Nanduwan Finance and Social News reporter Chen Yingshan "chain enterprises to make the scale bigger, must be inseparable from joining, the charm of joining lies in the integration of social resources to achieve from zero to one to unlimited chain effect", Baiguoyuan founder Yu Huiyong once said to Nandu. Now, after many years, Yu Huiyong, who once proposed the "Ten Thousand Stores Plan", has once again set his sights on Hong Kong stocks.
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. As the largest fruit chain retailer in China, Baiguoyuan has laid out more than 5,000 offline stores in China, and since its establishment, the company has also won the popularity of well-known institutions such as Tiantu Investment, CICC Capital, Shenzhen Venture Capital, CITIC, Source Code Capital, cornerstone capital and so on.
In the prospectus, Baiguoyuan's revenue in 2021 exceeded 10 billion yuan for the first time. Of the 10.289 billion yuan of revenue, more than 80% of the revenue comes from franchise channels. In 2021, the revenue of the remaining channels accounted for 0.4% of the total revenue, the regional agents accounted for 9.3%, the direct sales accounted for 5.7%, and the online channels accounted for 3.2%.
On April 29, just three days before Baiguoyuan submitted its application, Hong JiuGuo, who occupied a seat in the Chinese fruit circle known as "South Baiguo, Beixianfeng and Xihong Jiu", also submitted a prospectus to the Hong Kong Stock Exchange again.
From "opening 10,000 stores in 2020" to more than 5,000 offline stores today, Yu Huiyong, a Jiangxi couple in Shenzhen, started a business and personally brought out the "fruit king", can he successfully win the title of "the first share of fruit retail"? With the same income generated by joining, why is it difficult for the fruit business to make money?
Baiguoyuan offline store
Relying on joining to run out of the country's largest "fruit king"
Will it touch the ceiling of growth and profitability?
In the three-legged fruit circle, whether it is a hundred fruit orchards, Hongjiu fruits or fresh fruits, it has become a consensus to join the horse racing. But what does it mean to be highly dependent on joining? When the scale reaches a certain amount, can the growth rate and profitability pry open a new increment?
According to the prospectus, 8.1 billion of Baiguoyuan's revenue in 2021 will be contributed by franchise stores. In the planning of founder Yu Huiyong, the scale of the enterprise must be inseparable from joining, especially in the relatively high-loss and heavily invested industry of fruit.
"Joining the sixth store from the very beginning we are trying, the direction of joining has not changed, but the mode of joining will vary widely." Chain enterprise development must be to join, chain must be a platform company, we now look at the global chain, as long as it is big, it must be franchised. If you don't have to join, it's not called a chain, it's just a small chain. In past interviews with Nandu, Yu Huiyong affirmed the benefits of the franchise model to the development of enterprises and even the industry.
Compared with its peers, Baiguoyuan has the largest revenue scale, with a revenue of nearly 10.3 billion yuan in 2021, ranking first among all fruit franchise retail enterprises in China, and the scale is 2.8 times that of the second place. However, unlike the large scale of the opponent, in terms of growth rate and profitability, Baiguoyuan is not as good as its peers.
Prospectus prompts the size of peer rivals
Compared with the Hongjiu fruit products that recently updated the prospectus, the revenue of Baiguoyuan will not rise but decline in 2020. Removing the impact of the so-called severe blow of the epidemic, the revenue growth rate of Baiguoyuan in 2021 will increase by 16.2% year-on-year in 2020 and 14.6% compared with the growth rate in 2019. In this data, in the prospectus of Hongjiu Fruit, the revenue growth rate of this competitor of Baiguoyuan increased by 177.4% and 78.2% year-on-year in 2020 and 2021, respectively.
After all, the scale of the base is different, and the speed of growth is inevitably different in difficulty. However, hundreds of orchards in profitability also do not have an advantage. In 2019, the net profit of Baiguoyuan was 250 million, which was equivalent to 1.5 times the net profit of Hongjiu Fruit in the same year. By 2021, Hongjiu Fruit exceeded Baiguoyuan's 226 million yuan with a net profit of 290 million.
Although the net interest rate of both is less than 3%, the gross profit margin between the two still shows a large difference. In 2021, the gross profit margin of Baiguoyuan was 8.6%, and the net profit margin of Hongjiu Fruit was 15.7%, a difference of nearly double.
