On May 7, due to a video of a field visit, Baiguoyuan, which was originally in the silent period of listing, was on Weibo's hot search.
According to a video released after the investigation of the popular science blogger "Insider Picket Bureau", some stores in Baiguoyuan not only label small fruits as large fruits for sale, but also sell overnight fruits and fruit cuts, and even cut and sell the fruits that are about to deteriorate. In this regard, Baiguoyuan issued an apology statement in the early morning of the 7th, acknowledging that there were violations in the relevant stores and promising to rectify, and then, Baiguoyuan apologized and rushed to the hot search.
That's less than a week since Baiguoyuan submitted its prospectus. On May 2, as the largest fruit chain brand in China, Baiguoyuan submitted a listing prospectus to the Hong Kong Stock Exchange, which for the third time sent an impact on the "first share of fruit retail". For Baiguoyuan, which has always focused on high-end fruit retail, this widely concerned food safety storm has undoubtedly added many variables to the road to this listing.
20 years of slow business "Fruit King" hit the IPO for the third time
As a veteran retail enterprise, Since its establishment in 2001, Baiguoyuan has undergone three rounds of evolution, corresponding to the change of Baiguoyuan's model from franchise to self-operation to self-operation.
In 1994, 26-year-old Yu Huiyong returned to Shenzhen from the Jiangxi Academy of Agricultural Sciences, before which he had experienced stock speculation losses and transportation business failures. Seven years later, Yu Huiyong founded Baiguoyuan.
On July 18, 2002, Baiguoyuan's first store appeared on the streets of Shenzhen, which is also the first fruit franchise chain store in China. Since then, 100 stores have been opened nationwide through franchising.
However, this model brings losses to Baiguoyuan. Later, Yu Huiyong pointed out two major development bottlenecks when reviewing, one is that the fruit itself is a category that is extremely difficult to standardize in terms of service and quality, and the other is that there was a lack of talents who understood the management of the fruit industry at that time.
In 2008, the solution given by Yu Huiyong was to stop the franchise model and spend 3 years to buy back the shares of the previous franchise store, and Baiguoyuan became a direct operation. For the upstream supply chain, Yu Huiyong began to build a fruit production base. At the management level, Yu Huiyong established a new system by learning from 7-11, and for the quality control of the C-end, Yu Huiyong made a "three no return" commitment.
On this basis, Baiguoyuan has crossed the early barbaric growth and entered the standardized expansion stage, and in 2015, Baiguoyuan's self-operated stores reached 1,000. In "Boiling New Decade", Lin Jun described Baiguoyuan as a down-to-earth company and compared it to JD.com in the fruit industry.
In September 2015, Baiguoyuan officially entered the capital market and obtained a 400 million yuan A round of financing jointly invested by Tiantu Capital, GF Securities and Qianhai Huxing, taking this as a starting point, Baiguoyuan opened a crazy model of 6 years and 8 rounds of financing. From the national teams such as CICC, China Merchants, Shenzhen Venture Capital, and Qianhai Fund of Funds, to mainstream VCs such as Source Code Capital and Tiantu Capital, their shareholder backgrounds are also the top match in the retail industry.
With the help of capital, Baiguoyuan launched the store partnership system, shifting from pure self-operation to quasi-self-operation and entering the fast lane of diversified development.
In 2016, Baiguoyuan acquired One Meter Fresh and began to enter the online market. In 2017, the procurement trading platform was launched and cut into the 2B business. In 2018, the franchise model was restarted, and at the same time, it began to embark on ecological layout and successively invested in 17 industrial chain companies. In 2019, we will further expand the category, put forward a large fresh strategy, and join the community group purchase. Until 2020, the epidemic pressed the pause button.
At the beginning, the slogan put forward by Yu Huiyong was to achieve 10,000 stores in 2020. In the end, Baiguoyuan failed to achieve this expansion goal. According to the prospectus of Baiguoyuan, as of the last practical feasible date, the number of offline stores in Baiguoyuan was 5351, covering more than 130 cities in 22 provinces and municipalities directly under the central government, with a cumulative membership of 67 million +, and in 2021, the average monthly active users were 7 million+.
