Yangtze River Business Daily reporter Zhang Lu
In 2023, "Fruit Brother" Baiguoyuan (02411. HK) handed over an indescribably "satisfactory" answer sheet.
Recently, Baiguoyuan's 2023 results were released. According to the financial report, the company's revenue in 2023 will be 11.391 billion yuan, a slight increase of 0.69% year-on-year, and the net profit will be 362 million yuan, a year-on-year increase of 11.88%. From the perspective of revenue growth, compared with the growth rate of 9.94% in 2022 and 16.22% in 2021, Baiguoyuan can only be called "no regression".
On social platforms, Baiguoyuan is often associated with labels such as "high price" and "expensive", but "expensive" does not necessarily mean high quality.
During this year's "3.15" period, some media revealed that there were chaos in Baiguoyuan stores such as using rotten fruits to make high-priced fruit cuts, and overnight fruits being used as fresh fruit sales.
Later, Baiguoyuan said that it had verified and verified it as soon as possible, and closed the franchise store involved for rectification and a comprehensive and thorough investigation. It emphasized that although it is a problem of individual stores, it also highlights the loopholes and flaws in the company's management.
The Yangtze River Business Daily reporter noticed that as of April 6, there were 1,985 complaints about Baiguoyuan on the black cat complaint platform, of which food safety has become the core issue, including the presence of foreign bodies, mold, deterioration, expiration, etc.
As of 2023, Baiguoyuan has 6,081 franchised stores and 12 self-operated stores, totaling 6,093 stores, accounting for 99.8% of the franchised stores.
Some market analysts believe that Baiguoyuan franchise stores occupy almost all, which means that the company has considerable difficulty in the management chain, and if any of the franchise stores has food safety and other problems, it will bring great harm to the brand.
Net profit margin has not exceeded 3% in the past 5 years
Recently, Baiguoyuan released its 2023 performance report, the company achieved revenue of 11.391 billion yuan last year, a slight increase of 0.69% year-on-year, and a net profit of 362 million yuan, a year-on-year increase of 11.88%.
Although Baiguoyuan's revenue hit a new high last year, compared with 2022, its revenue only increased by 78.274 million yuan, a year-on-year increase of less than 1%, while in 2021 and 2022, the company's revenue growth rate reached 16.22% and 9.94% year-on-year respectively.
At the same time, the profit growth rate of Baiguoyuan has also stagnated, although the increase will reach 11.88% in 2023, but in 2021 and 2022, the company's net profit growth rate will be as high as 369.49% and 40.35% year-on-year.
Compared with other fruit chain brands, Baiguoyuan is positioned as a high-end product, and "expensive" has always been its distinctive label. Searching for Baiguoyuan on social media, there is no shortage of complaints about "23.5 yuan for an apple", "90 yuan for a watermelon", and "hundreds of sunshine roses".
But the problem is that Baiguoyuan has a reputation as "expensive", and it has not made a lot of money. According to the financial report, from 2019 to 2022, the gross profit margin of Baiguoyuan will be 9.8%, 9.1%, 11.2% and 11.6%, and the net profit margin will be 2.8%, 0.5%, 2.2% and 2.7% respectively. In 2023, the gross profit margin of Baiguoyuan will be 11.54%, and the net profit margin will rise to 2.98%, but it has not yet exceeded 3%.
The Yangtze River Business Daily reporter learned that the root cause is related to the asset-heavy business model of Baiguoyuan, and the fruit chain is a difficult business to do.
According to the research report of Guojin Securities, from the perspective of product attributes, fruits are non-standard products, and the planting and retail ends are relatively scattered, and they need to go through multiple procedures such as picking, sorting, packaging, preservation, storage, and transportation, and the long distribution process inevitably leads to high loss rates and limited transportation radius.
According to publicly disclosed data, from 2020 to 2023, Baiguoyuan's cost of sales accounted for 90.9%, 88.8%, 88.4% and 88.0% of the company's total revenue, respectively, and the high cost has become a pain point.
On the other hand, it is becoming more and more difficult for the franchisees of Baiguo Yuan to make money. It is understood that the business of Baiguoyuan is not complicated, buying fruits from suppliers and then selling them to franchisees, while charging franchise fees. Therefore, the franchisee directly determines the performance of Baiguoyuan.
