Fiercer than Michelle Ice City? Pot ring food converges into "the first share of eating at home"

Text | Dalei

On November 2, Guoquan Food Exchange was officially listed on the main board of the Hong Kong Stock Exchange. On the day of listing, its total market value reached about HK $16.73 billion, and its stock price rose by more than 2% on the first day of listing, officially becoming the "first stock to eat at home".

According to its prospectus, Guoquan Shihui is positioned as a "eat-at-home meal product" brand, providing ready-to-eat, ready-to-heat, ready-to-cook and ready-to-serve ingredients, focusing on hot pot and barbecue products at home. Since 2015, the number of its stores nationwide has reached 11,000 (including contracted stores).

Among the brands that also focus on second- and third-tier cities, Wandian's "record" took 13 years, Zhengxin Chicken Chop took 11 years, Wallace took 19 years, and Guoquan Shihui only took 6 years.

In terms of revenue, the revenue of Guoquan Shihui in 2020, 2021 and 2022 will be 2.965 billion yuan, 3.958 billion yuan and 7.173 billion yuan respectively, and the revenue in the first four months of 2023 will be 2.078 billion yuan.

The rapid expansion and beautiful revenue performance made Guoquan Shihui successfully ring the bell and go public in only 7 months. However, under the increasingly involuted and diversified consumer market, the business model of Guoquan Shihui has gradually revealed some hidden concerns: the store closure rate has skyrocketed, the scene advantage is no longer there, and the food safety problem has intensified...

01

Stepping on the tuyere, the pot ring food sink "rises from the ground"

According to the official website of Guoquan Food Exchange, its first store was established in 2017. At that time, the catering market was still an era of "comprehensive prosperity", with diversified catering forms, frequent influx of cross-border catering entrepreneurs, online takeaway entrances driving offline business growth, and huge space for new retail evolution. According to data, the total scale of the catering industry reached about 3.9 trillion yuan in 2017, and the online takeaway market size was 300 billion yuan.

Under the "savage growth" of the catering industry and online takeaway, it has stimulated the unique business model of Guoquan Shihui - B2B2C. To put it simply, it is a dual-channel sales model between takeaway and grocery cooking, with one end connecting with upstream food suppliers and the other end connecting with consumers through offline stores.

Although the new retail business model of B2B2C has certain competitive advantages, in that era of "competition for hegemony", Guoquan Shihui, which focuses on second- and third-tier cities and sinking markets, still seems to be "weak" in terms of consumer awareness and consumer group reach.

In the view of iBrandi Pinchuang, the real "bonus period" of Guoquan Food Exchange should be from 2019 to 2022, which is mainly manifested in two aspects, supply chain advantages and epidemic home outlets.

Due to the difficulty of fresh storage and large loss, the fresh e-commerce platform ushered in a bottleneck period of development around 2019. According to data from the China E-Commerce Research Center, in 2019, among the more than 4,000 fresh e-commerce companies in the country, only 1% achieved profits, the other 7% suffered huge losses, 88% suffered slight losses, and 4% remained flat.

At this time, Guoquan Food Exchange also relied on its own supply chain advantages to "break through against the trend". On its official website, we can see that Guoquan Shihui has its own factory, 200+ food suppliers, 14 major warehouses in the country, 3 major production bases, its own logistics, R&D centers, perfect cold chain cooperation, etc., which not only further reduces the circulation costs of all parties, but also improves the gross profit margin in disguise.

On the other hand, with the rapid development of the stay-at-home economy in 2020, it is inconvenient for consumers to go out to shop due to the impact of the general environment.

At present, there are more than 700 SKUs on sale, covering a wide range of categories such as hot pot, barbecue, lo-mei, one-person food, fast food, Western food, fresh food, etc., and its offline stores are mainly community stores, with one for every 2,000-3,000 households, which is closer to consumers.

In addition, its online business expansion is also very rapid, not only laying out multiple platforms such as Ele.me, Meituan, Tmall, JD.com, Pinduoduo, etc., but also launching an official APP in 2021. In this way, it has not only increased its customer acquisition rate, but also found a new way to accelerate the expansion of its stores - franchisees.

With the help of the franchise model, Guoquan Shihui has "flattened the ground and raised high-rise buildings" all the way, and the number of stores has doubled and surged. Intuitively, the number of stores in Guoquan Shihui has grown steadily to 500 around 2018 and 2019, and from 2020, it has almost "cliff-like growth", with an average of 2,000 stores per year, and until now, the number of its stores has exceeded 10,000.

