44-year-old former McDonald's female executive trader, 3 years loss of 900 million yuan by what to harvest "China's first"

How far is it from "China's first pizza"? Fast alone will not do

Recently, Darby Limited (hereinafter referred to as Delta China) recently submitted a prospectus to the Hong Kong Stock Exchange for listing on the Main Board, with Bank of America Securities as the sole sponsor.

According to the prospectus, the net proceeds from the IPO will be mainly used to expand the store network, and Domino's China plans to open 300 new stores in 2022 and 2023.

As early as 2020, Yum China, the parent company of another pizza chain brand Pizza Hut, has taken the lead in landing on the Hong Kong Stock Exchange, but from the perspective of business proportion alone, Domino's China, which accounts for a high proportion of pizza categories, may be regarded as the "first pizza stock" of Hong Kong stocks.

In terms of sales revenue in 2020, Domino's is the third largest pizza company in China, behind Pizza Hut and Zunbao Pizza.

Former McDonald's executive at the age of 44

The "Domino's Pizza" brand was born in Michigan in 1960, and Mr. Thomas Mona, a student at the University of Michigan, and his brother James bought a pizzeria called "DomiNick's" for $900, and 5 years later, officially changed its name to Domino's, which is today's Domino's.

The listing in Hong Kong this time is the general franchisee of the "Domino's Pizza" brand in China- Domino's China. In 1997, Domino's Pizza officially entered the Chinese mainland, and the current CEO is a 44-year-old woman, Wang Yi.

In 2004, Wang Yi graduated from Vanderbilt University in the United States and joined McKinsey. Starting from the grassroots staff, she worked at McKinsey for 5 years. After returning to China, Wang Yi joined McDonald's China, starting from a grassroots operation student in the Asia-Pacific region again, spending 8 years as the vice president of the franchise business department in China, leading the mcDonald's central region business.

In May 2017, 39-year-old Wang Yi became the CEO of Domino's China, responsible for the company's overall strategic planning and business direction. Just one month after taking office, Domino's China renewed its master franchise agreement with Domino's International, expanding its franchise to the entire Chinese mainland, Hong Kong and Macau.

It is worth mentioning that Domino's China has also continued the advantage of the parent company in the delivery service, and the data shows that more than 73% of the revenue of Darby shares in 2021 will come from delivery orders, much higher than the industry average of 49%. According to Frost & Sullivan's report, the brand is the only pizza company in China that has committed to "within 30 minutes" across all sales channels.

It is understood that as early as most takeaways are still in the telephone order period, Domino's launched PC and mobile ordering, and about half of its staff composition is data experts, doing software and data analysis work. In 2019, Dominoth China also independently developed the "Integrated Service Middle Platform", where customers can not only track departed orders online in real time, but also "go deep into the kitchen" to track the real-time status of orders from preparation to baking to riders to pick up meals.

According to the prospectus, in 2021, 95% of Domino's Delivery, Take-out and Dine-in orders will come from online, well above the pizza industry average (all below 70%), of which revenue from its own online channels accounts for about one-half.

"Domino's is actually a tech company, but it happens to be selling pizza." Wang Yi, CEO of Domino's China, once jokingly said.

Wang Yi's appearance has accelerated the pace of Meile China's expansion, under her deployment, since 2017, the number of Domino's Chinese stores has tripled, in 2019, Domino's 200th store in the Chinese mainland settled in Shenzhen, after which the company further accelerated the opening of stores, in two years has far exceeded 400 stores.

Wang Yi once admitted that the goal in China is to open 500-700 stores within 5 years. In the prospectus, Domino's China also made a vision like Monaghan did in the past: to become China's number one pizza company.

In terms of global retail sales in 2020, Domino's is the world's largest pizza company, with more than 18,800 stores in more than 90 markets as of January 2, 2022.

As of the latest practicable date, Domino's China has 485 directly operated stores in 10 cities in Chinese mainland. According to Frost & Sullivan's report, Domino's China has become the fastest growing company among the top five pizza brands in China and the third largest pizza company in China (in terms of sales revenue in 2020).

According to the prospectus, from 2019 to 2021, Domino's China's revenue was 837 million yuan, 1.104 billion yuan and 1.611 billion yuan, net losses were 182 million yuan, 274 million yuan and 471 million yuan, and adjusted net losses were 168 million yuan, 200 million yuan and 143 million yuan, respectively.

A total of 10 rounds of financing have been completed

Since its inception, Dominoth China has completed 10 rounds of financing and completed 3 financings in the past two years, totaling US$130 million.

The three rounds of funding are: Domino's investment in Domino's China of $40 million in the second quarter of 2020, an additional $40 million in the first quarter of 2021, and another $50 million financing in December 2021, of which Domino's contributed $9.1 million. In the past two years, Domino's has injected a total of US$89.1 million into Domino's China.

Source: Prospectus

According to the prospectus, Domino's shares, as an important shareholder of Darby Shares, holds 15.73% of the shares. Industry insiders believe that Domino's continuous additional investment in Domino's China is optimistic about the current blue ocean market of pizza in China.

Future development

According to Frost & Sullivan's report, the size of China's pizza market in 2020 is 30.5 billion yuan, and it is expected to double to 62.3 billion yuan by 2025, with a compound annual growth rate of 15.4%. In addition, the Chinese pizza market is still underserved compared to other markets in East Asia. In 2020, there were 9.8 pizzeria stores per million people in China, 28.4 in Japan and 28.9 in South Korea, respectively.

Domino's China plans to open 120 new stores in 2022 and 180 in 2023, respectively. In its prospectus, it stressed that in the long run, its goal is to become the number one pizza company in China.

In the future, in first-tier cities, Domino's China will increase the absolute number of stores on the one hand, and on the other hand, it will also develop a new store model that only provides take-out and delivery services. At the same time, Domino's China plans to move into more new first- and second-tier cities.

So, can Domino's China become "China's first pizza" as desired?