From the perspective of stores, in 2015, the number of Baiguoyuan stores just exceeded 1,000. With the continuous opening and expansion of stores, as of the end of 2023, Baiguoyuan has a total of 6,093 offline stores, a net increase of 443 over the same period last year. Among them, there are 6,081 franchised stores and 12 self-operated stores, accounting for 99.8% of the franchised stores.
It should be noted that in 2023, the revenue of Baiguoyuan's main franchised stores will decrease from 8.851 billion yuan in the previous year to 8.5 billion yuan, a year-on-year decrease of about 4%, and the revenue of self-operated stores will decrease from 61 million yuan to 48 million yuan.
This also means that the average annual revenue of the franchised stores supervised by Baiguoyuan is in a state of decline, with this indicator falling from 2 million yuan in 2022 to 1.8 million yuan in 2023, a decrease of 9.8%.
Retail sales of Hundred Fruit Farm also declined. In 2023, the total retail sales and online retail sales of Baiguoyuan stores will be 14.171 billion yuan, a decrease of 2.8% from 14.58 billion yuan in 2022.
Nearly 2,000 lawsuits were involved in quality control and other issues
Founded in Shenzhen in 2001, Baiguoyuan is mainly engaged in fruit retail, and was officially listed on the main board of the Hong Kong Stock Exchange on January 16, 2023, becoming the "first fruit chain retail stock".
The recent days of Hundred Fruit Garden have not been peaceful. During this year's "March 15 International Consumer Rights Day", Baiguoyuan was exposed to the chaos of using rotten fruits to make high-priced fruit cuts in Wuhan Yinhai Yayuan stores, storing fruits in the refrigerator overnight and selling them as fresh fruits the next day, and arbitrarily defining the grade of cherries.
In response to these allegations, Baiguoyuan Wuhan issued a statement on March 16 that it had suspended the franchisees involved for rectification and a comprehensive and thorough investigation, and said that this was only a problem for individual stores.
In fact, this is not the first time that Hundred Fruit Farm has been exposed to related problems. In 2022, Baiguo Yuan apologized for selling overnight fruit cuts and said that it had betrayed the trust of consumers.
It is worth noting that Baiguoyuan was also fined for excessive pesticides in fruits in 2023. Tianyancha App shows that Shanghai Baiguoyuan Industrial Co., Ltd., a wholly-owned subsidiary of Baiguoyuan, was fined more than 93,000 yuan by the Shanghai Qingpu District Market Supervision and Administration Bureau for exceeding the pesticide standard in the fruit.
The worrying quality of the food has made the market question the brand image of Baiguoyuan.
The Yangtze River Business Daily reporter noticed that as of April 6, on the black cat complaint platform, with "Baiguoyuan" as the keyword search, there were 1985 complaints, and most of the consumer complaints were in the problems of bad fruits, defective products, and merchants not returning goods, among which the majority of fruit quality complaints.
But even with all kinds of problems, Baiguoyuan has not given up the pace of expanding stores.
In 2016, Baiguoyuan shouted the goal of "opening 10,000 stores in 2020 and annual sales of 40 billion yuan". Subsequently, at the 2023 interim results meeting, the company's founder Yu Huiyong reiterated the 10,000-store plan, and the goal will be achieved in 2027. The long-term goal is to open 30,000 stores by 2042.
However, at present, Baiguoyuan still has a long way to go to complete the "10,000 store plan". In the eyes of industry insiders, as a high-loss fresh food industry, it is large and scattered, and it is difficult to achieve the goal.
In recent years, boutique supermarkets, fresh e-commerce, community group buying and other formats have entered the market strongly, further squeezing the basic plate of Baiguoyuan's simple fruit industry, and the fruit retail industry has entered a stage of diversified and homogeneous competition.
Reflected in the secondary market, on the day of Baiguoyuan's listing, the stock price hit a maximum of HK$7.12 per share, and the total market value once exceeded HK$10 billion. As of the close of trading on April 5, the share price of Baiguoyuan closed at HK$3.17 per share, and after one year of listing, Baiguoyuan's share price has fallen 55.48% from its peak and 47.17% from the issue price.
Under the rapid expansion, how to strengthen the control of franchisee stores and avoid the occurrence of food safety problems has become one of the homework that Baiguoyuan urgently needs to improve.
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