Since its listing in July 2019, the stock price of Three Squirrels has risen all the way, becoming one of the benchmark companies in the field of snacks consumption. But recently, while the market as a whole, especially the consumer industry, has gone up, the three squirrels have bucked the trend and went down.
On May 19, 2020, the market value of the three squirrels was as high as 36 billion yuan, but on December 31, the market value of the three squirrels had fallen to 16.3 billion yuan.
"Is there any remedy for the company's stock price falling?" "The company's stock has plummeted this year in the food category"... On an investor exchange website, the stock price drop has become the most concerned issue for investors. In 7 months, the market value has been halved. What happened to the three squirrels? In the future, can the three squirrels take off again?
Market value fell by half in 7 months
In May last year, Zhang Liaoyuan, the founder of the Three Squirrels and "Daddy Squirrel", should have been very satisfied.
On May 8, 2020, the three squirrels ushered in the visit of the leaders of the Anhui Provincial Party Committee and left a message of striving to become a "big tiger on the cloud"; on May 20, the three squirrels listed in July 2019, Held its first offline shareholder meeting, banners, stop signs, and squirrel dolls all expressed the enthusiasm of the three squirrels to the outside world.
Whether it is the rising market value or the prominent advantages of offline channels affected by the epidemic, the three squirrels have won market recognition. On May 19, the day before the three squirrel shareholders meeting, its stock price reached its highest point of 89.72 yuan, with a market value of 36.09 billion yuan.
But the good times didn't last long. With the recovery of the offline market in the post-epidemic era, the three squirrels went into recession and their market value dropped all the way. On December 31, the share price of Three Squirrels closed at 41.09 yuan per share, and the market value fell to 16.477 billion, which was more than half.
"What happened to the three squirrels?" This became a consistent doubt both inside and outside the market.
Is the zero food category no longer favored? Both are zero food products, and are also listed companies' Yipin Shop and Laiyifen. Although the stock price has completed the process of rising and falling last year, for example, the stock price of Laiyifen fell after reaching a historical high in August last year, but the decline Far less than three squirrels.
Or what happened to the three squirrels? In fact, the last straw that overwhelms the three squirrels is the reduction of holdings by major shareholders.
On July 8, 2020, when the three squirrels were listed on the expiry of the one-year stock lifting period, the second largest shareholder NICE GROWTH LIMITED and the person acting in concert and the fifth largest shareholder GAO ZHENG CAPITAL LIMITED announced that they plan to Reduce holdings of no more than 9% of the shares.
Immediately after a week, the third largest shareholder LT GROWTH INVESTMENT IX (HK) LIMITED also planned to reduce its holdings of no more than 9% of the total share capital.
As of 14/4/2020, NICE GROWTH LIMITED is still the second largest shareholder, holding 19.88%; LT GROWTH INVESTMENT IX (HK) LIMITED is the third largest shareholder, holding 14.68%.
| The top ten shareholders of Three Squirrels, from Wind
There has been a lot of discussion about the major shareholder's reduction of holdings, and investors have repeatedly asked the three squirrels. When communicating with the three squirrels, an investor said: "(Shareholders' reduction of holdings) obviously caused huge market pressure, and the company's stock price continued to fall."
NICE GROWTH LIMITED is actually IDG, and LT GROWTH INVESTMENT IX (HK) LIMITED is actually capital today. As well-known venture capital institutions, the two invested in three squirrels in 2012 and 2013.
"(Both) have a long investment period, and the reduction of holdings is also based on the consideration of fund management and their own capital needs, and does not represent their judgment on the company's development prospects and long-term investment value," the three squirrels soothed investors.
But this kind of reassurance cannot restrain the three squirrels' share price decline. On the first trading day of 2021, the three squirrels closed at 41.63 yuan per share, up 1.31%, and it was difficult to climb.
The pain of striding to the second stage
In December last year, the three squirrels responded to investors’ questions about why the stock price continued to fall and said: “The secondary market’s stock price is not only affected by a company’s operating conditions, but also by a combination of factors such as funding, market preferences, and investor sentiment. "This sentence is correct, but fundamentally, it is its own fundamentals that affect a company's stock price.
For the three squirrels, the reduction of major shareholders' holdings may be the reason for the sharp decline in their stock prices, but the declining performance growth rate and the market seizure due to the scattered channels are the root causes of the decline in the three squirrels' stock prices.
The three squirrels, established in 2012, have developed rapidly along with the rise of snack consumption in China and the expansion of online channels, and the scale has grown from zero to tens of billions in eight years. But in fact, it has been struggling to make a profit.
