Baiguoyuan is also going to go public?
Source | Daily business reports
Author | Xie Dongdong
Source/pexels
The shop that sells fresh fruit is no longer ordinary! In a year, the revenue can reach tens of billions. No, companies that are chained retail fruits have planned to go public.
On May 2, shenzhen baiguoyuan industrial (group) co., ltd. (hereinafter referred to as "baiguoyuan"), a chain fruit retailer, submitted a listing application to the Hong Kong Stock Exchange. Another, not long before, Chongqing Hongjiu Fruit Co., Ltd. (hereinafter referred to as "Hongjiu Fruit"), known as the "first share of fruit retail", also updated its prospectus.
In the fruit chain retail market, it is known as "South Hundred Fruits, North Fresh Feng, West Hongjiu". According to Frost & Sullivan, in 2021, Baiguoyuan is the largest company in the fruit retail industry, accounting for 1.0% of the market share, while the top five players together account for 3.6% of the market share.
This time the road to listing should be quite smooth. Since 2015, Baiguoyuan has raised 8 times, and institutions such as Shenzhen Venture Capital, Chenguang Equity, Guangzhou Yuexiu, and China Merchants Fund have rushed to enter. According to the prospectus, in October 2021, the last equity transaction between Baiguoyuan and Chenguang Equity was generated at a transaction price of 8 yuan per share, corresponding to a total share capital of 1.5 billion yuan, and the company's latest valuation has reached about 12 billion yuan.
Underpinning such valuations is the number of retail terminals. Up to now, Baiguoyuan has more than 5351 stores in more than 130 cities in 22 provinces and cities across the country; sales channels include Baiguoyuan APP, WeChat Mini Program, Tmall, JD.com, Douyin and other e-commerce platforms, as well as third-party food delivery platforms such as Meituan, Koubei and Ele.me.
Revenue has reached 10 billion
According to the prospectus, Baiguoyuan has established a highly specialized and standardized fruit quality control system of the whole industrial chain from orchards to stores, creating an industry-leading preservation and loss control mechanism. Its quality control system takes sales standards as the core, supporting procurement, warehousing, distribution and store standards, running through the entire industry chain.
From 2019 to 2021, the revenue of Baiguoyuan was 8.976 billion yuan, 8.854 billion yuan and 10.289 billion yuan, the net profit attributable to it was 249 million yuan, 49.063 million yuan and 235 million yuan, and the company's gross profit margin was 9.8%, 9.1% and 11.2% respectively.
Since the opening of the first Baiguoyuan store in Shenzhen in 2002, as an enterprise with more than 20 years of development experience, Baiguoyuan mainly sells various types of fruits. At present, the prospectus shows that Baiguoyuan provides more than 60 types of fruits, covering various types such as melons, citrus, berries, and stone fruits. In addition, the company also sells fruit products including dried fruits and fruit juices. And through the mobile APP and WeChat Mini Program, other large fresh products are distributed, including vegetables, fresh meat and seafood, grain and oil and dairy products.
The fruits sold by Baiguoyuan are divided into four grades of signboard, A, B and C according to the degree of deliciousness, corresponding to different price points to meet the needs of different consumers. In 2021, the sales of Baiguoyuan signboard and A-grade fruits accounted for about 70% of the total retail sales of the store, and as of May 2, 2021, Baiguoyuan has successfully launched 27 signature and A-grade product brands to the market.
In 2021, the retail sales of brand fruit stores will be 1 billion yuan, accounting for more than 8% of the total fruit sales of Baiguoyuan stores, of which six brand products will have retail sales of more than 50 million yuan in 2021, including red ballet strawberries and acetes.
Franchise stores are the main source of revenue
According to the prospectus, Baiguoyuan has built an extensive nationwide offline retail store network consisting of self-operated stores, franchised stores opened by self-recruited franchisees and supervised by the company ("self-managed franchised stores"), and franchised stores operated by franchisees and supervised by regional agents in designated areas ("franchised franchised stores").
In 2021, the revenue of each channel of Baiguoyuan accounted for 81.3% of franchised stores, 0.4% of self-operated stores, 9.3% of regional agents, 5.7% of direct sales, and 3.2% of online channels.
At present, Baiguoyuan's retail stores nationwide are divided into two channel brands, "Baiguoyuan" and "Guoduomei". "Guoduomei" is a trademark acquired by Baiguoyuan at the end of 2017 to achieve multi-channel brand operation. Guoduomei is mainly positioned to face the mass market and provide cost-effective mass fruits. "Baiguoyuan" is mainly positioned for the mid-to-high-end market, providing high-quality fruits for consumers with consumption power.
