Event review
In China's catering market, there is a chain of restaurants called Country Base, which specializes in Chinese fast food, featuring Sichuan cuisine, which is cheap and popular with workers. This restaurant is not KFC or McDonald's, but a dining empire founded by a Chongqing couple. The couple studied in the United States and founded the Rural Foundation with the slogan "Where KFC goes, the rural base goes".
The founder of Country Ji, who was also a former migrant worker, opened the first village chicken restaurant in Jiefangbei, Chongqing in 1996, focusing on classic Sichuan cuisine. They have gradually won the trust of consumers with their diligence and integrity. In 2006, Country Chicken changed its name to Country Base and began to expand nationwide. In 2010, Country Foundation was successfully listed and became a leading enterprise in China's catering industry. However, due to the decline in performance and the low stock price, the village base was delisted in 2016. Undeterred, the couple moved to the Sichuan-Chongqing region to launch a new brand of Mr. Rice, still focusing on local cuisine, and adhering to the all-direct sales model to ensure product quality and service levels.
Now, Country Key is preparing to hit the Hong Kong IPO again, which is its third attempt. They hope to use the power of the capital market to accelerate store expansion and brand upgrades. In the next three years, Village Foundation plans to add 1,120 stores to allow more workers to taste delicious and affordable Chinese fast food.
analyse
Can Country Key be successfully listed? Can it become a leader in the Chinese fast food industry? Can it win the recognition and love of consumers?
From the perspective of market demand and huge consumer groups, China has a huge population base and dietary diversity, and Chinese fast food meets the needs of many consumers as a convenient, fast, affordable and delicious way of catering. Especially during the epidemic, the takeaway business has become an important pillar of the catering industry, and Chinese fast food has also benefited. According to prospectus data, rural base's takeaway revenue reached 1.718 billion yuan in 2022, accounting for 36.5% of the total revenue. The two brands of Country Key and Mr. Rice have differentiated their positioning for different consumption scenarios and tastes, covering a wider range of customer groups.
At the same time, Country Foundation has a history of 25 years and has accumulated a wealth of professional knowledge and skills in Chinese fast food. It has its own R&D center, logistics center, training center and other background support systems to ensure the standardization and optimization of product quality, supply chain efficiency, employee quality and other aspects. The full direct operation model enables Rural Foundation to carry out unified management and supervision of stores and maintain the consistency of brand image and service level.
However, the village base also faces many challenges and difficulties.
On the one hand, the profitability of the rural base is weak, and it is under pressure from high costs and low prices. The all-direct operation model makes the rural base need to bear rent, water and electricity, labor, depreciation and other expenses, while paying high commissions for takeaway platforms. Positioned in affordable fast food, the unit price of rural customers is low, resulting in low gross and net profit margins. According to the prospectus, in 2022, the gross profit margin of Country Base is 28.4%, and the net profit margin is 6.6%, which is much lower than that of competitors.
On the other hand, Country Base's brand image and product innovation lack bright spots. Despite its 25-year history, brand awareness and reputation are not high, and many consumers still regard it as the "Chinese version of KFC". In terms of products, traditional Sichuan cuisine is the mainstay, lacking innovation and attractiveness. How to enhance brand value and product power has become an urgent problem to be solved.
In addition, there are also risks to the expansion speed and quality of rural bases. According to the prospectus, Country Foundation plans to add 1,120 stores in the next three years, mainly Mr. Rice. This means that the rural base needs to invest a lot of resources in a short period of time and take on more operational pressures and risks. As a relatively new brand, Mr. Rice's market acceptance and operational efficiency need to be verified. Expanding too quickly can lead to reduced quality, mismanagement, and increased losses.
General
Overall, Country Base has a long history and professional management, and has a great market demand and a wide range of consumer groups in the field of Chinese fast food. However, to cope with the challenges of weak profitability, lack of brand image, and risks to expansion speed and quality, rural foundations need to constantly reinvent and optimize themselves.