According to Sullivan's data, in terms of fruit retail sales, Baiguoyuan ranks first among China's fruit franchise retail enterprises, 2.8 times the size of the second place, and has the largest distribution network in China's fruit industry, but this still cannot hide the essence of the slow business of fruit retail. Reflected in reality is that in the past 20 years, the so-called "fruit retail first stock" has not appeared in the secondary market.
Even as a bellwether, Baiguoyuan has repeatedly encountered walls in the secondary market. As early as June 2020, Baiguoyuan had submitted listing information to the International Department of the China Securities Regulatory Commission (CSRC) for listing on the Hong Kong Stock Exchange, but there was no following. In November of the same year, Baiguoyuan signed a listing counseling agreement with Minsheng Securities to move to the ChiNext board, and finally sank into the sea, calculating that this return to the Hong Kong Stock Exchange was the third impact of Baiguoyuan's IPO.
Category expansion encountered obstacles Single-store sales declined
"Only do one thing in your life, and make fruit wholeheartedly", this is Yu Huiyong's positioning of Baiguoyuan. In the past 20 years, around the fruit business, Baiguoyuan has gradually developed into a large-scale chain enterprise integrating fruit procurement, planting support, post-harvest preservation, logistics and warehousing, standard grading, marketing expansion, brand operation, store retail, information technology, financial capital, scientific research and education.
According to the data disclosed in the prospectus, from 2019 to 2021, the total revenue of Baiguoyuan was 8.98 billion yuan, 8.85 billion yuan and 10.29 billion yuan, respectively, and the corresponding revenue growth rate was -1.4% and 16.2% respectively.
In fact, China's fruit retail market has been growing steadily over the past few years, but the growth rate of Baiguoyuan is much lower than the growth rate of the broader market. According to Sullivan, the total size of China's fruit retail market increased from 827.3 billion yuan in 2016 to 1.23 trillion yuan in 2021, with a compound annual growth rate of 8.2%. From 2019 to 2021, the total annual compound growth rate of Baiguoyuan's total income is only 7.05%.
From the perspective of income structure, the source of income of Baiguoyuan is mainly four parts: 1. 2. Revenue from sales of fruits and other products; 2. Royalties and franchise income; 4. Membership fee; Other income such as store system maintenance fees. Among them, the sales revenue of fruits and other products is still the top pillar of the revenue of Baiguoyuan, and from 2019 to 2021, its revenue proportion will reach 97.5%, 97.6% and 97.1% respectively.
Specifically, in addition to fruits, Baiguoyuan's products also have dried fruits and fresh, however, from the data point of view, Baiguoyuan's income is still heavily dependent on a single fruit category, and the big fresh strategy that has been held high before has not aroused too much splash. From 2019 to 2021, the total revenue of fruits will be as high as 96.5%, 96.4% and 95%, while the total income of dried fruits and fresh fruits will be 1%, 1.2% and 2.1%.
From the perspective of channel layout, the model of Baiguoyuan is still heavily dependent on offline. From 2019 to 2021, the revenue contributed by Baiguoyuan's online business was 0.3 billion yuan, 280 million yuan and 330 million yuan respectively, accounting for 0.4%, 3.2% and 3.2% of the total revenue. In the same period, in addition to the two major channels of direct sales and regional agency business, the proportion of revenue of Baiguoyuan offline stores is still as high as 88.4%, 85.1% and 81.7%.
High dependence on fruit categories and high dependence on offline stores is the commercial inertia and path dependence of Baiguoyuan in the past 20 years, at the same time, this also determines that the scale expansion of Baiguoyuan mainly depends on the number of stores. From 2019 to 2021, the number of baiguoyuan stores was 4307, 4757 and 5249 respectively, of which the proportion of self-operated stores was small, and most of them were franchised stores.
