Baiguoyuan fell on the eve of listing: a year's income exceeded 10 billion, and netizens rebuked "so expensive and sell rotten fruits"

Baiguoyuan, a high-end fruit chain that has just submitted its prospectus, fell on the eve of its listing.

On May 7, Baiguoyuan, which wants to impact the "first share of fruit", was on the hot search for the sale of spoiled fruits. There was a video of a covert interview. On May 6, a blogger in the process of secretly visiting the Baiguoyuan store found that the store staff cut the spoiled fruit and sold moldy fruit. In the video, the beer pear that has been placed for a month and a half still appears on the shelf, and the clerk said that other stores have been on hold for a long time, and some places even sell fruits that have been placed for two or three months.

Once the video was released, it quickly caused discussion among netizens, and many people focused on "fruit cutting", believing that "fruit cutting is a pit", "buy less fruit cutting, unless it is cut in person", and more people will target the hundred fruit orchards.

Baiguoyuan, which could not withstand the pressure of public opinion, appeared in the early morning of May 7 and issued an apology statement on Weibo, saying that the stores involved had problems related to illegal grading of fruits, selling overnight fruits, and deliberately avoiding inspection by the headquarters. Baiguoyuan also said that in order to prevent similar behavior from happening again, it has suspended business to rectify the stores involved, suspended the employees involved, and inspected stores nationwide.

However, for the response of Baiguoyuan, netizens did not buy it. "Poor quality, high price" has become the fuse that ignites consumer anger. In the comment area of the apology statement, there have been voices of boycotting Baiguoyuan.

Just a week ago, Baiguoyuan submitted a prospectus to the Hong Kong Stock Exchange. In less than two years, three shocks were listed, which shows the desire of Baiguoyuan for capital "ammunition". Judging from the data released in the prospectus, the revenue of Baiguoyuan has exceeded 10 billion yuan in 2021, but its gross profit margin and net profit margin have been at a low level.

In the fruit retail industry of "leaning over and picking up steel hammers", the listing road of "fruit first shares" does not look very good.

Selling so expensive and selling rotten fruit

One day in March, Chen Xin bought a coconut, a box of freshly cut unicorn melons, and an imported banana in Baiguoyuan, but she vomited violently that night when the three fruits fell into her stomach.

Chen Xin said that the taste of these fruits was not obviously abnormal, and there was no mildew on the appearance, but after eating, he vomited very badly, "almost suffocated." She speculates that it may be because the freshly cut watermelon has been stored for too long or not too clean.

Compared with vegetable farms and fruit stalls, the price of Baiguoyuan Fruit Shop is more expensive, so Chen Xin does not often consume in Baiguoyuan. Occasionally "try to facilitate" to order takeaway, but "spent money to suffer, when the wronged head", Chen Xin sighed, "chain fruit stores, will give people the impression of safety, but the truth may be the opposite, whether the fruit is safe in the end, we ordinary consumers do not know at all." ”

Wang Qi and her boyfriend are regular customers of Baiguoyuan. At the end of April, Wang Qi's boyfriend bought some rake citrus in Baiguoyuan, which looked intact on the outside but were full of spoiled mold when opened. After eating, Wang Qi had a stomach bloating and nausea reaction, and the boyfriend immediately responded to Baiguoyuan, but the other party said that only if the hospital proved that it was a problem caused by bad fruit, it would compensate.

After many complaints, Baiguoyuan finally promised to compensate Wang Qi for 100 yuan and return the principal, but as of May 7, they still had not received a refund. Wang Qi said: "The problem of fruit mold is not common, but the attitude and plan of Baiguoyuan to deal with the problem are very unsatisfactory, so that I never want to go to his house to buy it again." ”

(Source: Courtesy of Wang Qi)

Baiguoyuan positioning high-end fruit chain, before consumers would rather spend more money to buy, the purpose is to save worry, did not expect that the "bad fruit into fruit cutting" of the "industry shady" is also staged on it.

"Willing to spend a high premium to buy fruit, but also to a peace of mind, if this can not be done, why not go to the small fruit stalls?" At least save money. A number of consumers told the Weekly Magazine of Finance and Economics.

Baiguoyuan focuses on high-end fruits, and "expensive" has always been its most distinctive label. Searching baiguoyuan in real time on the Weibo platform, you can see the complaints of "an apple for 23.5 yuan" and "a watermelon for 90 yuan". Huang Yuanyuan, from Shanghai, said she spent 88 yuan on 3 pounds of lychees in Baiguoyuan, which are "small, sour, and have bad fruit." The same 3 pounds of lychee only need 59.7 yuan per day.