Usually, "Baiguoyuan" stores are smaller community stores with an average area of about 50 square meters, while "Guoduomei" is usually located in a relatively large area of about 150 square meters located in high consumer traffic (such as transportation hubs and business districts). In addition, the company has seven self-operated stores operating under other channel brands.
As of May 2, 2022, there are 5,134 franchised stores and 6 self-operated stores under the "Baiguoyuan" brand, covering the whole country. As of the last practicable date, there were 102 franchised stores and 2 self-operated stores under the "Guoduomei" brand.
In 2018, Baiguoyuan hired a Japanese consulting company to assist the company in improving the systematization and efficiency of franchise management and strengthening the standardized operation of Baiguoyuan stores. The prospectus said that in principle, Baiguoyuan currently requires franchisees to personally participate in store operations, and they must pass the company's test before they can become franchise store managers.
However, based on the franchisee's application and the company's assessment, Baiguoyuan may allow existing franchisees with good performance records to open other new franchise stores. In this case, the franchised store must appoint an assistant store manager to participate in the training of Baiguoyuan to qualify as the manager of the second franchised store.
Prior to January 1, 2019, each franchisee in Baiguoyuan operated an average of three stores, and the number of stores operated by a single franchisee ranged from 1 to 119. Since 2019, Baiguoyuan has strengthened its franchise operation and management, after which each franchisee operates an average of one store per franchisee, and the number of stores operated by a single franchisee ranges from 1 to 49.
There are shortcomings in store management
In terms of specific sales, Baiguoyuan said that it will plan around all aspects of the product brand, form online and offline promotional interactions, and quickly enhance popularity.
For example, in addition to advertising and promotional activities for target consumers through social media, red ballet strawberries were launched in January 2019, and a number of brand promotion activities such as "Heartbeat Red Ballet" theme marketing were held on Valentine's Day. At the same time, through the offline store network of Baiguoyuan, the theme display and creative strawberry bouquet sales are launched simultaneously, and the online theme marketing is closely interacted with to deepen the brand image of red ballet.
In the 2021 strawberry season, Baiguoyuan further strengthened the market recognition of red ballet through multi-channel marketing such as live broadcast and short video of origin, festival theme promotion, movie IP co-branding, and store linkage promotion. From 2019 to 2021, the retail sales of red ballet strawberries increased from 143 million yuan to 231 million yuan, with a compound annual growth rate of 27.1%, and the retail price was about double that of B-grade strawberries in the same period.
While the company increased its brand promotion, the sales of Baiguoyuan also increased, and the company's sales expenses from 2019 to 2021 were 345 million yuan, 395 million yuan and 452 million yuan, respectively.
At the same time, there are also many problems in the operation of Baiguoyuan. It is understood that recently, the negative news of "selling spoiled fruits" has seriously affected the image of high-end fruits that Baiguoyuan has always emphasized.
Shortly after Baiguoyuan submitted the prospectus to prepare for listing, a blogger released a video of a secret visit, exposing that some stores in Baiguoyuan would cut the spoiled fruit and sell the small pineapple as a more expensive large pineapple.
On May 8, the Shanghai Municipal Consumer Protection Commission issued a claim against "individual stores in Baiguoyuan using spoiled fruits to make fruit cuts" that in recent years, many violations of the legitimate rights and interests of consumers have been related to franchise stores. Brands cannot just pursue the speed of expansion and neglect the management and supervision of franchise stores. Consumers enjoy the right to know according to law, and whether the store belongs to the franchise store is an important information related to the quality of goods and services, and the brand has the obligation to make it clear to the consumer.
In this regard, Baiguoyuan issued a statement saying that the store involved deliberately evaded the headquarters inspection, and had been suspended for rectification in accordance with the company's franchise management measures, and the employees involved were suspended and re-educated, and the supervisor of the area where the store was located was recorded once, and the regional responsible person was punished with a warning and required to rectify in place.
At the same time, the daily business report also noted that on the black cat complaint platform, the "three no returns" promoted by Baiguoyuan were also accused of being "nominal and untrue".
According to the prospectus, Baiguoyuan took the lead in launching the "three noes" return service in the industry, improving customer satisfaction and trust in the brand, so that consumers will associate the "Baiguoyuan" brand and high-quality fruits with high-quality services. "Three noes" return service standards, that is, "no physical object", "no receipt", "no reason".
Perhaps, in general, there are not many consumers who request returns, because the prospectus shows that Baiguoyuan paid for the "three noes" refund service, and from 2019 to 2021, the costs incurred due to the return of the service accounted for 0.07%, 0.18% and 0.15% of the total revenue, respectively.
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