Not every duck can be made into a duck neck.
As a dietary country, Chinese has a long history of eating duck meat, with a wide variety of ducks in china, and is also the third largest livestock breed after pigs and broilers. But like white-feathered chickens and cows, the ancestral duck seedlings of Chinese meat ducks were once "stuck in the neck" by foreigners – in the 1990s, 92% of China's breeding pigs, 100% of broiler chickens, 95% of dairy cows and 90% of meat ducks had to be imported from abroad.
To this day, there is still a considerable number of meat ducks in the country, belonging to the "Cherry Valley Duck" from the United Kingdom. It's just a little laughable that although the hukou is hanging in the UK, the ancestral home of Cherry Valley Duck is in China.
During the Opium War, the American James Palmer brought 15 "Peking Ducks" from China to immigrate to the United States, and after 124 days of sailing, 9 (6 females and 3 males) ducks survived and became the ancestors of the American Peking Duck. Later, a group of American Chinese ducks crossed the Atlantic Ocean and were introduced to Europe, until the 1950s, the British Cherry Valley Farm (Cherry Valley Farm) began to focus on the technical problems of meat duck breeding, and finally bred the cherry valley duck that is now popular around the world.
During Margaret Thatcher's visit to China in 1991, a large number of Sino-British loan cooperation projects were promoted, and the meat and duck breeding project of Henan Huaying Group was one of them. It was also from then on that Cherry Valley duck began to enter China on a large scale. Until the first two years, Cherry Valley ducks still accounted for about 80% of China's white-feathered duck market [3].
In recognition of Cherry Valley Farms' contribution to export earnings, the Queen awarded them the Queen's Medal in 1984 and 1994. Ironically, cherry valley ducks are still called Pekin-duck in many european and American countries.
Mallard (top) and Cherry Valley duck (bottom)
Cherry Valley duck can be widely popularized for three reasons: (1) The lean meat rate is high and the taste is more universal. The lean meat rate was also one of the technical problems that Cherry Valley Farm vigorously conquered that year; (2) it was fast, and it could be out of the bar in about 40-60 days, and the turnover rate was high; (3) the conversion rate of feed was high, compared with the 2.8:1 ratio of other duck species, Cherry Valley duck could do 2.2:1, which belonged to the level of capitalists dreaming and laughing.
Generally speaking, in addition to the traditional Beijing roast duck, which has certain requirements for duck fat, the raw materials of plate duck, brine duck, sauce duck and other categories are cherry valley duck with low body fat rate, lean meat and a healthy body. The prosperous meat duck breeding industry has also created a category with very Chinese characteristics: duck neck, and has given birth to three listed companies with a market value of tens of billions - Absolute Taste, Zhou Black Duck and Huang Shanghuang.
This article is not to explore the meat duck farming technology, nor to exchange duck cooking techniques, but through the two companies of Absolute Taste and Zhou Black Duck, I found that there are many interesting things hidden in this seemingly inconspicuous business.
Now go to the main text section.
01
Mode: One is HiCha, one is Michelle Ice City
Although they are both made of duck necks, Absolute Taste and Zhou Black Duck are two completely different companies.
Both companies were founded at about the same time, but the number of stores in the taste is more than 6 times that of Zhou Black Duck, because the former is a franchise system and the latter is a direct operation system.
It is said that Zhou Black Duck also did franchise at the beginning of its establishment, but it was difficult to control the quality of franchisee service, and finally chose direct operation. In addition, the founder Zhou Fuyu once said that he once had "ideological limitations", thinking that the cashier must be responsible for his wife or relatives, and when he heard that his peers opened 100 chain stores, Zhou Fuyu felt incredible: "How many relatives does this boss have?" ”
Franchise and direct operation have also outlined two completely different development routes for the two companies. To put it simply: The taste sells the goods to franchisees, relying on the opening of stores; Zhou Black Duck sells the goods to consumers, and the price rises quickly. Or in other words, the absolute taste is more like Honey Snow Ice City, and zhou black duck is more like xi tea.
In 2005, Zhou Fuyu registered the "Zhou Black Duck" trademark, and all stores did not add up to more than single digits. The first store was opened in Changsha that year, and the number of stores became 61 at the end of the year. Correspondingly, the average unit price of the taste is less than 60 yuan / kg, and the average unit price of Zhou Black Duck is close to 90 yuan / kg.
Absolute Taste can expand at an average rate of nearly 1,000 per year, and the core is to make franchisees profitable. In order to do this, Absolute Taste gives franchisees about 40% of the profit margin, and the franchisees are responsible for store location (subject to company review), rent and decoration costs, as well as daily staff expenses and store operations.
