Chengdu frozen product company Chuanwei is suspected of encountering a collective "siege" from the industry, not only local distributors boycotted, but also the head companies Anjing Food and Haibawang Food also issued a document to block. This cutting-edge frozen products company, which has only been established for three years, has caused a huge shock in the industry with its unique digital business model, which also reflects that the field of frozen products circulation is undergoing profound changes.
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He Zhilin, the founder of Chuanwei Frozen Products, originally ran a smaller, traditional frozen food distributor. Later, he decided to go digital, established Chuanwei Frozen Products in 2020, and achieved a hundredfold increase in revenue from 500 million to 6 billion in just three years.
The secret of Chuanwei's success lies in making full use of digital technology to establish its own warehousing and distribution system, expanding the distribution scope through a third-party digital freight platform, and achieving a leap from 150 kilometers to 500 kilometers in service range. Digitalization helps Chuanwei quickly occupy the market, and the goal is to "sell Chuanwei frozen products to the world".
The sudden rise of Chuanwei has disrupted the pattern of traditional frozen food enterprises. In the traditional model, after the product is shipped from the manufacturer, it must pass through multiple layers of distributors and finally reach the hands of consumers or catering merchants, and the profit distribution of the entire circulation process is closely linked. Chuanwei adopts a B2B model that directly faces end customers, eliminating intermediate links and lowering prices to quickly open the market.
This has led to the squeezing of the profit margins of traditional dealers, and it is difficult to compete with Chuanwei, so they collectively boycott Chuanwei and get the response of upstream enterprises. However, He Zhilin does not care about the industry resistance, he believes that he is just using the advanced model to defeat the backward old model, and Chuanwei's low-price strategy is not operating at a loss.
In his opinion, the profit margin left by traditional dealers is too high, and the current 100 yuan purchase can be sold at a price of 101 or even lower, with a gross profit of only 5%, but the company is still profitable. There is a huge gap between He Zhilin's concept and traditional dealers, which reflects that digital transformation is profoundly subverting the frozen food industry, and a new pattern is still in the making.
From a more macro perspective, this confrontation reflects that the trillion-level frozen food consumer market is at an important juncture in consumption upgrading. As consumers become more sensitive to price and control food safety more stringently, the traditional distribution model with too many links and high costs is facing great pressure.
Consumption upgrading forces frozen food enterprises to accelerate digitalization and large-scale transformation to achieve more efficient circulation, which is an inevitable trend in the development of the industry. Chuanwei's low-price strategy bypassing the intermediate link can indeed provide more preferential prices for end customers, so squeezing the profit margin of the supply chain upwards will also intensify the contradiction and provoke resistance.
This may seem like a quick way to open up the market, but it is questionable whether it will be sustainable in the long run. It is suggested that while adhering to digital transformation, Chuanwei should also actively communicate and coordinate with traditional dealers to improve their profitability by providing better services and gradually achieve a win-win situation.
We will further improve our operational efficiency, reduce costs, and expand at scale rather than at a low price to become more sustainable. Only by allowing digital achievements to benefit more participants in the industrial chain can the overall success of the digital transformation of the frozen food industry be achieved.