Image source @ Visual China
Text | Giant Tide WAVE, author | Degree, editor| Yang Xuran
On March 28, a topic about "Gu Ming was fined 11.61 million yuan for tax evasion" appeared on the hot search, because zhejiang Guming Technology Co., Ltd., an affiliate of Gu Ming Milk Tea, evaded taxes by more than 23.22 million yuan. The topic quickly surpassed 500 million views and sparked about 30,000 discussions.
Juchao found that while many netizens shouted "collapsed house", some netizens said that they had never drunk it and did not know the existence of the tea brand of guming.
Before the tax evasion incident, Gu Ming's voice in the industry was not particularly large, and the awareness among consumers seemed to be inferior to brands such as Xicha and Naixue. According to a survey conducted by Ai Media Consulting on the brand perception of consumers of China's new tea drinks in Q2 2020, the brand perception of Gu Ming only ranked 9th. On the one hand, this is because it has not yet been listed, and on the other hand, it is also because the store distribution has a certain regionality.
But in fact, Gu Ming has been making a fortune in a muffled voice. According to the public data on The official website of Gu Ming, in 2021, Gu Ming will have more than 6,000 stores across the country, several times that of Xi Tea and Nai Xue. And because Gu Ming is mainly based on the franchise model, it can achieve profitability itself.
Gu Ming focuses on the low-line market, focusing on cost-effective fruit tea, so it is also called the "flat replacement" of hi tea by netizens. According to the data of the Red Food Research Institute, its product price is between 8-21 yuan, and the per capita customer unit price is 15 yuan, which is more than twice that of Mi xue ice city, and it should be said that it is not easy to gain a foothold in the sinking market at such a price.
Recently, some self-media sources said that Gu Ming is about to complete a new round of financing, and the post-investment valuation is as high as about 45 billion yuan. Although this news was quickly denied by Gu Ming officials. But even so, from the number of stores and product positioning to calculate, the strength of Gu Ming has been extraordinary, and it may even be squeezed into the first echelon of the industry.
Image source: Gu Ming's official website
However, the muffled and rich Gu Ming is not without troubles. In 2021, there were 32 financings in the new tea industry, and the number of financing and the amount of financing disclosed reached the peak of the past 10 years, the competition in the industry became more and more fierce, and the news of store closures and layoffs was not uncommon.
In particular, recently, Xicha, Neixue and Lele Tea have all started to reduce prices, trying to penetrate the mid-price market, and will inevitably meet with gu ming. In the face of the crazy inner volume market, can Gu Ming still be alone and continue to make a fortune in a muffled voice?
01 Xicha Pingdi, sitting on 6,000 stores
Even during the epidemic in the past two years, the speed of Gu Ming's store opening has not slowed down at all.
Many netizens have neither drunk ancient tea nor know the existence of this tea brand, largely because of the regionality of its store layout.
Although the number of franchise stores has reached more than 6,000, Guming only covers more than 140 cities in 18 provinces, and some provinces are completely uninhabited. For example, in the core cities of Beijing and Tianjin in the north, there is not a single shop for ancient tea.
The logic of the expansion of Guming stores is not based on indicators such as local GDP and population, like Starbucks, but according to the distribution range of its own logistics supply chain. This is not difficult to understand, the per capita consumption of 15 yuan of drinks can indeed be compatible with most consumer groups, for the local consumption level is not too high requirements.
The main focus of ancient tea is fruit tea, so there are high requirements for the timeliness of raw materials and logistics distribution. Since 2013, Gu Ming has deployed a self-distribution model, built its own supply chain, and then built its own orchards, and established storage bases in East China, Central China and South China, and its cold chain logistics can achieve low-temperature distribution of raw materials to stores every other day.
Therefore, Gu Ming only opens stores in places where its logistics supply chain can cover. Previous media reports have mentioned its strategy of "not opening stores north of the Yellow River". According to the data of the institutional narrow door restaurant eye, the top four provinces in the number of stores are Zhejiang, Fujian, Jiangxi and Guangdong.
