Image source @ Visual China
| Tidal Business Review
According to media reports, Baiguoyuan, known as the "world's largest fruit chain enterprise", is expected to formally submit a prospectus to the Hong Kong Stock Exchange in April, and intends to be listed on the main board, which is expected to become the "first fruit retail stock" in China.
Now that April is drawing to a close, the prospectus of Baiguoyuan is still missing.
We pulled back two years ago, and in June 2020, Shenzhen Baiguoyuan Industrial (Group) Co., Ltd. submitted overseas listing application materials to the CSRC for listing on the main board of the Hong Kong Stock Exchange, which was approved on 10 September 2020.
However, two months later, Baiguoyuan accepted counseling from Minsheng Securities and switched to the ChiNext Board, but there was no follow-up after the Shenzhen Securities Regulatory Bureau conducted counseling filing. Now, Baiguoyuan has returned to the Hong Kong Stock Exchange for the third sprint IPO, can it succeed?
There is a saying on the fruit circle that "South Hundred Fruits, North Fresh Feng, West Hongjiu", and there are also fresh fruits and Hongjiu fruits that are also seeking fruit business with Hundred Fruit Orchard.
For them, the road to listing is also not so smooth.
At the end of 2019, Xianfeng Fruit and CITIC Securities signed a listing vice-master agreement, and in 2021, they chose CITIC Construction Investment Securities as a counseling team, but there has been no news of a formal IPO; Hong jiu guopin moved to Hong Kong stocks in September last year after failing to sprint A-shares in 2019, but there has been no further news since then.
The "Hundred Orchards" had a bumpy listing, and apparently, the fruit retail business didn't seem to be doing that well.
01 Where is the market for fruit retail?
"Oranges born in Huainan are oranges, and those born in Huaibei are oranges, and the leaves are similar, but they actually have different tastes." So what? This story from "Yanzi Spring and Autumn" not only interprets the outstanding wisdom of a diplomat, but also vaguely outlines the overview of the fruit market 2,000 years ago.
Image:pexels
Throughout the development of fruit retail formats, from stall vendors to husband and wife stores, and then to brand chains, the advent of the Internet era has opened up a new sales path for fruit retail, online drainage to the store consumption, mobile phone order offline distribution, coupled with fresh franchise stores, comprehensive supermarkets, these turmoil, the original relatively stable fruit industry, in recent years, novice fish have entered, consumer choices are numerous, and competition is becoming more and more fierce.
The rapid rise of emerging retail channels has led to a compound annual growth rate of 40.7% in its market.
The new channel seems to be in full swing, but the main channel of domestic fresh fruit retail is still in the hands of traditional channels such as supermarkets, mom-and-pop shops, and vegetable markets. According to the data of China Insight Consulting, in 2020, the traditional fruit retail channels accounted for about 77.7% of the total market size of China's fresh fruit retail, while the emerging channels grew rapidly, but in the total domestic fresh fruit retail sales, accounting for only over 20%.
For Baiguoyuan, competitors include traditional supermarkets, mom-and-pop stores, fresh e-commerce and community group buying that have been on fire in recent years. Some data show that even if it sits in the top position in the industry, the market share of Baiguoyuan is only about 1%.
With the upgrading of consumption, people's pursuit of healthy diet is getting higher and higher, the quality upgrade of fruits and the increase of consumption volume is an inevitable trend of future development, it is foreseeable that the fruit industry is entering a golden period of rising volume and price.
02 The "dilemma" of the supply chain of the fruit industry
There is such a description of lychees in the "Lychee Diagram Sequence": "If you leave the branch, the color changes in one day, the fragrance changes in two days, the taste changes in three days, and the color and fragrance are gone after four or five days." "It can be seen that after the fruit is picked, if you want to reach the table of the people of the whole country in its original appearance, the requirements for the supply chain are quite high."
The continental terrain is high in the west and low in the east, the geographical form is diverse, the climate is complex, and the cross-latitude is wide, of which Shandong and Henan are the largest fresh production areas in the mainland, and the whole country presents the supply characteristics of "east and west", and the production area is quite uneven.
Therefore, the domestic fresh fruit transportation and storage difficulties are greater than other countries, fresh fruit from ripe, picked to the hands of consumers, the loss rate of up to 35%, in other words, after the harvest of fruit into circulation will be lost one-third.
For such a high loss rate, improving the efficiency of the supply chain has become an urgent problem to be solved in the fresh fruit retail industry.
First of all, from the fruit planting end, due to the impact of unexpected weather and planting technology, fruit products ready to enter the market are often uneven and cannot be mass-produced.
The second is the transportation link, although cold chain logistics is booming, but for the huge market demand in the mainland is still a drop in the bucket.
According to statistics, as of 2020, the total output of mainland fruits has reached 286.924 million tons, but the cold chain preservation capacity of mainland fruits is only 5.92% of the total output. The cold chain circulation rate of our fruits and vegetables is only 22%, and the indicator in Europe and the United States has reached more than 95%.