Searching for apples in the Baiguoyuan APP, high-end fruits such as "Leqi apples", "imported green apples", and "imported afterburners" appeared, and there was no trace of local apples such as Luochuan Fuji and Yantai Fuji. Among them, 5 Leqi apples are priced at 58.9 yuan, an average of nearly 12 yuan, while Luochuan Fuji is only 9.9 yuan in the daily excellent fresh two.

Watermelon, one of the most popular fruits of summer, is also sold at high prices. In the Baiguoyuan APP, the A-grade Kirin melon of about 3kg is priced at 64.9 yuan, while the kirin melon of the same weight only sells for 59.9 yuan and 55.9 yuan in the daily excellent fresh and Dingdong vegetables. Thai coconut green in Baiguoyuan, Daily Excellent Fresh and Dingdong to buy vegetables are priced at 22 yuan, 19.9 yuan and 12.9 yuan respectively.

(Source: Baiguoyuan, Daily Excellent Fresh, Dingdong Buy Vegetables)

Nowadays, the hot selling lychee, Baiguoyuan 500g is priced at 25.9 yuan, Dingdong buys vegetables 250g and sells 9.9 yuan, and multi-point platform 450g sells for 19.9 yuan, compared to Baiguoyuan is the most expensive.

The price of Baiguoyuan fruit is much higher than that of similar enterprises in the market, and it is much more expensive than that of vegetable markets and small vendors, but now it has been exposed that the quality is not good, which instantly ignites public anger. Consumers have said, "Baiguoyuan fruit is expensive and poor", "selling so expensive and selling rotten fruit, never buy it again" "selling so expensive and uneasy and kind, don't get used to this kind of business".

There are also netizens from all over the world who have appeared to say that more than the above-mentioned stores have fruit spoilage. A Jiangxi netizen said, "Nanchang also has many (similar stores), rotten fruits, especially sour fruits to take out fruit cut." "Expensive can be, but there must be quality assurance, order 10 times takeaway 8 times not satisfied, not angry enough, has long been not to buy fruit from the hundred orchards."

In fact, the quality problems of Baiguoyuan have been emerging in an endless stream, and on the black cat complaint platform, this large chain enterprise that focuses on the high-end market and is inspired to build a "national fruit store" has accumulated more than 1,200 complaints. Among them, "buying bad results without refunding" is a common cause of complaints. One complainant said he had bought white cream on guiyuan and other fruits, and that he wanted to replace it with another box but was refused. "(Buying) the fruits of Baiguoyuan is originally aimed at quality, so this attitude and way of handling should not appear in a chain fruit store, right?"

"Lack of weight and short of two pounds" is another major reason for complaint. Some consumers complained: "I ordered the takeaway fruit cut of Baiguoyuan several times, and each time the impression was not good, the portion was touching, and the price was not marked." The last time I completely let me no longer call their fruit cut, 200 grams is about the same as 500 grams (price), the most common local black and green bananas have to be marked with A-grade large bananas. ”

Regarding the problems reflected by consumers, Caijing Tianxia Weekly called the headquarters of Baiguoyuan, but as of press time, there was no response.

Franchise stores account for 90%, losing the store manager's burden

In an apology statement for the video of the secret visit, Baiguoyuan threw the pot to the franchisee, saying that the stores involved in the investigation were jianhe road stores in Chengdu Chenghua District and Jianghan North Road stores in Wuhan District, and there were problems related to illegal grading of fruits, selling overnight fruits, and deliberately avoiding headquarters inspections. For the stores involved, it said that it had suspended business for rectification in accordance with the requirements of the franchise store management measures, and ordered the franchisees to suspend and re-educate the employees of the stores involved.

(Source: Baiguoyuan Weibo)

Industry insiders analyzed that the franchise store is not a store directly opened by the brand, but the franchisee pays a certain brand franchise fee to open the store, this type of store is specifically a loss is to earn and have nothing to do with the brand, the cost of opening a store is borne by the franchisee himself, in the past development, there are many chain stores that have problems are poured on the franchise, although this model can help the rapid development of enterprises, but also bring uncontrollable problems.