From 2019 to 2021, the revenue contribution of Baiguoyuan franchised stores is as high as more than 80%, accounting for more than 99.5% of the revenue of Baiguoyuan offline stores. According to the prospectus, the number of Baiguoyuan's latest offline stores is 5351, of which 5336 franchised stores are 5336, accounting for 99.8% of the total, and it is foreseeable that the revenue proportion of Baiguoyuan franchised stores will further increase.
This is undoubtedly a good thing for the scale-driven Baiguoyuan, but not necessarily for franchisees. According to the revenue data and the number of stores, from 2019 to 2021, the average annual revenue of a single store in Baiguoyuan is about 2 million, and the corresponding daily revenue of a single store is 5709.8 yuan, 5085.2 yuan and 5370.6 yuan, respectively.
At the same time, the number of closed stores in Baiguoyuan is also rising. From 2019 to 2021, Baiguoyuan closed 166 stores, 249 stores, and 379 stores, accounting for 3.9%, 5.2%, and 7.2% of the total number of stores in the same period. At the same time, from 2019 to 2021, the number of new stores in Baiguoyuan reached 928, 695 and 865 respectively, accounting for 21.5%, 14.6% and 16.5% of the total number of stores in the same period.
It can be seen that the growth of Baiguoyuan is actually mainly driven by the continuous opening of new stores, but with the increase in the growth rate of closed stores and the slowdown in the growth rate of newly opened stores, Baiguoyuan will face a growth bottleneck, of which the impact of the epidemic is undoubtedly an important factor, but the decline in competitiveness is also an indisputable fact.
In the face of the reality of high wear and tear and low gross profit in the fruit retail industry, the pressure at the revenue level will undoubtedly further squeeze profits. According to the prospectus, from 2019 to 2021, the gross profit margin of Baiguoyuan was 9.8%, 9.1% and 11.2%, respectively. In the same period, the net profit was 248 million yuan, 0.46 billion yuan and 226 million yuan respectively, and the corresponding net profit margin was 2.8%, 0.5% and 2.2% respectively, and the overall profit level was less than 3%.
Where is the imagination space of Baiguoyuan?
As a high-end fruit brand, the model of Baiguoyuan relies on two major underlying supports, one is the supply chain, and the other is the store partnership system.
In terms of supply, Baiguoyuan began to establish a fruit standard system from 2015, in the words of Baiguoyuan's discourse system, it is "four degrees of one taste and one safety", that is, the fruit is divided into 4 levels according to "sugar acidity, freshness, crispness, tenderness, flavor, and safety", and strictly controls the supply standards of fruits, and the customer is the final inspection standard, which is not delicious to return.
Starting from the standard of delicious food, Baiguoyuan traces back to the upstream of the industry, establishes a standardized planting base, establishes a quality control process from the whole link of planting, picking, distribution of origin, etc., and enables cold chain control and freshness management from the place of origin to the store. This refined supply chain management brings a lower loss rate to Baiguoyuan, compared with the loss rate of nearly 10% of the industry as a whole, the loss rate of Baiguoyuan is about 4%.
And the power of Baiguoyuan in the supply chain is also Yu Huiyong's bottom line into freshness, "fruits and vegetables are not divided into families, commodity attributes are the closest, so Baiguoyuan selling vegetables is not cross-border, and the fruit is the highest level of 'rhizomes and leaves and flowers and fruits', Baiguoyuan can sell good fruits, and it must also sell good vegetables", from the online BaiguoXin enjoy in 2019 to the launch of Panda Fresh in 2020, Baiguoyuan has followed this logic.
However, from fruit to fresh, the ability of the orchard to be reused is limited. First of all, there are differences in the supply chain of vegetables and fruits, from upstream planting to procurement to warehousing logistics, and Dingdong to buy vegetables, daily excellent fresh, etc., Baiguoyuan still needs to start from scratch, secondly, fruits are a lower frequency consumption compared to vegetables, from high frequency to low frequency, Baiguoyuan directly faces the crushing of giants such as Hema and Qixian.