At the same time, in the distribution of fresh fruits, from processing and packaging to warehousing and transportation, these links may be involved by multiple participants, and the quality control of each company is different, and there is no unified standard for operating procedures, resulting in the inability to maintain the stability of the supply of fresh fruits and the consistency of the quality of each batch.
For fruit chain enterprises, from planting and picking to warehousing and transportation, to the guidance of consumption habits, from the maintenance of supply chains to online and offline operations, as well as user management, this not only requires a lot of capital, but also requires long-term and steady investment.
Taking Baiguoyuan as an example, as of August last year, Baiguoyuan had laid out more than 200 fruit planting bases, 17 fresh distribution centers, and a large number of transportation fleet resources across the country, but it was still insufficient in terms of supply procurement and cold chain logistics. According to the data released by the National Cold Chain Operation Alliance, the cost of cold chain usually accounts for more than 40% of the unit price of fruit e-commerce.
In addition, the "three no returns" policy of no small tickets, no physical objects and no reason to return the goods proposed by Baiguoyuan has also brought a lot of burden to it.
Anxin Securities Research Report shows that the gross profit margin of the fresh e-commerce industry is capped at 30%, and the average gross profit margin of the industry is about 15%.
In the context of low profits, many companies have difficulty in achieving breakeven.
03 Entering the fresh e-commerce, can the "hundred fruit orchards" open up the second growth pole
If a single category is not enough to support the valuation of a ten-billion-dollar unicorn, Baiguoyuan, which is firmly at the top of fruit retail, has shifted its attention to a new category - fresh. But for the expansion of new business, it seems that it is far less easy than Baiguoyuan imagined.
Initially, Yu Huiyong, chairman of Baiguoyuan, hoped that the fruit shop could act as a fresh pre-warehouse and "integrate the warehouse store" to reduce costs. In 2019, Baiguoyuan proposed the "Big Fresh Strategy" to expand its business categories to all fresh, and at the same time launched an independent fresh platform "Baiguo Xinxiang", and tested the water in the base camp Guangshen area in the second half of the year.
But the reality is not so ideal. Taking the Baiguoyuan store as an example, its area is usually between 30-40 square meters, while the area of the fresh store is mostly between 60-200 square meters, which means that the area of the Baiguoyuan store cannot provide the front warehouse function for its fresh business.
The idea of a front warehouse was also abandoned by Baiguoyuan shortly thereafter. According to the data released in 2019, the proportion of all members accounted for less than 2% of all members.
In June 2020, Internet giants Ali, Meituan, Pinduoduo, and Didi cut into the community group buying track with extremely fast play, and Baiguoyuan, as the vanguard of the fruit retail industry, did not launch the community group buying product "Panda Fresh" until 4 months later. And Baiguoyuan is dominated by "high quality", the price of products is higher than that of similar fresh community stores, and its corresponding consumer groups are not very consistent with the consumer groups that value price in community group buying. However, if you follow the trend of opponents and use subsidies to reduce prices in exchange for consumer favor, I am afraid that it will also affect the positioning of Baiguoyuan. Taking a step back, the model of community group buying is actually not suitable for the high-end retail positioning of Baiguoyuan.
Since the outbreak of the epidemic, although the "community group buying" track has continued to heat up, the business is not so easy to do.
From 2019 to 2021, the revenue of the so-called "first share of community group purchase" daily excellent fresh, from 2019 to 2021, was 6.001 billion yuan, 6.130 billion yuan and 2.122 billion yuan, and the net profit was -3.474 billion yuan, -2.164 billion yuan and -974 million yuan, respectively. Although the revenue of Dingdong Grocery, which was listed almost at the same time, increased 5 times, 3.880 billion yuan, 11.336 billion yuan and 20.121 billion yuan, the net profit was -1.994 billion, -3.497 billion yuan and -6.717 billion yuan, respectively. Community group buying is not as glamorous as it seems.
In recent years, the fruit retail business seems to be getting harder and harder to do? In fact, this is inseparable from the fruit industry's own characteristics.
The first is the industry characteristics of "three highs and three lows": high rent, high loss, high labor, low specification, low threshold, and low net profit make it difficult for many companies to expand on a large scale.
Secondly, as the last highland of the Transformation of the Internet, the fresh food industry, many giants, including Pinduoduo and Meituan, vowed to nibble this piece of fat meat, and the gods fought and the little brother suffered.
Finally, the differentiation of the fruit industry itself: the low-end volume plate is large, but the market dispersion profit is low, and the high-end market profit is high, but none of them has achieved scale.
Yu Huiyong once said, "In the future, the business of Baiguoyuan, the proportion of online and offline is more reasonable, if you do not embrace new retail will definitely be eliminated, this 30% is the life and death line, must be kept." ”
Many of the world's problems are dilemmas, it is easy to lose the other, righteousness and profit can not be both, for business leaders, perhaps jumping out of this chess game, with a more profound and open-minded attitude to propose solutions, will open up a whole new world.