According to the prospectus, Baiguoyuan has a total of 5351 stores nationwide, of which only 15 are self-operated stores, and about 99.72% of them are franchised stores. And among the franchised stores, 4382 are self-managed, and only 954 are entrusted management.

Baiguoyuan adopts the franchise model for development, which is not unrelated to the goal of 10,000 stores set by Yu Huiyong, the founder and chairman of Baiguoyuan. In 2015, Yu Huiyong put forward the goal of "opening 10,000 stores in 2020 and reaching annual sales of 40 billion yuan". To complete this goal of opening a store by yourself is tantamount to fantasy, and finally, in 2018, Baiguoyuan officially opened its franchise business to the public. For the past 16 years, Baiguoyuan has been using an internal franchise model to support internal employees to start their own businesses.

Different from the joining of other enterprises, the franchise model of Baiguoyuan has certain differences, using the "platform + partner" model, the company does the platform, the employees do makers, and the store manager is the main body of investment and is responsible for store operation. Under the store manager partnership system, the store manager invests 80% of the shares, mainly responsible for the operation of the store; the precinct manager invests and accounts for 17% of the shares, mainly responsible for the management of the precinct store; the regional franchisee invests and accounts for 3% of the share, mainly responsible for the location of the store.

Under this model, Baiguoyuan does not contribute capital, does not occupy shares, and does not charge a franchise fee, but collects 30% of the store profit as income, and 70% of the store profit is distributed to the store manager, the precinct manager and the regional franchisee according to the corresponding equity ratio. The intention is to combine the benefits of the store manager with the cultivation of talents, requiring each store to output a new store manager (partner) candidate for the company every year. This training model similar to Haidilao's "mentor-apprentice" system can complete the needs of enterprises to expand stores rapidly in the period of rapid development.

Although the upfront cost of the franchise manager seems to be low, in the actual operation process, some signature strategies also spread the loss cost to the store manager. According to the refund data report released for the first time in 2019 by Baiguoyuan, the number of "three no returns" orders and the amount involved in the year accounted for about 0.5%, and this part of the money was borne by Baiguoyuan and franchised stores each by 50%, while the single-day turnover of Baiguoyuan single store in that year was only 8219 yuan, and the total profit margin was less than 5%.

On the other hand, the fruit itself is a high-loss, low-gross profit margin commodity, "Nissin" model allows Baiguoyuan to earn face, but also transfers the loss cost to the franchisee.

Compared with traditional supermarkets, Baiguoyuan retail store area is small, the unit area of labor and rent is higher, and the category is single, which requires high ping efficiency and gross profit margin to support store profitability.

Under the "Nissin" model, one way to improve the gross profit margin is to load a more expensive product: fruit cut. In order to reduce costs, some stores have taken care to cut rotten fruits and expired fruits and sell them, so that consumers can't see whether they are good or bad, and also reduce losses and increase prices.

"Finance and Economics" Weekly inquiry found that on the Baiguoyuan platform, 200g of freshly cut Golden Beauty Melon is priced at 13.5 yuan, while a 1kg of Golden Beauty Melon is priced at 36.5 yuan, that is, 200g is only 7.3 yuan, which is almost twice as expensive as the cut. Chen Xin said that the 200g freshly cut watermelon she bought cost 10.9 yuan, while if she bought the whole watermelon, the 200g was only about 4 yuan, which was nearly twice as expensive.

"I never buy fruit cuts, expensive and unsafe, is it not good to buy fresh fruit directly at that price?" Post-95 consumer Li Min said.

The road to new retail is bumpy

Founded in Shenzhen in 2001, the real rapid development is the last ten years, in the capital of 8 rounds of financing, Baiguoyuan began the expansion of the fruit empire: has been with Guo Duomei mergers and acquisitions, mergers and acquisitions of Nanjing Fresh Times, with the fresh e-commerce one-meter fresh strategic merger, the acquisition of fruit chain brand Green Leaf, with Chongqing fruit industry leading enterprise Chaoqi reached a strategic cooperative relationship, into Changzhou Jieji Fruit, and hunan fruit industry leader fruit friends reached strategic cooperation.

But the ambitions of the Hundred Orchards go far beyond fruit.

The prospectus shows that Baiguoyuan has expanded the market to a broader and expected faster growth of the big fresh food field. Since 2019, Baiguoyuan has expanded its distribution business to Dasheng through mobile apps, WeChat Mini Programs and online pre-orders, including vegetables, fresh meat and seafood products, grains and oils, dairy products and other products.