Reflected in the results is that the fresh business of Baiguoyuan has not been opened for a long time. Up to now, Baiguo Xinxiang has disappeared from the market, and Panda Fresh has also been incorporated into the WeChat Mini Program of "Baiguoyuan +". According to the prospectus, in 2021, the total revenue of fresh and dried fruits accounted for only 2.1% of the total revenue, although the profit situation was not disclosed separately, but the overall online was not optimistic.
Since Baiguoyuan's fresh food is mainly picked up through online order stores or delivered through takeaway, it can be glimpsed from the profitability of online business. According to the prospectus, from 2019 to 2021, the gross profit margin of Baiguoyuan's online business was 2.8%, -4.9% and -0.3%, respectively, which was far lower than the gross profit margins of 6.8%, 7.1% and 9.2% of offline franchise stores, but also lower than the overall gross profit margin of 9.8%, 9.1% and 11.2%.
In terms of the store partner system, Baiguoyuan has always been considered to have avoided many problems in the franchise chain through interest design, and has become a quality stabilizer in the expansion of Baiguoyuan scale, as the external brain of Baiguoyuan, Yima Group once used it as a benchmark to package. It is reported that the partnership system of Baiguoyuan covers four aspects: equity distribution, talent training, loss subsidies, and exit channels.
For example, without the franchise fee, Baiguoyuan, the district manager and the regional franchisee and store manager participate in the investment, the first three years of the loss of the Baiguoyuan bottom, the profit of the Baiguoyuan and the store three or seven open, the original price exit and one-time compensation of three times the income, these are the interest binding magic weapons that have been praised by the outside world in the past. According to the official franchise system obtained by the power plant, there are two main types of franchise schemes for Baiguoyuan today.
The total investment cost of Plan A is 277,000 to 297,000 yuan, and the total investment cost of Plan B is about 85,000 yuan, of which 30,000 yuan is included in the franchise fee. According to the official introduction of Baiguoyuan, the difference between the two is that Plan B is responsible for three expenditures such as store decoration, sign layout, and equipment installation by Plan B, while Plan B charges a higher franchise fee every month, with an average difference of about 5 points.
However, from the hot search of the "spoiled fruit cutting" incident, even if the franchise control system is more thorough, Baiguoyuan can not avoid all the store control problems, especially when there are more and more franchise stores, single stores are facing downward pressure on income, management problems are even more invincible, from the perspective of the black cat complaint platform, nearly 1500 complaints in Baiguoyuan are basically quality control and refund problems.
To some extent, these are actually the side effects of speed, and this is not something that Baiguoyuan can solve with an apology.
In fact, in addition to the need to spend efforts on store management to make up lessons, in the face of the capital market, the more pressing problem of Baiguoyuan is the lack of imagination. Previously, according to the last private equity transaction of Baiguoyuan in October 2021, the valuation of Baiguoyuan before listing has reached 12 billion yuan, corresponding to a net profit of 226 million yuan in 2021, and the price-earnings ratio of the primary market has reached 53 times.
Today, there are not many companies in the secondary market that have a P/E ratio of this level. A set of intuitive data is that the same is the retail industry, Alibaba currently has 24 times PE, Pinduoduo 45 times PE, Mingchuang Premium 20 times PE, walmart 30 times PE. In order to support the market value of tens of billions, in recent years, in addition to cutting fresh and expanding categories, Baiguoyuan is also constantly stacking franchise stores in the third- and fourth-tier markets and taking the sinking route
According to the previous disclosure of Baiguoyuan, in 2021, the proportion of third- and fourth-line new stores in the overall new stores has reached 30%, and in 2022, this is expected to increase to 40%. However, in the face of the news of layoffs that Continue to break out in the sinking business of Ali, JD.com, meituan, etc., it is difficult for the outside world to believe that the low-cost group purchases of the giants are all returning home, and the baiguoyuan that takes the high-end route can blossom.