Since 2016, the three squirrels' net profit growth has been on a downward trend, and reached its lowest point in 2019. The financial report shows that the revenue of the three squirrels in 2019 was 10.173 billion yuan, an increase of 45.30% year-on-year, and the net profit was 239 million yuan, a year-on-year decrease of 21.43%.
| From Wind
In the casual snack market, the three squirrels are typical Internet players and are even classified as Tao brands. Its development also continued the typical "Internet" style, focusing on strategic location and revenue expansion. Profit growth was seen as the second-stage goal after revenue expansion.
The relatively unique development process also determines the lack of profitability of the three squirrels. The three quarterly reports for 2020 show that the gross profit margin of the three squirrels is 27.03%, which is the lowest among the listed leisure snack companies of the same type-Liangpin Shop 31.5%, Qiaqia 33.55%, Yanjin Shop 42.48%, and Laiyifen 43.64%.
| The gross profit margin of three squirrels in the past five years, from Wind
When the three squirrels went public in July 2019, Zhang Liaoyuan felt a lot of emotion. One of them was that he believed that the three squirrels had entered the second stage of corporate development, not relying solely on scale growth, but on the growth brought about by management innovation. . In May last year, Zhang Liaoyuan once again revealed the information that the three squirrels are changing in the development stage at the shareholders meeting.
At that meeting, he talked about multi-brand development, offline development, and how to improve net profit. When answering investors’ questions about the level of net profit, Zhang Liaoyuan emphatically mentioned the shortcomings brought about by the three squirrels Internet’s inception and online development: “The Internet is very sensitive to prices” and “(online) suppressed Offline pricing system".
In his view, the three squirrels have always had a low level of net profit, which is related to their own Internet development. On the one hand, it is difficult to make profits on the Internet battlefield. "From the past homogenized follow-up micro-innovation to product autonomy Innovate and make brands and emotions better"; on the other hand, the three squirrels had previously sold online and offline goods, which suppressed offline pricing.
When analyzing the problem, Zhang Liaoyuan was also working to solve the problem. Last year was a year of big changes for the three squirrels. Whether it was the emphasis on offline channels, the adjustment of SKUs, or the launch of multiple brands, the three squirrels that had been in development for eight years are indeed growing The next stage of his own leap.
Especially in the channel, the three squirrels speed up the offline layout. In 2019, the number of three Squirrel stores was 386, including 108 directly-operated stores and 278 franchise stores. By December 25, 2020, there were more than 1,000 stores, 167 directly-operated stores, and alliance stores. 914 homes.
"At the same time, the company's new distribution channels are actively deploying KA systems, chain convenience stores and other offline channel terminals, which currently cover more retail terminals." Three Squirrels revealed. At the same time, in response to the two online and offline products mentioned by Zhang Liaoyuan, the three squirrels selected about 100 products offline to launch mini bags, and promoted food and toy products and dolls in stores.
Channel change is just one of the three squirrels' attempts to leap to the second stage. Judging from the performance figures, this "leapfrog" change is obvious. The financial report shows that in the first three quarters, the net profit of the three squirrels was 264 million, a year-on-year decline of 10.62%. Although net profit is still declining, compared with the 2019 annual report, the situation of the three squirrels increasing revenue but not profit is changing.
For the three squirrels, this was a good thing, but what needs attention is that the prerequisite for the reduction in net profit is the decline in revenue growth. The financial report shows that in the first three quarters, the revenue of the three squirrels was 7.231 billion yuan, a year-on-year increase of 7.70%, the lowest increase since 2015.
| From Wind
The transformation and transformation of all companies will go through a period of pain, some people survived, some people did not. Although the three squirrels are trying their best to develop offline, it is still an "Internet company". For Internet companies, if they do not grow in scale, it means decline. The three squirrels are obviously not ready to switch power sources.
"The strongest point" is no longer
At this special node in 2020, the three squirrels' anticipated management innovation growth has not been realized. On the contrary, its channel system and marketing system, which was originally a trump card, have been challenged.
"As long as a company wants to grow by leaps and bounds, it must find its strongest point and continue to grow, that is, how to transition from consumer-level Internet applications to industrial-level applications." said Zhang Liaoyuan at last year's shareholder meeting.
The three squirrels obviously know what their strongest point is. As he said, in the past eight years, three squirrels have captured the revolution brought about by the Internet and formed a new connection, one that includes user data, factory data, and new marketing.
Therefore, when moving to the second stage, the three squirrels chose to expand their existing users, factories, and marketing, so they have a multi-brand layout of the three squirrels. Last year, the three squirrels launched four sub-brands, Tie Gongji, Xiaolulanlan, Raising a Hairy Child, and Xixiaojing, entering the business of instant fast food, baby food, pet food and customized wedding gifts.