(Source: Baiguoyuan APP)

In 2019, despite the collapse of a number of fresh e-commerce platforms, 5 companies have been suspended or bankrupt in two months, Yu Huiyong still announced in a high-profile manner that he would develop Baiguoyuan in the direction of large fresh food, released Baiguoyuan Group's independent fresh platform "Baiguo Xinxiang", and also used Amazon as a benchmark to create a business empire that expanded from a single category to a full category.

In 2020, Baiguoyuan launched the community group buying platform "Panda Fresh" to get involved in community group buying; at the beginning of 2022, it funded the establishment of three zeros of vegetable planting brands, trying to develop into a multi-category digital fresh platform. Previously, Baiguoyuan also participated in the pre-A round of financing of the community group buying platform "Life in the Same City", but the company declared bankruptcy last year, becoming the first platform for the community group buying track to collapse.

While the vision is beautiful, the reality is harsh. In the field of fresh retail, Baiguoyuan faces many opponents.

In the past two years, Hema and Dingdong also have high-end fruit product lines, which not only have more commodity categories, but also have a higher frequency of consumption times, and the delivery price and starting price are lower than those of Baiguoyuan.

Li Minjia has 5 Baiguoyuan in the north fifth ring road of Beijing's Chaoyang District, within a radius of less than 3 kilometers, and the review score fluctuates from 3.6 to 4.4. At the same time, there are also three large supermarkets, including Carrefour, Hema Fresh and Yonghui Supermarket. Li Min said that he is accustomed to using the fresh platform to order fruits and vegetables, and when hoarding goods, he orders boxes of fruits in Pinduoduo, and occasionally wants to eat, so he chooses two at the fruit stall in front of his home. Gen Z consumers in first-tier cities like Li Min have a wider variety of new retail brands to choose from.

Under pressure, Baiguoyuan is also actively expanding the low-tier market outside the first-tier cities. According to media reports, Baiguoyuan's newly opened stores in 2021 account for 30% of third- and fourth-tier cities, and it is expected to increase to 40% in the next year, and fourth- and fifth-tier cities have become the development targets of Baiguoyuan.

However, in terms of revenue contribution, from 2019 to 2021, first-tier city stores accounted for 49%, 47.9% and 45.7% of total store revenue in the same period. This means that high-income consumers in first-tier cities are still the most important source of revenue for Baiguoyuan, and the attraction of "high-end fruits" for the sinking market is not so great.

In addition, the contribution of online channels to Baiguoyuan is not as high as imagined.

In 2017, when the IPO was first rumored, Yu Huiyong proposed the importance of Baiguoyuan embracing new retail: "In the future, the business of Baiguoyuan, the proportion of online and offline in three or seven 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." ”

In 2018, the Baiguoyuan Mini Program was launched for more than a year, claiming that sales accounted for about 15% of total online sales. Jiao Yue, founder of the native fresh e-commerce "One Meter Fresh" and current vice president of operations of Baiguoyuan Group, once revealed that in the short term, the online business of Baiguoyuan is expected to account for about 40% of the overall sales, and in the medium and long term, this proportion will be five or five. In 2019, the goal of its online business is to achieve retail sales to about 30%.

Despite its ambitions, Baiguoyuan's revenue from online channels has remained minimal in total revenue. According to the prospectus, Baiguoyuan launched the "Online Baiguoyuan" in 2008 and the mobile app "Baiguoyuan" in 2016, but the revenue of the "online channels and others" business in 2019, 2020 and 2021 was 0.33 billion yuan, 279 million yuan and 326 million yuan respectively, accounting for only 0.4%, 3.2% and 3.2% of the total revenue.

At present, the business model of Baiguoyuan is not only highly dependent on the sales of the fresh category of "fruit", but also highly dependent on offline channels.

Baiguoyuan is in urgent need of new ammunition

Baiguoyuan, which wants to sprint to the "first share of fruit", the road to listing is not smooth, and there are three sprint IPOs in less than two years.

(Source: Baiguoyuan Weibo)

Since entering the capital vision in 2015, the question of "when to go public" has hung on the head of Baiguoyuan. Feng Weidong, chief investment officer of Tiantu Investment, said publicly very early that the investment in Baiguoyuan is to help it expand outward and quickly occupy the market, and said that it is expected to help Baiguoyuan go public within 3 to 5 years.

