Spoiled honeydew melon is exposed to make fruit cuts! Baiguoyuan IPO suffered a "blow to the head"

Produced by Radar Finance and | Zhang Kaijing, editor| deep sea

Spoiled honeydew melons are cut into fruit, small pineapples act as large pineapples, and the requirements of the headquarters to prohibit the sale of overnight fruits are ignored... On May 6, Baiguoyuan, a domestic fruit retail leader who had just submitted a prospectus to the Hong Kong Stock Exchange, was exposed by the Insider Picket Bureau of the B station.

The next day, Baiguoyuan issued an apology statement on the official Weibo, confirming that the two stores in Chengdu involved did have problems related to illegal grading of fruits, selling overnight fruit cut fruits, and deliberately avoiding headquarters inspections, and also launched five rectification measures based on this.

However, netizens do not seem to buy this. "A few days ago, I bought the fruit of the worm, ignored the various dialects of the clerk in the store, and the complaints were not accepted and followed up", "Selling so expensive is still uneasy and kind", "Ordering your takeaway 10 times has 8 times not satisfied"... In addition to the complaints on the social platform, the cumulative number of complaints in The Black Cat Complaint Platform has reached 1282 times.

It is worth mentioning that while the quality and price of Baiguoyuan are frequently criticized, its own money-making effect is not obvious. According to the prospectus, the company's revenue in 2021 has exceeded 10 billion, but the corresponding net profit is only 226 million, and its net profit margin has remained between 2% and 3% in the past three years.

"Fruit is not a good business." Some industry insiders sighed.

A number of violations were found to be secretly visited, and Baiguoyuan quickly apologized

Radar Finance learned that even the same variety of fruit, sometimes because of the different size of the price is different, and according to the secret visit video, the staff of a Baiguoyuan store not only marked all the small pineapple labels into more expensive large pineapple labels, but also said: "It doesn't matter, anyway, people have money." ”

In addition, Baiguoyuan has strict rules for the storage of fruits, that is, fruits with high freshness requirements cannot be sold overnight, but the clerks of the two stores under investigation have knowingly committed crimes.

The clerk of one of the stores said: "If you are caught selling overnight, you will be fined, the first time you will be fined five hundred, the second time you will be fined a thousand, like the weather is cold now, I will immediately hide the melon underneath, the next time you go to training, you will be asked if the store has sold overnight melons and say no." The clerk of another store reacted to a five-hundred-year fine when caught: "Yes, I didn't get caught." ”

For the beer pear that has been placed for a month and a half, the clerk said that the problem is not his own business, who sells it to count who, "You see other stores have been put longer than us, some stores have been put for two or three months." We've been a month and a half. "The apples that have become moldy, the clerk also said that they don't have to care about it, and they can continue to sell."

In addition, the clerks will also leave the melon that has been fermented naturally for a long time, and put it on the table to spread the flavor and sell it as a fruit cut.

A series of insider revelations have plunged Baiguoyuan, which just submitted a prospectus to the Hong Kong Stock Exchange on May 2, into a crisis of public opinion. About 7 hours after the video of the investigation was issued, Baiguoyuan issued an apology statement, saying that the two stores involved in the investigation were located in Chengdu and Wuhan, which had been suspended for rectification, and had a large record of the supervision of the precinct. Since then, supervision, supervision and guidance for mystery customers to check the freshness of fruits in stores from time to time will also be strengthened.

In fact, consumer complaints about the quality problems of Baiguoyuan have occurred frequently. For example, in the black cat complaint platform, consumers said that they bought a durian in Baiguoyuan on April 29 and it was broken when it was opened; on April 23, some consumers bought several moldy strawberries.

Radar Finance searched for Baiguoyuan in the public review platform, and its Beijing store scores were mostly below 4 points, while consumers gave the reason for the bad reviews, focusing on poor service, unfree fruit, and expensive prices.

"I should be a loyal customer of Baiguoyuan, when I was not pregnant, I was buying the goods of Baiguoyuan, and now the second child is going to come out, and during this period, I have been eating fruits and buying Baiguoyuan, but it can be clearly felt that the production of Baiguoyuan is getting worse and worse." Some consumers complained on social platforms.