Among them, the scale of franchise stores accounts for 99.9%, and there are only 6 directly-operated stores. According to Guoquan Shihui, the purpose of the directly-operated store is also to provide a model for franchisees, as a pilot for innovative store operation and management strategies and tools, marketing activities, digital tools and new decoration styles, etc., and then introduce them to their franchised stores.

It is no exaggeration to say that about 90% of the revenue of Guoquan Food Exchange depends on franchise stores, and even the franchise model has achieved the performance of "10,000 stores" and the "peak moment" of "the first share of eating at home".

02

The competition of hot pot is intensifying, the growth of barbecue is hard to find, and the listing of the pot ring food exchange is the peak?

Although the franchisee model has helped Guoquan Food Exchange quickly realize the "horse race" and successfully ring the bell for listing in Hong Kong, from a deeper perspective, there are still many hidden worries about Guoquan Food Exchange, and it is very likely that there will be a dilemma of "listing is the peak".

First of all, Guoquan Shihui is overly dependent on franchisees, and the store closure rate has skyrocketed.

As we have analyzed above, Guoquan Shihui is a B2B2C business, with strong supply chain advantages, and the blessing of the franchisee model is just one of the links in the scale of Guoquan Shihui's "10,000 stores" on the surface, but it is actually a business that stabilizes the supply chain through the logic of opening stores.

The franchisees of Guoquan Shihui are a bit similar to 711, which are all attracted to franchisees with "no franchise fees and reduced financial pressure on investors". Although there is "no charge", the franchise cost of Guoquan Shihui is not low. According to its prospectus, the pot ring does not require franchisees to pay franchise fees or royalties, but will charge a fixed amount of annual comprehensive guidance service fees to each franchisee, and a deposit will be charged when signing a contract for the first time.

Under the pressure of labor, rent and upfront input costs, the closure rate of Guoquan Food Exchange has been rising, with 28, 194 and 279 franchise stores closed between 2020 and 2022, respectively, and 132 in the first four months of this year. It can be seen that the franchisee business is actually not so easy to do.

Secondly, the consumption trend has turned, and the dividend of prefabricated dishes has declined.

Among the 710 SKUs of Guoquan Shihui, prefabricated dishes account for almost all of them, and to put it bluntly, it is also a typical enterprise with the concept of "prefabricated dishes".

In the face of profits, prefabricated dishes are "loved" by major catering brands with lower costs and more efficient meal times. According to the China Hotel Association's estimation of sample catering companies, the profit margin of catering enterprises using pre-made dishes is expected to increase by 7%. From the perspective of more mature Western-style fast food, the extensive use of pre-made dishes can reduce the proportion of raw material procurement costs to about 30% of the restaurant's revenue, far lower than the current average of about 40% for Chinese food.

At the same time, during the epidemic, prefabricated dishes have been "sought after" by consumers due to their advantages of rich dishes and simple and easy to make. According to the data, the scale of China's prefabricated vegetable market will reach 419.6 billion yuan in 2022, a year-on-year increase of 21.3%. The surging demand of the B and C ends has attracted the layout of fresh e-commerce, catering and other enterprises, and the number of industry players has increased.

However, with the dissipation of the epidemic, the uneven quality of the prefabricated food market, and the frequent occurrence of food safety problems, consumers are increasingly biased towards fresh and high-quality ingredients, and the trend of prefabricated dishes has "changed from good to bad", and even "resisted". At the same time, the penetration rate of the concept of prefabricated dishes is only 10%-15%, which is really "small and big" in the entire consumer market.

Finally, the proportion of barbecue is still low, and the second growth curve is hard to find.

Due to the declining trend of prefabricated dish dividends and the current situation that the hot pot market will intensify, Guoquan Shihui began to gradually increase the proportion of barbecue revenue.

From its prospectus, we can see that from 2022, the proportion of sales of hot pot products in the pot circle food exchange has decreased significantly, and the proportion of barbecue products has been on the rise, although in terms of the total amount, hot pot products still reach 74.8% of the total revenue, but under the year-on-year "not increasing but decreasing", the growth trend of barbecue seems "insignificant".

03

epilogue

In recent years, we have always seen many brands squeezing their heads to go public. It is true that the favor of capital is tantamount to more conducive to the integration of resources and sustainable growth of the brand, but if you look at the Guoquan Shihui, the consumer market environment is changing rapidly, and the hot pot industry is even more involuted.