Although there has always been the idea of going public, the listing process of Baiguoyuan has been very slow, and the news of the first listing did not come until 2020, when In March of that year, Baiguoyuan received an equity financing from Pioneer Investment, the amount of which was not disclosed. This is the only round of financing that Baiguoyuan has received since 2018. The following month, Baiguoyuan completed the shareholding system reform, and two months later submitted materials to the International Department of the China Securities Regulatory Commission to start the listing process in Hong Kong.

The first listing of Baiguoyuan was unfavorable, and after submitting the materials, Baiguoyuan failed to go public as planned. In June of the same year, the China Securities Regulatory Commission disclosed that Baiguoyuan officially submitted the relevant approval materials for overseas IPO and prepared to list on the US stock market, but this time it still failed to meet the expectations. In November of the same year, Baiguoyuan signed a listing counseling agreement with Minsheng Securities to be listed on the ChiNext board of the Shenzhen Stock Exchange.

Industry insiders believe that behind Baiguoyuan's transition to A shares, or have a certain relationship with the capital side. Under the registration system, the market financing environment is relatively relaxed, which promotes the listing of enterprises at this point in time and facilitates the exit of early investors. But the third time, it did not work out.

Baiguoyuan, which was eager to go public, did not have accurate news until May 2, this time Baiguoyuan transferred to the Hong Kong Stock Exchange and has submitted a prospectus, with Morgan Stanley as the sole sponsor.

However, as a business of "leaning over and picking up steel hammers", fruit retail originally had a high loss rate, coupled with the "Nissin" model of Baiguoyuan in order to maintain the "high-end" positioning, it was destined to be a category that was difficult to make money.

Judging from the prospectus, Baiguoyuan sells high-end fruits, although it can make money, but the profit is very small. From 2019 to 2021, the revenue was 8.98 billion yuan, 8.85 billion yuan and 10.29 billion yuan respectively, but the corresponding net profit was only 248 million yuan, 0.45 billion yuan and 226 million yuan, and the net profit margin was only 2% to 3%.

This is not a problem for the Baiguoyuan family, and at the same time, the net profit margin of Hongjiu Fruit, which is seizing the "first share of fruit", is almost the same as that of Baiguoyuan.

At present, the growth of Baiguoyuan's revenue and net profit is greatly dependent on the expansion of the number of stores. Of the 10 billion in revenue in 2021, 8.1 billion will be contributed by franchisees.

However, the number of Baiguoyuan stores has also fallen into a growth bottleneck in the past year. From the end of 2019 to the end of 2020, the number of baiguoyuan stores nationwide increased by 1,097. According to the prospectus, as of the last feasible date, the number of Baiguoyuan stores nationwide was 5351. This means that in the whole year of 2021 plus the four months of 2022, the net increase in the number of stores in Baiguoyuan is only 565.

It is worth noting that Baiguoyuan chose to go public in Hong Kong at this time, which is not a good time. Since the second half of last year, the Hong Kong stock market has continued to decline, and the market value of Internet companies and physical retail companies has fallen by more than half at a high point. Baiguoyuan is listed at this time, or there is also pressure to withdraw from early venture capital.

According to the prospectus, the price per share in the last equity transaction generated by Baiguoyuan in October 2021 is 8 yuan, corresponding to a total share capital of 1.5 billion yuan, and the latest valuation of Baiguoyuan is about 12 billion yuan, which means that the single store valuation of Baiguoyuan is 2.24 million yuan.

Compared with the fresh platforms such as Dingdong Grocery Shopping, which continue to break after listing, whether Baiguoyuan can support the valuation of 12 billion yuan still needs to be questioned.

Yu Huiyong, the founder of Baiguoyuan, believes that the essence of business is to establish trust, to establish trust with employees, shareholders and partners internally, to establish trust with customers and customers externally, and the essence of operation is business trust.

However, on the eve of the listing, Baiguoyuan lost the trust of consumers and fell into a crisis of public opinion.

(At the request of the interviewee, Chen Xin, Wang Qi, Huang Yuanyuan and Li Min are pseudonyms)

Author/ Author of "Finance and Economics" Weekly Zhao Zikun Yang Yang

Editor / Chen Fang

This article is originally produced by AI Finance and Economics, an account of Caijing Tianxia Weekly, without permission, please do not reprint it on any channel or platform. Violators will be prosecuted.