance of the three squirrels in the past few quarters is that due to the high cost performance, some gift packages in the price range have broken through the single festival consumption scene and began to move towards daily sales. At the same time, in addition to the online basic market, other daily products are also gradually promoting regional distribution, covering more than 100,000 effective high-quality terminals, and reaching direct sales model cooperation with more than 70 chain systems such as Wal-Mart, China Resources, Wumart, and Liansheng. This ensures the sustainable sales of the product and paves the way for the next two and three quarters of sales.
It is worth mentioning that the in-depth promotion of the "high-end cost-effective" strategy has made the company's profitability gradually increase while the three squirrel products are rapidly increasing in various channels. In the first quarter of this year, although the comprehensive gross profit margin of the three squirrels decreased slightly by 0.87% year-on-year to 27.4%, the gross profit margin of the core category remained stable, and at the same time, the company's net profit margin after deducting non-attributable to the parent increased to 7.2%, and finally achieved a double growth in revenue and net profit. The realization of profit margin also dispelled the market's concerns about profitability under the cost-effective strategy, and demonstrated the results of the company's supply chain optimization and internal management efficiency improvement.
To be a "manufacturing-oriented private label retailer" and open a new path for the goal of 10 billion
The good start of the first quarter has undoubtedly laid a solid foundation for the realization of the goal of 10 billion yuan in 2024 for the three squirrels, and to some extent, it has also dispelled many doubts from the outside world.
Although there are still different voices from the outside world about the return of the three squirrels to 10 billion, Zhang Liaoyuan is determined to win. In Zhang Liaoyuan's view, as long as the strategic path is clear, this year's business will definitely exceed expectations. He also told Nei Sanjun that the focus of his and his team's work this year is not only to return to 10 billion, but to focus on longer-term growth and greater goals: "The company no longer talks about the goal of 10 billion, we are concerned about how to quickly climb to more than 20 billion in two or three years...... My current action is to start laying out what to do next year, such as the supply chain layout of one product and one chain. ”
It is worth mentioning that in 2019, the three squirrels also briefly entered the 10 billion revenue club, but after the highlight, the company's revenue continued to decline. "Don't be nostalgic for history, but reflect on why we couldn't go up after we reached 10 billion, the main reason is that we didn't know who we were at that time. Zhang Liaoyuan said. In other words, the reason why the three squirrels at that time were able to quickly break through 10 billion was that the times gave a lot of dividends. In 2019, China is at the peak of the last economic cycle, and it is also the peak of the traditional e-commerce traffic dividend period, and all walks of life are discussing consumption upgrades.
Today, the market environment has changed dramatically. The economic downturn and the unstable employment rate have caused most consumers to lower their expectations for the future, and they are becoming more and more rational in their consumption behavior. On the one hand, they pay more and more attention to the function and quality of products, and on the other hand, they pursue the cost-effectiveness of products, thus reflecting the coexistence of consumption "upgrading" and "downgrading".
Obviously, compared with five years ago, the consumption environment faced by the three squirrels is becoming more and more severe, but "this time they know who they are". In Zhang Liaoyuan's view, the current three squirrels are a "manufacturing-oriented private label retailer" with all-category + omni-channel operation, and its goal is to provide consumers with "high-quality and low-price" and a wide range of snacks through the strategy of "high-end cost performance" and the use of all channels that can reach consumers.
In terms of specific implementation, for example, in the layout of categories, while focusing on the core category of nuts, we have fully explored emerging categories, expanded the proportion of snack categories, and successfully created a number of large single products through full-link optimization. Judging from the business data, in addition to the excellent performance of nut gift boxes in various channels, three squirrels' daily nuts, macadamia nuts, spicy marinated gift packs, shaqima, quail eggs, cod intestines and other series of large items are also ranked first in multiple channels. According to Zhang Liaoyuan, there are currently more than 10 single products with annual sales of more than 100 million yuan for the three squirrels, and this year it may break through to 20 or 30.
In terms of omni-channel layout, in the face of the trend of online and online traffic differentiation, the three squirrels have made every effort to adjust the channel structure in the past year or so, and initially formed an omni-channel collaboration system of "Shake + N". According to the financial report, in 2023, the revenue of the three squirrels in a single channel of Douyin will reach 1.204 billion, a year-on-year increase of 118.51%, and the revenue of the entire online channel will reach 4.951 billion yuan.
This year, the three squirrels will focus on the channel offline. "Last year, 200 stores were opened, and the model has run to 60 or 70 percent. ”
During the exchange, Zhang Liaoyuan repeatedly mentioned the importance of the distribution business, and said that distribution is the first priority of the company this year. Prior to this, the three squirrels also mentioned in the 2023 financial report that they would "focus on the distribution business" and for the first time proposed to "promote the regionalization and in-depth distribution of daily products". Nei Sanjun noticed that in the recently updated content of the "Squirrel Daddy Zhang Liaoyuan" video account, there have been many times that Zhang Liaoyuan took the company's executives to visit regional dealers, which attracted the attention of the industry.
In 2023, the revenue of the three squirrels distribution channel will be 1.641 billion yuan, and this result obviously has room for growth. In Zhang Liaoyuan's view, China's retail foundation is 6.8 million mom-and-pop stores, in the past, nuts were too high unit price, it was difficult to appear in these small stores, and with the in-depth promotion of the high-end cost-effective strategy, the three squirrels can penetrate into these capillary-like terminals after the unit price of nuts is lowered. "For example, we will develop a bag of nuts and dried mangoes for 3.5 yuan and a bag of air-dried beef for 9.9 yuan, in short, we will try our best to put high-value snacks in the husband-and-wife store, so that people who couldn't afford them before can now afford them," Zhang Liaoyuan said.
As management guru Drucker said, the mission of a business is to create customers. Unlike five years ago, which relied on a relatively single nut category and a single e-commerce channel to sell into the 10 billion camp, the three squirrels who insist on omni-category and omni-channel operation and deep cultivation of their own supply chain obviously know who they are and are bound to go more stable and long-term. It is not difficult to understand why, when the outside world is still concerned about whether the three squirrels can break through 10 billion this year, Zhang Liaoyuan and his team are already building a blueprint of 20 or 30 billion in two or three years.