In the original three squirrel brands, the strategy of simplification was implemented, that is, to 300 SKUs, from a full category to a focus on "dried nuts + selected snacks."
In the official flagship store of an e-commerce platform of Three Squirrels, Yidian Finance found that the page is already focusing on nuts, but there are currently 641 SKUs, including nuts, meat, dried fruit, and pastries, and there are only 87 SKUs for roasted nuts; Among the top ten sales, there are 7 types of nuts and 3 types of other snack products (preserved meat, bread, and preserved fruits).
For the three squirrels, returning to the nut is the original intention, but it also has to go through some injuries. Of course, such brand and category adjustments are imperative even if it hurts. Rather than saying that the new brand expansion and main brand contraction of Three Squirrels is an active transformation, it is rather a helpless move under passive choice.
In 2019, the market share of the three squirrels is 18%, and the sales scale has reached tens of billions. It has been the first online for more than a year, and its future growth space is limited. Compared with the previous route, it will open up new areas, It is obviously more cost-effective to save energy to develop a single category.
In the context of new traffic, online traffic is getting more and more expensive. For the three squirrels who rely heavily on online sales, this means that sales costs are high and profits are suppressed. The financial report shows that in 2019, the service and promotion fees of the three squirrel platforms reached 660 million yuan, accounting for 28.8% of the total sales expenses; in the first half of 2020, this number rose again, with platform promotion fees of 398 million yuan, accounting for 40 %.
"In the first half of the year, platform traffic was dispersed and e-commerce channel traffic declined, which led to a further increase in the company's traffic acquisition costs. At the same time, due to the impact of traffic factors under the epidemic, sales expenses and fixed expense amortization increased, which had a certain impact on profits." Three Squirrels Once answered investors’ questions frankly.
The dispersion of platform traffic has not only caused a rise in single-brand sales costs, but also changes in the market structure. In recent years, especially the outbreak of live e-commerce in 2020, in addition to changes in users' buying habits, there are also the rapid rise of new brands such as Perfect Diary and Huaxizi.
In the field of casual snacks, the original market was relatively fragmented. The centralized rise of Taobao and other e-commerce platforms has brought about the branding and market concentration increase represented by the three squirrels. Now with the decentralization of platform traffic, the three squirrels rely on the original Brands with e-commerce channel systems have been hit hard.
According to data from Pacific Securities, in October and November 2020, the market concentration of the casual snack industry declined year-on-year. In October, CR3 fell by 11.21% year-on-year, CR5 fell by 10.92% year-on-year, and CR10 fell by 11.11% year-on-year; in November, CR3, CR5, and CR10 fell 7.39, 7.19, and 6.80 percentage points year-on-year, respectively.
The more the top brand, the more the market share is declining. The rise of new channels has given equal opportunities to many brands, causing the casual snack market to change from the trend of increased concentration brought about by the rise of Taobao’s e-commerce. Usher in the rise of small brands.
"Compared with platform-based snack companies, consumers have gradually begun to prefer large single brands, and small brands have a certain rising trend; it is also related to the favorable small brands such as live broadcast and private domain marketing." Pacific Securities analyzed in the research report. Called.
In order to adapt to this change, the three squirrels adopted a completely different channel strategy from previous sub-brands such as Tie Gongji, Xiaolulanlan, Raising a Hairy Child, and Xixiaoque. They used contentized short videos, live broadcasts and on-site advertising. As the main position, trying to replicate the success of the three squirrels.
But ideals are one thing, reality is one thing. Time has changed. The three squirrels succeeded in channel centralization, that is, the flow of traffic is gathered on e-commerce platforms such as Taobao and Tmall. Now is the era of channel decentralization, and the brand structure is naturally also decentralized. Successful and unable to copy.
The three squirrels used to be the "strongest point" of users, channels, and marketing. But now, users and channels are changing. What was once strong is no longer strong. This is the reality that the three squirrels cannot escape.
Conclusion
The rise of the three squirrels has benefited from the changes in channels, the rise of new channels and the emergence of new marketing. Nowadays, new channels and new marketing methods have appeared again, and the three squirrels are the original beneficiaries. Become the challenged.
In the channel reform, other companies are tapping the residual value of online channels, which makes the market value steadily rising. On the contrary, the three squirrels online channels have proved that there is not much room for the future, and retail is essentially channel competition. As a result, its stock price continued to fall.
New brands, new channels, and a series of transformation plans of the Three Squirrels are courageous, but the current situation cannot support the future and imagination of the Three Squirrels.