China's largest fruit chain Baiguoyuan hit the listing, with annual revenue exceeding 10 billion

Reporter | Zhao Xiaojuan

Edit | Ya Han Xiang

On 2 May, Shenzhen Baiguoyuan Industrial (Group) Co., Ltd. (hereinafter referred to as "Baiguoyuan") submitted an application for listing to the Hong Kong Stock Exchange. According to the prospectus, from 2019 to 2021, the revenue of Baiguoyuan was 8.976 billion yuan, 8.853 billion yuan and 10.289 billion yuan, respectively, and the net profit was 248 million yuan, 0.46 billion yuan and 226 million yuan, respectively.

Baiguoyuan was founded in 2001 by Yu Huiyong, a native of Jiangxi, and opened its first Baiguoyuan store in Shenzhen in 2002. As of May 2, Baiguoyuan's offline stores include 5,351 stores in more than 130 cities in 22 provinces and cities in China, of which 5,336 are franchised stores and 15 are self-operated stores.

China's fruit retail is very scattered, with channels throughout the wholesale market, modern supermarkets, fruit chains, e-commerce and so on. According to Frost & Sullivan data quoted in the prospectus, the retail sales of Baiguoyuan fruit in 2021 ranked first among all fruit franchise retail enterprises in China, and the scale was 2.8 times that of the second place.

Image courtesy of: Baiguoyuan Prospectus

The prospectus data also shows that in the breakdown of revenue sources, in 2021, the sales of fruits and other products of Baiguoyuan will be 9.992 billion yuan in 2021, accounting for 97.1%; the royalties and franchise income will be 160 million yuan, accounting for 1.6%; the membership fee income will be 77.67 million yuan, accounting for 0.8%; and other income will be about 59.66 million yuan, accounting for 0.5%.

In addition, in 2021, Baiguoyuan's revenue from various channels accounted for 81.3%; self-operated stores accounted for 0.4%; regional agents accounted for 9.3%; direct sales accounted for 5.7%; and online channels accounted for 3.2%.

It can be seen that the rapid growth of Baiguoyuan is inseparable from the way of joining the chain.

In the early years of the establishment of Baiguoyuan, franchise chains in the Chinese market just emerged, Baiguoyuan also through the way of joining in 2008 to develop more than 100 stores, but the loose management model can not grasp the quality control of franchised stores, resulting in store standardization, customer experience varies from store to store.

In the following 3 years, Yu Huiyong successively took back the franchise store in the form of equity participation and encouraged internal employees to join Baiguoyuan, which has been existing within Baiguoyuan. Judging from the development context of Baiguoyuan, its attitude towards joining has been repeated, but the degree of openness has changed from loose to strict.

By 2011, the 10th anniversary of the establishment of Baiguoyuan, in addition to the semi-direct operation model with incentive nature explored by Baiguoyuan, Yu Huiyong also began to establish a fruit standard system and cultivate key talents, reaching 300 Baiguoyuan stores in 2012. According to the figures on the official website of Baiguoyuan, the number of stores exceeded 1,000 in 2015 and reached 3,000 in May 2018. In September 2019, it exceeded 4,000.

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In order to develop franchise, Baiguoyuan previously recruited dozens of people from the Japanese convenience store company 7-Eleven and designed two AB franchise programs for it.

According to the ab two franchise schemes given by the WeChat public account of Baiguoyuan, opening a franchise store needs to prepare 300,000-360,000 yuan and 21-27 million yuan respectively, taking the A model with higher participation as an example, the cost covers 30,000 yuan, the site selection evaluation fee is 15,000 yuan, the decoration is 120,000 yuan, the engineering equipment and information equipment are 90,000, the sixth generation standard store deposit is 10,000 yuan, and the commodity advance payment is 30,000 yuan.

A Baiguoyuan franchise worker said that The Baiguoyuan store in Beijing can reach an average sales volume of 9,000 yuan per day, of which more than half of the contribution comes from A-grade fruits, and its gross profit is usually 20%-30%, and some categories can even reach 50%.

According to the prospectus, Baiguoyuan strategically participates in the upstream planting end and proposes a quality management plan covering the whole production cycle of the fruit, with the purpose of establishing a standardized network of high-quality suppliers, and finally distributing the fruit to retail stores or online sales through hierarchical pricing. Sales of signature grade and Grade A fruits account for about 70% of the total retail sales of Baiguoyuan stores in 2021.

In addition to the stores posted to the community, Baiguoyuan has developed online business through APPS, mini programs and other e-commerce platforms, and by 2021, the total number of orders in Baiguoyuan will exceed 290 million, of which orders from online channels account for about 23% and the number of online monthly active members will exceed 7 million.

Baiguoyuan continues to be optimistic about the future of fresh fruit. Quoting data from consultancy Frost & Sullivan in the prospectus, the market size of China's fruit retail market has increased from 827.3 billion yuan in 2016 to 1,229 billion yuan in 2021, with a compound annual growth rate of about 8.2%. The market size of China's fruit retail market is expected to grow at a CAGR of 7.6% from 2021 to 2026.

Before the formal submission of the prospectus, Baiguoyuan had obtained several rounds of financing. In 2015, Baiguoyuan obtained a total of 400 million yuan of A round financing from Tiantu Capital, GF Xinde and Qianhai Huxing, and in December of the same year, it obtained A+ round financing. In 2017, it obtained strategic financing from CICC Qianhai Development Fund and China Merchants Capital. In January 2018, it obtained a Series B financing of 1.5 billion yuan; in July of the same year, it obtained equity financing from CICC Qizhi Investment, as well as strategic financing from the Free Trade Zone Fund, Ateles Capital and CITIC Agricultural Industry Fund; in November of the same year, Baiguoyuan completed equity financing, and the investor was Jin Yafu Investment.

Prior to the formal submission of the prospectus to the Hong Kong Stock Exchange, in February 2021, there was news that Baiguoyuan planned to list on the Growth Enterprise Market of the Shenzhen Stock Exchange.