The journey of Three Squirrels Inc. (SZSE: 300783) over the past six months has been a stark departure from its former glory.
In June 2026, the company launched its first batch of "fresh snack shop-in-shops" in partnership with RT-Mart across nine stores in East China.
This marked at least its fifth significant attempt to expand its offline business. Since opening its first physical store in 2016, the company has experimented with nearly every conceivable retail format.
The company's 2025 financial results were startling. It reported revenue of 10.189 billion yuan, with net profit attributable to shareholders plummeting 61.9% year-on-year to 155 million yuan. Its non-GAAP net profit collapsed by 84.53% to 49.4 million yuan. More alarmingly, approximately 65% of that 155 million yuan profit came from government subsidies. In essence, excluding these subsidies, the company's core operations were barely profitable despite its ten-figure revenue.
This once high-flying snack food giant, which initially dazzled capital markets, is now mired in a crisis involving the breakdown of its core business model, the pains of transformation, and a challenging financial situation.
The company, which rose to prominence as the "nation's first snack stock" by capitalizing on the e-commerce boom, is enduring its most difficult period since going public.
Revenue in the Billions, Profits Bleeding Out
Founded in 2012, Three Squirrels Inc. has focused for over a decade on the e-commerce track for snack foods, specializing in the R&D, sales, and brand operation of nuts and healthy snacks. It ranks first in revenue among listed snack food companies, earning the title "nation's first snack stock."
However, beneath this impressive industry ranking lies a company with highly unstable profitability.
In 2025, its annual revenue was 10.189 billion yuan, a slight decrease of 4.08% year-on-year. In the context of overall pressure on the snack food industry, maintaining this 10-billion-yuan threshold was no small feat.
Yet, the picture painted by the income statement is far less rosy. Net profit plummeted 61.9% to 155 million yuan, while non-GAAP net profit crashed 84.53% to 49.4 million yuan.
A key figure to note is that about 65% of that 155 million yuan profit stemmed from government subsidies. For a company with 10-billion-yuan revenue, its core operating profit was less than 50 million yuan.
The quarterly breakdown reveals an even more concerning trend. In Q1 2025, net profit was 239 million yuan. It then swung to a loss of 100 million yuan in Q2, eked out a meager profit of 22.27 million yuan in Q3, and fell back into a loss of 5.31 million yuan in Q4. The company was in the red for two out of four quarters.
Net cash flow from operating activities was 208 million yuan, a sharp decline of 65.36% year-on-year, indicating a visibly shrinking ability to generate cash.
Where Did the Money Go? 1.3 Billion Yuan "Fed" to Platforms
With 10.1 billion yuan in revenue, profits were paper-thin. Where did all the money go?
The answer is traffic.
In 2025, Three Squirrels Inc. spent a staggering 2.011 billion yuan on sales and marketing expenses, a year-on-year increase of 7.67%. Within this, a massive 1.312 billion yuan was burned on platform service and promotion fees alone. The company's full-year non-GAAP net profit was less than a fraction of this single expense.
The company's origins are in e-commerce, and online channels still contribute about 70% of its income. In 2025, revenue from third-party e-commerce platforms was 7.176 billion yuan, accounting for 70.42% of total revenue. This included 2.272 billion yuan from Douyin, 1.719 billion yuan from the Tmall ecosystem, and 1.513 billion yuan from the JD.com ecosystem.
The company's success was built on traffic, and its struggles are now tied to traffic.
In the early days of abundant, low-cost e-commerce platform traffic, Three Squirrels Inc. expanded rapidly. Now, with that traffic红利 peaking and platform fees continuously rising, the company has effectively become a "laborer for the platforms."
In its annual report, the company candidly admitted that one reason for the profit decline was the "increase in fees on some online platforms."
An expert in chain store operations stated bluntly that the continuous rise in traffic costs and other expenses on online channels is the primary reason for the company's sharp profit decline.
A leading management consultant also pointed out that Three Squirrels Inc.'s profit margins are among the lowest in the industry, leaving it with weak risk resilience. Furthermore, investments in R&D and the supply chain are constrained by its thin profit base.
The Dual Squeeze of the "Premium Value" Strategy
In 2022, Three Squirrels Inc. proposed a "premium value" strategy, attempting to find a balance between brand premium and price competition.
The ideal was ambitious, but the reality has been harsh.
In 2025, global prices for nut raw materials fluctuated wildly, with international purchase prices for core categories like macadamia nuts and cashews soaring. As a major player in nuts, the company faced immense pressure on its cost side.
However, its "premium value" positioning tied its hands, preventing it from fully passing on the cost increases to consumers.
In an effort to break its dependence on online traffic and find new growth engines, the company has never stopped exploring a "business model transformation."
Since opening its first offline direct-sale "Feeding Store" in Wuhu, Anhui in 2016, it launched the franchised "Alliance Small Store" model in 2018, introduced its own-brand "Community Snack Store" for neighborhood settings in 2023, transformed into a "lifestyle" oriented "Three Squirrels Life Hall" in 2025, and launched the supermarket "shop-in-shop" partnership with RT-Mart in 2026, alongside various other experimental formats.
Yet the offline journey has been exceptionally rocky. In 2025, offline business revenue was 3.013 billion yuan, down 6.30% year-on-year. The total number of stores, which had exceeded 1,000 at its peak in 2021, plummeted to 333 by the end of 2024 and saw only a slight increase to 366 by the end of 2025.