The national distribution of guming stores, source: narrow door dining eye
It is worth mentioning that even during the epidemic in the past two years, the opening speed of Gu Ming has not slowed down at all.
According to the data of the narrow door restaurant eye, GuMing opened 849 stores in 2019, 2253 stores in 2020, and 1806 stores in 2021, and two-thirds of the stores were opened in the past two years. For comparison, Nesher's tea opened 164 stores in 2020 and 326 stores in 2021, respectively.
Only the layout of some parts of the country has achieved 6,000 stores, and the number of stores is still growing against the trend, which is enough to see the strength of its brand potential and rapid growth. Up to now, Gu Ming has publicly disclosed two rounds of financing, respectively, in the first half of 2020, its investors include Sequoia China, Meituan Dragon Ball, and the US hedge fund Kotu Capital.
Even the opponents expressed appreciation and favor. At the FBIF 2020 Food and Beverage Innovation Forum, Lu Liang, the founder of Cha Yan Yue, said unabashedly: "If I were an investor, I would also invest in (Gu Ming)." ”
02 Franchise brand, muffled and rich
The franchise model means faster development, more stores, and higher operating income.
Offline stores of catering have always existed two different business models of franchise and self-operation, which have their own advantages and disadvantages.
The "franchise faction" is represented by Honey Snow Ice City, Absolute Duck Neck, Yang Guofu Spicy Hot, etc., because it does not need to bear the operating funds of the store, it can achieve asset-light expansion relatively quickly. The pace of development of the franchisee is in stark contrast to its self-employed competitors.
Due to the many problems that have existed in history, the franchise model gives people the impression that the quality of product and service is unstable. From a management point of view, there is a natural gap between this model and the self-operated model.
However, from the perspective of consumers, the difference between franchised and self-operated brands is actually not so obvious, especially in the case of brands having strong control over franchise management. Absolute Duck Neck, Honey Snow Ice City, and Yang Guofu are all completely joined model adherents, and there have been no "devastating" food safety problems so far (of course, small problems occur from time to time).
One of the more extreme cases is that the absolute duck neck and the Zhou black duck pursue a franchise model, a adhere to the self-operated model, and after several years of development, the absolute taste duck neck is far more than the zhou black duck in terms of the number of stores and market value. It was not until the autumn of 2020 that Zhou Black Duck was forced to open up to join.
Zhou Black Duck's open franchise system once doubled its stock price, which very directly demonstrated investors' optimism about the logic of joining. That is, (franchise model) means faster development, more stores, higher operating income.
As a staunch "franchiseist" on the new tea drinking track, Gu Ming has many similarities with Mi Xue Ice City - including the large number of stores, the advantages in the sinking market, and the product price is also controlled within a clear price band to adapt to the actual situation of the sinking market.
Judging from the development of the industry in the past few years and the cultivation of consumer habits, milk tea has become one of the just needed consumption of young people, and it has shown certain social attributes and addiction - which means that the stickiness and repurchase rate are improved, and it also means that the process of sinking and penetration is smoothly advancing.
The contradiction is that because The head brands such as Naixue's tea and Hey tea usually adopt the self-operated model, cherish the brand feathers, and are unwilling to sink to the low-tier cities by joining the store and reducing prices, more are using sub-brands to cut, and the internal strategic positioning is very low.
This gives Gu Ming and Michelle Ice City a huge market space: based on excellent products and high-quality brands, with low prices, franchise as a means, and even with the distribution of interests that are more inclined to franchisees as "bait", in the fastest possible time, as far as possible to occupy the market and consumer minds. The strong growth and scale of Gu Ming also proves the feasibility of this model.
There is even a "legend" about joining Gu Ming in the industry: only one of the 100 franchisees is charged, highly stringent screening criteria, three rounds of interviews, and even strict requirements for the age, experience and financial status of the owner, but the number of sign-up franchisees is still large. This also shows from one side that Gu Ming's franchisees are profitable in this franchise system.