Founder Yu Huiyong attaches the most importance to the word "trust"

Baiguoyuan, who was exposed to quality problems, founder Yu Huiyong attached the most importance to the word "trust".

"Like I just said, Baiguoyuan actually did not have a very strict system along the way, and I can survive the nine deaths, and my deepest understanding is only two words: trust." At the end of 2021, Yu Huiyong mentioned it in a speech at the Zhenghe Island New Year's Family Banquet held in Haikou.

In the view of this "fruit king", "trust" is the secret of his annual sales of more than 10 billion yuan from 7 consecutive years of losses.

In the 1990s, after graduating from Jiangxi Agricultural University, Yu Huiyong was assigned to the Jiangxi Academy of Agricultural Sciences, and he came from a class to revitalize this on the verge of closure in only one year, and thus earned the first bucket of gold in his life. However, Yu Huiyong, who carried 200,000 yuan to go south to Shenzhen for the first time, continued to fold in the stock market and transportation industry, and once lost all his family money.

Yu Huiyong's dream did not end there. A year later, he came to Shenzhen again from his hometown and entered a fresh food company, all the way from a grassroots salesman to a sales manager, and it was at this time that he discovered the hidden business opportunities of fruit chains.

In 2002, the first Baiguoyuan store opened in Shenzhen, with a turnover of up to 19,000 yuan on the same day. But Yu Huiyong soon found that the fruit direct sales store not only did not have a business path to refer to, but also did not make money.

Yu Huiyong believes that the pioneering franchise system is an effective way to solve the profit dilemma, because only if the boss is responsible for his own profit and loss, there will be no situation where the money does not know where to lose. However, the franchise system also has new troubles, because each shopkeeper has to carefully accept the goods, and problems must be solved, and the company's transportation efficiency is greatly reduced. If a large number of transport vehicles are purchased according to the traditional practice, the cost of freight will skyrocket.

In this context, Yu Huiyong first proposed the concept that "trust can reduce costs". Specifically, after the delivery man throws the order to the store, he can go directly to the next one, leave the goods to the store for his own inspection, and recognize the scales or bad fruits. This practice of fully trusting franchise stores has also achieved a rapid increase in the number of Baiguoyuan stores.

Since then, Yu Huiyong has regarded trust as an important corporate culture: "Without the culture of trust, Baiguoyuan would not be where it is today, and the culture of trust and trust extended has helped Baiguoyuan overcome many difficulties." ”

For example, in the field of fresh food, the problem of corruption in procurement is no secret. It is also because of the seriousness of corruption that many large enterprises in the industry will implement a three-year rotation system. But Yu Huiyong said that too frequent rotation will affect everyone's perception of procurement staff, and it is difficult to accumulate professionalism.

Therefore, Baiguoyuan implemented a lifelong procurement system in this regard. According to Yu Huiyong, "It is precisely because of being trusted and respected that the purchasing staff of Baiguoyuan is highly loyal. In the case of such a hot fresh food industry, many Internet companies offer three or four times the salary, and they can't dig up our procurement. ”

In addition to the company itself, the most important strategy of "trust" for the consumers of Baiguoyuan is the three no returns that have been implemented since 2009 - that is, no physical goods, no receipts, and no reason to return. Later, with the development of online stores, sanwu returns have developed into online instant refunds.

This strategy, which was initially considered to be "brain water", unexpectedly received good results. Yu Huiyong said that the return rate was at the earliest about 1%, and after the implementation of the three no returns, the current return rate is only 0.6%. According to Frost & Sullivan, the overall repurchase rate of Baiguoyuan members in 2021 is 49%, ranking first among fruit franchise retail enterprises.

It is difficult to solve the dilemma of low net profit

However, trust alone will not solve all the problems in the development of the company.

On the one hand, the high difficulty of management of the original franchise model is already the consensus of the industry, and in the case of the rapid growth of the number of stores, the difficulty of management will continue to increase. The two stores investigated in Chengdu and Wuhan are examples.

On the other hand, even with a foundation of trust, it is difficult for Baiguoyuan to shake the long-standing "difficult to make a profit" trait in the fruit industry itself.

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; in the past three years, the revenue contributed by the sales of fruits and other products (including fruits, dried fruits and other large fresh fruits) to Baiguoyuan accounted for 97.5%, 97.6% and 97.1% of the total revenue, respectively.

