"China's largest distributor of private label fresh fruit and a distributor of imported fresh fruits from Southeast Asia."
This article is original for the IPO long known
The author | Stone Jin
According to the IPO news, Chongqing Hongjiu Fruit Co., Ltd. (hereinafter referred to as "Hongjiu Fruit") launched a IPO today (August 24), which ended on August 29 and may become the "first share of China's fruit".
Hongjiu Fruit plans to sell 14,012,500 shares worldwide at offer prices ranging from HK$40 to HK$52 per share. In addition, GF Global and Southern Fund participated in the offering as cornerstone investors.
Founded in 2002, Hongjiu Fruit is a multi-brand fresh fruit group with an "end-to-end" supply chain, focusing on the whole industry chain operation of high-quality fruits mainly originating in China, Thailand and Vietnam.
According to the information of China Insight Consulting, according to the sales revenue in 2021, Hongjiu Fruit is the largest private label fresh fruit distributor in China and the largest distributor of imported fresh fruit in Southeast Asia in China; In terms of sales revenue in 2021, Hongjiu Fruit is the largest durian distributor in China, as well as the top five distributors of dragon fruit, mangosteen and longan.
From 2019 to 2021, the revenue of Hongjiu Fruit was 2.078 billion yuan, 5.771 billion yuan and 10.280 billion yuan, respectively, with a compound annual growth rate of 122.4%; Adjusted profits were $228 million, $662 million and $1,090 million, respectively, representing a CAGR of 118.5%.
In the first five months of 2022, Hongjiu Fruit's revenue increased by 25.1% to RMB5.725 billion from RMB4.576 billion in the same period of 2021, and adjusted profit increased by 39.6% to RMB745 million from RMB533 million in the same period of 2021.
Since its establishment, Hongjiu Fruit has received investment from Alibaba, China Agricultural Reclamation, CMC Capital, CITIC Construction Investment, Tianyi Capital, Sunshine Life, Guochuang Zhongding, Jinyi Capital, Kailian Capital, Shenzhen Venture Capital and other well-known institutions.
Hongjiu Fruit said in the prospectus that the net proceeds from the IPO will be mainly used to improve the fruit supply chain; Build fruit brands and promote products; Upgrade the digital system and develop the global fruit industry Internet platform; Repayment of bank loans; as well as supplementary liquidity requirements and other general corporate uses.
Strategically select 6 types of fruits as core fruit products, and the sales revenue of private brands fruits will account for more than 73% in 2021.
From the perspective of core competitiveness, the advantages of Hongjiu Fruit are mainly reflected in two aspects: one is the creation of its own brand; The second is the strong operational capability of "end-to-end".
First, let's look at the creation of private labels.
It is undeniable that the fruit industry has been in a state of "category and no brand" for a long time in the past, and the homogenization of the industry competition is serious and the profit margin is low. This means that for Hongjiu fruit products that have been cultivated for decades, they have the first-mover advantage and innate foundation of building their own brands.
In 2013, Hongjiu Fruit began to lay out and build its own brand; At present, Hongjiu Fruit has formed a fruit product portfolio of 49 categories with durian, mangkhut, longan, dragon fruit, cherry and grape as the core, and has launched 18 fruit brands in 14 fruit categories.
It is worth mentioning that among the many fruits, Hongjiu Fruit has selected 6 of the fastest growing fruit categories in China as the core fruit products. According to the data of China Insight Consulting, the retail sales of these six fruits will account for 64.6% of the total imported fruit market in China in 2021, becoming the main imported fruit category.
From this point of view, when selecting core products, Hongjiu Fruit considers its rarity, characteristic flavor, nutritional level and its origin to ensure that these categories are relatively difficult to find substitutes in domestic fruits. At present, Hongjiu Fruit has built its own brand on all core fruit products.
In terms of product creation, Hongjiu Fruit products cooperate with local orchards in depth to control product quality from the source; At the same time, Hongjiu Fruit converts the fruit into standardized goods through standardized processing, grading and packaging to ensure that it meets the quality standards of "freshness, color, crispness and sweetness" of the product.
Based on the above-mentioned strategy in product selection and high quality requirements, the sales revenue of Hongjiu Fruit's own brand fruit will account for 73% of the total revenue in 2021, far exceeding the industry average of 34%.
