This investment of CNY 240 million is based on the company's strategic development needs in improving overall competitiveness.
Image credit: Three Squirrels official website
On March 20, Three Squirrels announced (in Chinese) plans for a CNY 240 million (USD 33.85 million) investment in five subsidiaries related to international trade, supply chain management, logistics, computer technology and intelligence sales. This will involve wholly-owned subsidiaries being set up by Three Squirrels supply chain management companies.
Three Squirrels was established in 2012. The company is headquartered in Anhui province. It was the first enterprise in China to be positioned as a pure Internet snack brand. According to its 2019 financial report, its annual sales exceeded CNY 10 billion (USD 1.41 billion), becoming the first company in the snack industry to cross the 10 billion threshold.
The strategy changes mainly related to its released (in Chinese) financial report for last year. Its operating income increased by 45.61% compared with the same period of the previous year, but the total profit had fallen by 20.27%. Net profit attributable to shareholders decreased by 17.80% compared with the same period last year. Moreover, in Q4 2019, operating income was CNY 3.48 billion (USD 490 million), and net profit was nearly CNY 46 million (USD 6.48 million). As Zhang Yiyuan, the founder of Three Squirrels said, "companies are most afraid of stagnant growth. Once the growth stops, the problems will come."
Besides its own operating problems, other players in the snack industry are showing strong competitiveness in market share and have taken actions. At the end of last year, Alibaba's Tmall supermarket launched its own snack food brand, Bonbater, which has not yet been promoted on a large scale. Three Squirrels' market value is about CNY 25 billion (USD 3.53 billion) now, and its main competitor Bestore's market value is about CNY 22.8 billion (USD 3.21 billion). These are the two joint top-ranked companies' situations, while the second-place company Baocaowei was purchased by PepsiCo on February 23, 2020, for USD 705 million.
In order to improve its profit and stand steadily in the market, this leading snack maker took several actions. On March 2, Three Squirrels announced that they would recruit thousands of people in 40 days, accounting for a quarter of the total number of employees. Two days later, on March 4th, the company launched a 'cloud selection fair,' which now collects quality products online, including snack foods and pet foods nationwide.
These actions will bring Three Squirrels much potential to expand its business nationwide and improve its sales revenue, but whether it will solve the problems of profit drop while revenue increases we will need to wait and see.