03 Sink with inner volume, competitive challenge upgrade
Costs and operating pressures have led to milk tea shops becoming a "fast-in, fast-out" business.
In essence, the milk tea shop is not a good business model, even if it has a large number of consumers. The reasons behind it are more complicated, but the core is that although this business is hot downstream, it is difficult to control upstream.
The difficulty of upstream control is mainly reflected in two aspects, one is the difficulty of controlling raw materials - if consumers focus on which flavor, it will lead to an increase in the price of corresponding raw materials. For example, coconut, coffee and orange have all experienced a process of sharp price increases in the past two years; the other is rigid expenditure, store rent, labor costs and franchise fees.
These costs and operating pressures have led to milk tea shops becoming a "fast-in, fast-out" business, opening up fast and closing quickly.
Meituan data shows that as early as 2017, the number of newly opened and closed milk tea shops nationwide was the same as 180,000. In addition, the statistics of enterprise investigation show that the number of milk tea shops cancelled nationwide in 2021 doubled compared with 2017, reaching nearly 350,000.
Gu Ming's franchise stores have got rid of the general status quo of "fast in and fast out" in the industry. According to the "Guming 2020 Annual Report", it opened 4,097 stores in 139 cities across the country in 2020, the store closure rate remained at 0.13%, and the growth rate of single-store revenue increased by 37.1% compared with 2019.
Compared to most other brands, Gu Ming's franchisees obviously have better operating income. Since Gu Ming did not disclose financial data to the public, we cannot know the specific situation. Xiao Ma Song, a well-known strategic marketing expert, once pointed out in the article that Wang Yunan, the founder of Gu Ming, once said that when Gu Ming had more than 70 stores, the profitability of the entire company was not as good as that of a franchisee who did well.
Xiao Ma Song summed it up as "Gu Ming's business code is to let franchisees make money, which is Gu Ming's unique altruistic culture." This can also explain why so many small merchants are eager to join Gu Ming, so that they have to go through three rounds of interviews and face a 90% elimination rate.
From this observation of Wang Yun'an's strategic intentions, it is relatively clear - "profit postposition", let profits to franchisees, the early and medium-term stage of development to endure a lower level of profitability, first to make the scale larger. To this end, Gu Ming will also seek capital support.
Some products of Neixue and Xicha have fallen to the mid-price level, source: Xiaohongshu
Gu Ming's franchise model has been very successful, but when the industry enters a more competitive 2022, there are new changes: the head brands Nai Xue, Xi Cha and Le Le Tea have recently carried out a relatively large price reduction, and after the price reduction, the main price band of 14-25 yuan has greatly coincided with Gu Ming (8-21 yuan). If the two industry giants follow up with the strong brands of first-tier cities to penetrate violently, Gu Ming may face the risk of passenger flow loss.
From the perspective of NaiXue's tea and xi tea, price reduction means that it has a stronger initiative, which will also impact a series of competitors. Gu Ming's name will certainly not appear on the industry's dead list, but the pace of expansion is likely to be limited.
04 Write at the end
Zhang Lei of Warburg Pincus Investment is one of the most outstanding young investors in China, and he once had a judgment on the investment of express delivery companies:
The express delivery network that operates the franchise model is essentially an operating ecosystem, and the real investors of these companies are not capitalists, but franchisees.
This passage shows the relationship between franchisees and brand owners more deeply, and raises franchisees to the height of corporate investors. From Wang Yun'an's successful business strategy, it can be seen that this is a powerful logic that can be confirmed.
When a brand can solve the product force, can solve the logistics distribution, can also solve the food safety problem, and even allow the franchisee to make money, how much difference is left between it and the direct operation model?
The problem will be the distribution of benefits after the success of the business, especially after the listing. But for Gu Ming and Wang Yun'an, that was something that didn't need to worry about the future for the time being.