As of May 31, 2022, Hongjiu Fruit has 19 sales branches across the country, and uses this as a sales outpost to radiate 300 cities, covering various fruit sales channels nationwide, including terminal wholesalers, supermarkets and emerging retail channels. Moreover, as of May 31, 2022, Hongjiu Fruit's customers have included eight of the top ten supermarkets in terms of national sales revenue in 2021, which also proves the product strength of Hongjiu Fruit's own brand fruits to some extent.
Another point to note is that Hongjiu Fruit has continuously opened up emerging retail channels in the past few years to enjoy the dividends of the rapid expansion of emerging retail channels - from 2019 to 2021, Hongjiu Fruit's sales revenue to emerging retailers increased from 471 million yuan in 2019 to 2.134 billion yuan in 2021, with a compound annual growth rate of 112.7%; In the first five months of 2022, Hongjiu Fruit's sales revenue to emerging retailers increased by 14.5% to MOP1.185 billion from MOP1.035 billion in the same period of 2021. According to CCI Consulting, hongjiu fruit is already the top fruit distributor among emerging retailers in China in 2021.
After the local direct mining, it can be processed into branded standards, and the customized containers are sent directly to the customer warehouse from the source
In addition to private label fruits, the digitally driven "end-to-end" supply chain is also another core competitive barrier for Hongjiu Fruit.
At present, Hongjiu Fruit will be most of the brand fruit in its place of origin direct procurement, processing in the local fruit factory, grading screening, and further distribution to customers throughout China.
In order to control the quality of the product from the source of planting and obtain high-quality fruits, Hongjiu fruit is preferentially harvested directly from local orchards. As of May 31, 2022, Hong Jiu Guopin has established a local team of nearly 400 employees in Thailand and Vietnam to work closely with local orchards and share advanced planting techniques with local growers; At the same time, Hongjiu Fruit combines the growth characteristics, procurement timing and market conditions of different fruit varieties to flexibly determine the quantity, price and cycle of purchase orders, thereby improving the predictability of the supply of relevant orchards and further promoting the cooperative relationship with them.
Based on the above two measures, Hongjiu Fruit was able to establish a strong bargaining power in the local market and gain a high market share. In 2021, Hongjiu Fruit's durian purchases in Thailand accounted for 10.1% of China's total imports of durian to Thailand.
On the basis of local direct harvesting, Hongjiu Fruit has also established a processing plant in the core fruit production area, realizing the standardized operation of the origin end. As of May 31, 2022, Hung Kho Quoc Has 16 Fruit Processing Plants located around orchards in the core fruit producing areas of Thailand and Vietnam. This makes Hongjiu fruit can be directly sorted, preserved, packaged, marked, etc. after being picked locally, and the fruit is processed into branded standards.
In order to meet the multi-dimensional needs of customer orders for cargo scale, arrival time, product quality and other dimensions, Hongjiu Fruit products have realized on-demand customized containers to send customers directly to the warehouse from the source; Coupled with the 60 sorting centers covering the country equipped with intelligent equipment, Hongjiu Fruit can also sort large fruits into small packages and standards of various specifications according to the needs of customers, which meets the needs of small sizes and sales.
In addition, Hongjiu Fruit has also created a proprietary digital supply chain management system "Hongjiu Xingqiao" - through different modules to achieve "mining, transportation, sales" of the whole business chain integrated control, and the use of big data analysis to assist enterprises to make business decisions, reduce costs and increase efficiency, thereby improving overall profitability.
In the prospectus, Hongjiu Fruit stressed that by using the supply chain management system and the "end-to-end" operating model, it has accumulated and studied a wide range of data from the whole industry chain. The analysis results of big data can fully assist it in making important decisions such as port selection and sales area selection, and upgrade the industry's traditional way of relying only on manual decision-making.
In other words, data accumulation and analysis capabilities have laid the foundation for Hongjiu Fruit to develop the fruit industry Internet platform.
It is foreseeable that as Hongjiu Fruit is about to officially become the "first share of China's fruit", based on its own brand fruits and digitally driven "end-to-end" operation capabilities, Hongjiu Fruit may further enlarge its head advantages and scale effects, so as to occupy a more important position in China's fruit industry chain and gain a greater market share.