(Yicai) Nov. 21 -- Three Squirrels is pivoting toward brick-and-mortar shop expansion due to online markets becoming increasingly saturated, with the leading Chinese snack brand seeking to boost growth via community retail channels.

"While we're already leading across online channels, expanding offline isn't about transformation, but rather it's about scaling up," Zhang Liaoyuan, founder of Three Squirrels, told investors recently. "Moving into offline retail is essential for our growth."

Three Squirrels aims to reverse its sales ratio from 70 percent online and 30 percent offline to the opposite over the next two to three years, Zhang noted.

Late last month, Three Squirrels acquired snack retailer Love Snacks and announced its strategic focus on community retail. The shift came as the Wuhu-based company, which built its success through e-commerce, faced a drop in online revenue.

Three Squirrels's third-party platform revenue fell to around CNY5 billion (USD690.5 million) last year, accounting for 70 percent of its total income, down from CNY9.9 billion in 2019, when it made up 97 percent of the total.

"Community stores have become crucial consumption scenarios, with people spending 60 percent of their lives in their communities," according to Zhang Jixue, founder and chairman of Xinchao Media Group.

Beyond community retail expansion, Three Squirrels also aims to enhance supply chain efficiency by integrating manufacturing, branding, and retail operations to become a private label manufacturer. Shanghai-based snacks maker Laiyifen made a similar move when it opened its first membership warehouse store in September.

"Snack brands have several advantages in developing offline channels," Zhang Yi, chief executive of iiMedia Research, told Yicai. "The franchise model allows brands to transfer sales pressure while achieving high turnover and predictable revenue. With their low operating costs and strong youth appeal, community snack stores can achieve sustainable sales through digital supply chain management and competitive pricing."

Editors: Tang Shihua, Martin Kadiev