Facing the immense allure of offline channels, which account for nearly 80% of the snack market, Three Squirrels Inc. has tried and failed repeatedly over the past decade. Furthermore, the strategic investment required for new store formats also erodes profits in the short term.
The dual squeeze from rising costs and strategic investments has left the "premium value" strategy in an awkward position.
The Transformation Dilemma and Capital Conundrum
Amid these difficulties, the company has pinned its hopes on a Hong Kong listing.
In April 2025, it submitted a listing application to the Hong Kong Stock Exchange, planning a dual primary listing in both the A-share and H-share markets. The publicly stated reasons were to support the globalization of its supply chain, expand offline channels, and build digital capabilities. In September of the same year, it received a filing notice from China's securities regulator.
However, the market's interpretation was more direct – Three Squirrels Inc. is short on cash.
As of Q3 2025, the company's short-term borrowing stood at 576 million yuan, an increase of nearly 60% year-on-year, while cash on its balance sheet was shrinking significantly. Transformation requires money, building factories requires money, opening offline stores requires money, yet the "cash-generating" ability of its core business continues to weaken.
However, the path to the Hong Kong Stock Exchange has not been smooth. According to HKEX rules, if a listing application is not completed or the listing process is not finalized within six months of submission, the application documents lapse automatically. By the end of October 2025, the company's application had lapsed as the process was not completed. Based on currently available information, the company has not yet updated its application or re-submitted it.
Regarding market rumors questioning financial fraud, the company's board secretary responded on an investor relations platform in February 2026, stating that the company "has always adhered to legitimate entrepreneurship and there is no situation of financial fraud."
Despite these denials, investors have voted with their feet in a very tangible way. In 2025, the share price of Three Squirrels Inc. fell from 36.57 yuan to 23.15 yuan, a drop of over one-third.
As of June 30, 2026, the share price was reported at 15.80 yuan. Data shows the company's total market capitalization had shrunk to just 6.35 billion yuan.
This figure is less than 20% of the company's peak market capitalization of approximately 36 billion yuan, representing a cumulative evaporation of over 82% or about 29.65 billion yuan in market value.
Q1's Recovery: An Inflection Point or a Mirage?
The Q1 2026 report offered a glimmer of hope to the market. Revenue was 3.835 billion yuan, up 3.01% year-on-year. Net profit attributable to shareholders rose 14.35% to 273 million yuan, and non-GAAP net profit surged 51.59% to 246 million yuan. Its profit for a single quarter already exceeded that of the entire year 2025.
Gross margin improved from 24.42% for the full year 2025 to 27.33%. The sales expense ratio also decreased, from 19.74% to 15.87%.
Concurrently, in June 2026, the company officially announced a strategic partnership with RT-Mart, with the first batch of "fresh snack shop-in-shops" launching in nine East China stores, representing its latest attempt at a "lightweight" model.
However, whether these marginal improvements can be sustained remains uncertain.
One securities firm significantly lowered its net profit forecasts for the company for 2026-2027 in a research report. The consensus analyst rating for Three Squirrels Inc. is merely "neutral."
The company is currently attempting to juggle three potentially conflicting objectives: maintaining low prices, pursuing expansion, and seeking refinancing. Its existing operational structure is already struggling to support this combination.
Trapped in the Maze: Not Just Three Squirrels
Data shows that in 2025, China's snack food industry reached a scale of 1.18 trillion yuan, characterized by extremely low concentration, resembling an "ant market." The combined market share of the top five companies is only 5.9%.
Within the industry, traditional brands are generally under pressure.
Another listed company, a similar brand operator with a comparable business model, has also yet to find successful "self-rescue" amidst offline price wars and channel transformations.
After its price reduction strategy backfired, this competitor suffered a double blow to both revenue and profit and is now in a period of deep adjustment following a breakdown in its business model.
As of the close on June 30, 2026, its market capitalization was only 3.469 billion yuan, hovering near historical lows.
Another snack food company headquartered in Anhui also experienced a "darkest hour" in 2025, with its profit halving. Its 2025 revenue was 6.574 billion yuan, down 7.8% year-on-year, and net profit fell 62.5% to 318 million yuan.
However, as a typical "product-oriented" company with a business model grounded in offline channels and product manufacturing, this firm has a more solid foundation. This has allowed it to demonstrate greater resilience in navigating the cycle, staging a strong rebound in Q1 2026 with revenue up 41.5% year-on-year to 2.222 billion yuan and net profit surging 117.8% to 168 million yuan.
In stark contrast, new discount retail players are advancing rapidly.
While the share of traditional supermarkets is declining, discount snack stores have become the largest offline channel (accounting for over 40%). Two prominent players have risen swiftly based on a "low margin, high volume + massive SKU" model. In 2025, their combined revenue reached 117.629 billion yuan, surpassing the total of ten traditional listed companies (41.5 billion yuan), with profits also significantly exceeding those of traditional brands.
Meanwhile, a group of "new brand pioneers" is also gaining ground. Representatives that have risen through new channels like content e-commerce have become category experts within the industry by creating hit core products and leveraging content marketing.
The market is growing, but profits are shifting. Old and new forces are engaged in fierce competition centered on channels and efficiency, and the industry is undergoing a severe shake-up.
Online channels have become unprofitable, while offline expansion is a quagmire. Having been weaned off the feeding of cheap traffic, what can Three Squirrels Inc. rely on to survive?
This is likely the fundamental question the company's management needs to answer clearly, after a decade of strategic initiatives that have failed to gain traction.
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