However, in the same period, the net profit of Baiguoyuan was only 248 million yuan, 0.46 billion yuan and 226 million yuan, and the net profit margin was always maintained between 2% and 3%.

"The high retail loss rate of fruit and the upstream involve agricultural products mean that the gross profit margin and the net profit margin after compliance will not be very high." Some investors in the consumer sector analyzed in an interview.

In addition, the low net profit of Baiguoyuan is also related to the difficulty of expanding online channels. The data shows that from 2019 to 2021, the number of online channel orders in Baiguoyuan accounted for 19%, 22% and 23% of the total order number, respectively, increasing year by year, but the gross profit margin of the company's sales of fruits and other foods in online channels was 2.8%, -4.9% and -0.3%, respectively.

In this regard, Baiguoyuan explained that the lower gross profit margin of online channels is mainly due to the response to intensified competition and the change of online strategy with the launch of "Panda Fresh". Since 2019, Baiguoyuan has shifted from selling high-end fresh food only to paying members to selling more mass-market fresh and other products to all customers, and the company has begun to open its own online stores in Tmall and JD.com in B2C mode.

Specifically, the growth of online sales has caused the company's delivery costs and packaging costs to rise, and the gross profit margin of fresh and other categories expanded by Baiguoyuan on the basis of the original fruit products is relatively low. Coupled with the fierce online competition, in addition to the traditional e-commerce giants, the front-end warehouse model such as Dingdong buying vegetables and the community group buying model such as Duoduo buying vegetables will squeeze Baiguoyuan, which makes the company's expectations of establishing new brands and expanding online channels difficult.

After years of deep cultivation in the fruit market, Baiguoyuan is well aware of the difficulty of this business. The company has also taken a number of measures to solve the difficulties encountered at present.

The first is to lay out the whole industrial chain such as planting, logistics and transportation, freshness and quality control, and retail terminals in the production area through investment and incubation. At present, Baiguoyuan has established strategic cooperative relations with dozens of planting bases and agricultural technology companies.

With this layout, Baiguoyuan was able to establish a standardized network of high-quality suppliers and grade the fruits sold. For example, in the store sales of Baiguoyuan in 2021, the sales of signature and A-grade fruits accounted for about 70%. According to insiders, more than half of Baiguoyuan's revenue comes from A-grade fruits, and its gross profit is usually 20%-30%, and some categories can even reach 50%. This is also in line with the impression that the price of Baiguoyuan is high in the consumer's impression.

The second is to continuously expand the scale of operation and use the scale effect to make up for the lack of profits of a single store. In 2015, Baiguoyuan once completed the largest merger and acquisition in the history of the industry through the merger and acquisition of Guoduomei. Today, the number of Baiguoyuan stores has exceeded 5300. Among them, in 2021, 81% of the company's revenue will be contributed by franchised stores.

But expansion brings with it the problem of difficult to control.

In addition, franchisees will encounter other problems in expansion. For example, the domestic fruit retail market has the characteristics of high dispersion and rapid changes in consumer demand. According to the total retail sales of fruits in 2021, Baiguoyuan only accounts for 1.0% of the market share, and the top five participants account for only 3.6% of the total. The highly fragmented market form will weaken the scale effect and the cost cannot be effectively diluted.

Another example is that after the number of stores reaches a certain scale, the first- and second-tier markets gradually become saturated, and sink to third- and fourth-tier cities to continue to expand, and the profitability of single stores will be further tested. From 2019 to 2021, the number of stores in Baiguoyuan first-tier cities accounted for 36.8%, 35.4% and 33.8% of the total number of stores, decreasing year by year, while the average revenue contributed by each store also fell from 2.0841 million yuan to 1.9603 million yuan.

In the past three years, more and more franchisees have chosen to "retreat from the rapids". From 2019 to 2021, Baiguoyuan closed 166, 249 and 379 stores respectively, accounting for 17.86%, 35.8% and 43.8% of the number of new stores, respectively. That is to say, for every 100 new stores opened in Baiguoyuan in the past three years, about 18, 36 and 44 franchisees chose to close their stores.

Some insiders believe that at present, the track where Baiguoyuan is located, the imagination space is not very large.

Note: This article is the original of Radar Finance (ID: leidacj). Unauthorized reproduction is prohibited.