Deeply cultivating the fresh supply chain for more than ten years, industry insider Cheng Jia said that the fruit industry, like the entire fresh industry, is a low-margin business. Relying on joining or burning money to play the scale, and then relying on the scale of the increase to reduce costs and increase efficiency, has become an open thing in the circle. However, as the scale reaches a certain level, the scale growth rate slows down, and it will inevitably usher in a decline in revenue, and the ceiling of profitability may need to be found in another way.
In fact, the efficiency of stores has declined. In 2021, the single-day turnover of Baiguoyuan single store was 5263 yuan, and in 2019, this data was 8219 yuan.
Prospectus on the franchise channel revenue generation statement
Can new retail open the door?
High loss and low gross profit are still difficult to avoid the pain of the fruit business
Can online be a new means of solving problems? In past interviews, Yu Huiyong, the founder of Baiguoyuan, once expressed high hopes for new retail to Nandu. "Online and offline integration is the general direction of the future, and we were paying attention to this area as early as before Ali proposed new retail." However, Baiguoyuan's revenue channels are still highly dependent on offline franchises. In 2021, online channel revenue accounted for only 3.2% of total revenue.
At present, Baiguoyuan has been doing online channels for 6 years, mainly including APP, Mini Program, mainstream e-commerce platform, takeaway platform, etc. Because the increase in online channels does not increase profits, and even has to lose money to do construction, Baiguoyuan currently sinks the franchise model more. Developing into second- and third-tier cities has become the practice of Baiguoyuan.
From 2019 to 2021, the gross profit of Baiguoyuan's online channels was 919,000 yuan, -13.635 million yuan and -1.054 million yuan, and the gross profit margin was 2.8%, -4.9% and -0.3% respectively.
In other words, the proportion of online channels and fresh food in Baiguoyuan is extremely low, and only by continuously opening franchised stores can we ensure stable revenue growth. In addition to targeting fruits, Baiguoyuan once set its sights on fruits, vegetables, eggs and milk, and once developed bottled fruit juice retail products, but until now, selling fruits is still the income pillar of Baiguoyuan.
In the eyes of consumers, the fruits of Baiguoyuan are inseparable from a "expensive" word. However, even so, the hundred orchards that sell high-end fruits have not made much money. According to the prospectus, the revenue of Baiguoyuan from 2019 to 2021 was 8.98 billion yuan, 8.85 billion yuan and 10.29 billion yuan respectively, corresponding to net profits of 248 million, 0.45 billion and 226 million.
According to Frost & Sullivan, fruit retail on the mainland is highly fragmented, with the top five in the industry accounting for only 3.6% of the market. Consumers do not have to go to fruit stores to buy fruit, as well as farmers' markets, supermarkets and convenience stores, e-commerce channels and other choices.
In Cheng Jia's view, with the rise of e-commerce channels, this will have a revenue impact on the "fruit kings" who have a single income channel. Another fundamental pain point in the industry itself is high loss. "Due to the dispersion of the fruit market, the supply chain will also be lengthened according to different links, and each link will bring higher losses, compared to fresh high-frequency consumption, fruit will be relatively backward; and compared with the online model of the sellers who make a fortune, the fruit kings who rely on offline circle traffic are relatively inferior in profit generation."
In 2002, the first store was opened in Shenzhen, and Yu Huiyong and his wife Xu Yanlin, a Jiangxi couple, brought Baiguoyuan from Shenzhen to the whole country step by step. With long hair tied up, thin feet and wide eyes, and Buddhist books in hand, Yu Huiyong, who was interviewed by Nandu at the time, was still calm when talking about the huge amount of financing thrown by the capital, "As agriculture, fruit itself is a business that deals with land and slows down."
Images are from the web
Today, the cash flow on the books remains positive, but Baiguoyuan has rushed to the listing many times in two years. Since its establishment, Baiguoyuan has won several rounds of financing. Tiantu Investment, CICC Capital, Shenzhen Venture Capital, CITIC, Source Code Capital, Cornerstone Capital and other well-known institutions stand behind them, gathering more than 20 VCs/PE. Among them, Tiantu Investment is the largest institutional investor in Baiguoyuan.
Now, peer rivals have also submitted hong Kong stock listing applications again. This time, can Baiguoyuan successfully pull out the "first share of fruit retail"? Can the "fruit king" who has won high financing in the primary market hand over a satisfactory answer to the secondary market?
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