When the lights came on, Zhang Liaoyuan, founder of Three Squirrels, appeared center stage in a tuxedo, baton in hand.
This was the scene at the ecosystem conference recently hosted by the company. After weathering years of darkness and dragging the company back from its lowest point, Zhang finally seemed at ease again.
Looking back, 2019 was a peak year: Three Squirrels had gone public on the A-share market and became the first snack brand in China to exceed RMB 10 billion (USD 1.4 billion) in annual revenue. But as Zhang alluded to before, this was also the beginning of a reversal. What followed was a four-year decline, marked by sliding revenues and shrinking profits.
As the company’s figurehead, Zhang spiraled into deep anxiety and insomnia. “Whatever I did, it felt like the wrong move,” he said.
Everything began to shift at a senior management meeting at the end of 2022. Gone were the postures of strength. After three days and nights of intense discussion, the team came to a consensus: the problem wasn’t the product, but the price. Three Squirrels was selling snacks that were simply too expensive.
This insight marked a turning point. The company pivoted to a new focus on being value-for-money, and expanded its sales footprint beyond JD.com and Taobao to platforms like Douyin and Pinduoduo. By 2024, Three Squirrels had returned to RMB 10 billion in annual revenue.
Among all the channels, Douyin played a critical role. In 2023, sales from Douyin hit RMB 1.2 billion (USD 168 million), and in the following year surged to RMB 2.2 billion (USD 308 million), surpassing the brand’s Tmall performance for the first time.
For Zhang, making Douyin work came to symbolize the company’s rebound. Yet, he insisted, it wasn’t Douyin itself that mattered most, but the methods rediscovered by the firm and the organizational discipline to execute them.
Armed with those insights, Three Squirrels is now venturing into new territory. The company has launched 33 proprietary brands spanning pet food, supplements, convenience meals, coffee, and feminine care. It’s also planning to open convenience stores and lifestyle shops.
In Zhang’s long-term vision, Three Squirrels will evolve into an integrated powerhouse of manufacturing, branding, and retail: a super supply chain company.
And if the plan fails?
“Then it fails. We’ll adjust.”
The following transcript has been edited and consolidated for brevity and clarity.
36Kr: Did Douyin play a crucial role in pulling Three Squirrels out of the downturn?
Zhang Liaoyuan (ZL): Douyin was important, but not for the reasons people think. What really mattered was that we discovered the right way to operate.
36Kr: What kind of decision-making went into that shift?
ZL: We had succeeded on Tmall and JD.com and thought of ourselves as winners. That mindset made us resistant to change. Before 2022, every attempt we made on Douyin or Pinduoduo failed. We didn’t want to adapt.
It wasn’t until we hit rock bottom that we realized we had no choice. We had to shed the old strongman mentality. The “Tao Te Ching” says the way of strength is to act from weakness. True strength lies in yielding, in aligning with the natural order.
We changed nearly everything: pricing, profit structures, organizational systems. We simplified our product development process drastically.
36Kr: What exactly were you reluctant to adapt to on Douyin and Pinduoduo?
ZL: They are dominated by white-label products with low prices. We assumed we couldn’t compete. But instead of rejecting it outright, we should’ve asked: why can others succeed where we can’t?
For example, others ship directly from factories while we had shipped everything to a warehouse first, which added costs. Their boxes cost RMB 0.8 (USD 0.11), and ours cost RMB 1 (USD 0.14). We were too proud to notice.
And for a decade-old company with thousands of employees, change is hard. Initially, we hired a consulting firm, ran constant workshops and transformation sessions, but things only got worse. Eventually, we abandoned big slogans and focused on small changes, small units, small wins. That’s when we realized we had to govern like underdogs.
36Kr: Without that downturn, would these changes have happened?
ZL: Definitely not. That’s human nature. In 2017 and 2018, we were flying high. We thought everything we did was right, but in truth, we just happened to be riding a wave.
Rock bottom brings two outcomes: death or rebirth. Maturity only comes after you survive the fire.
36Kr: When did you realize Three Squirrels’ prices were too high?
ZL: We had a three-day executive meeting. After dissecting every layer of the business from raw materials to logistics, we reached a consensus: we were overpriced. Fixing that meant decentralizing authority and sending top executives into the trenches. That’s what ultimately led us to Douyin.
36Kr: Didn’t you already know the prices were high?
ZL: We knew. But after spending more than a decade to build our brand, it takes real courage to suddenly go mass market.
At the time, we ignored the white-label and challenger brands. Then our mindset shifted: forget whether they seem legitimate and just try the products. If someone’s selling mixed nuts for RMB 19.9 (USD 2.8) and ours are only 20% better but priced at RMB 59.9 (USD 8.4), that’s still overpriced. Why not go for RMB 39.9 (USD 5.6) with better quality?
It’s a simple logic, but we had been too rigid.
36Kr: How do you ensure price competitiveness now?
ZL: Through innovation in our model. We’re building centralized supply chain hubs in Wuhu, Tianjin, Chengdu, and Foshan. Wuhu is nearly complete, with seven factories and 17 production lines covering 65% of our snack products.
We manufacture nuts in-house. For everything else, we co-invest with top-tier suppliers. Products go straight to nearby consumers, which shortens transport distances and cuts costs. We control the full production cycle and get cost savings at every step, whether that’s on materials, operations, or even R&D feedback.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Li Xiaoxia for 36Kr.