Some securities companies have done calculations, 8,000-16,000 yuan per year franchise fee and management fee, plus 30,000-60,000 yuan decoration fee, 1-20,000 yuan equipment fee and other one-time expenses, plus rent, the initial investment cost of the franchisee is about 150,000-200,000, 3-6 months can be balanced, the investment payback period is 1-1.5 years.
The "self-operated" part of the taste, in addition to the self-operated stores that account for a small proportion, is the upstream production, processing and transportation links. The core of making money is to compress raw materials and transportation costs as much as possible under the premise of ensuring the profits of franchisees, and to widen the price difference between the factory price and the terminal retail price.
The cost of raw materials (i.e. meat duck) of duck neck /duck brine products often accounts for more than 70% of the total cost, and for Absolute Taste, due to the large number of stores and the large scale of procurement, it has greater bargaining power in the upstream than Zhou Black Duck. On the other hand, because the franchise system saves rent expenses, coupled with the first payment for suppliers and the goods, Absolute Taste can hoard goods at the low point of meat and duck prices through better cash flow, diluting the cost of raw materials.
In 2012, the outbreak of avian influenza caused the price of raw materials to plummet, and the tasteless opportunity was to hoard a large number of raw materials. In 2015, corn prices bottomed out, and the cost of meat and duck farming fell, creating another hoarding opportunity. For two reasons, the cost of raw materials per unit of taste is only 70% of that of Zhou Black Duck and about 90% of That of Huang Shanghuang.
In the transportation process, the core of cost reduction is to increase the density of factories and reduce the radius of transportation. Since its establishment, Absolute Taste has laid out more than 20 production bases across the country, basically covering the consumer market outside Xinjiang in Tibet, and the radius of product transportation has been compressed to 300-350 kilometers.
On the one hand, Zhou Black Duck has only 4 factories, and the distribution mode of high-speed rail + SF B2C makes its transportation costs naturally higher than absolute taste. On the other hand, the self-operated model has led to zhou black duck more personnel and rent expenses, which is reflected in the financial report, that is, the sales rate of zhou black duck is often ten times that of the taste, coupled with fewer stores, small procurement, and relatively weak bargaining power.
Therefore, the core of Zhou Black Duck's moneymaking is how to improve the efficiency of a single store, in other words, to do a premium. And the secret of the premium has always been hidden in the packaging of Zhou Black Duck.
In 2012, Zhou Black Duck launched the MAP modified air lock fresh packaging. The principle of MAP packaging is to use a mixture of carbon dioxide and nitrogen to reduce the oxygen content in the box to the maximum limit, which in turn extends the shelf life of the food. Compared with vacuum packaging, MAP packaging can avoid the squeeze of aromatics in food and maintain the taste as much as possible.
Zhou Black Duck's tone-of-air packaging
MAP packaging, although more expensive, is more likely to raise the premium because it looks safer and tastes better. From 2013 to 2016, the proportion of MAP packaging of Zhou Black Duck rose from 37.8% all the way to 89.4%, corresponding to which the average unit price of Zhou Black Duck also rose from 63.9 yuan / kg to 85.8 yuan / kg.
Two diametrically opposed development ideas are reflected in the data, that is, although the number of stores with absolute taste is 6 times that of Zhou Black Duck, before 2020, the revenue gap between the two companies is only about 1.4 times. However, the choice of route determines not only the income, but also the respective ceiling.
02
Upper limit: one is difficult to densify, one continues to sink
In June last year, Zhou Black Duck announced through its official WeChat public account that the single-store franchise model (that is, franchise) was opened, and small and medium-sized investors could also participate, and the threshold was more than 300,000 yuan of its own funds.
During the epidemic period, Zhou Black Duck, which has hubei as its base camp, has suffered heavy losses, and its income and profit have both fallen sharply, so that the "eternal old third" Huang Shanghuang has surpassed Zhou Black Duck for the first time in terms of income. Although the growth rate of this year's mid-year report is gratifying, more also comes from the low base of the year-on-year.
Although Zhou Black Duck repeatedly mentioned the impact of the epidemic in the annual report, in fact, the growth of its performance showed fatigue after 2018: on the one hand, high pricing made it difficult for Zhou Black Duck to expand into the sinking market, and could only continue to increase the density in first- and second-tier cities. On the other hand, when the MAP packaging is fully covered and the premium dividend will be exhausted, Zhou Black Duck has not found the next premium incision.
Therefore, whether it is the lack of growth of Zhou Black Duck or the release of franchises, it is more determined by the characteristics of the duck neck /duck brine category itself:
(1) There is little room for product differentiation. Compared with milk tea and baked goods, as a product with extremely standardized production, it is difficult for duck neck to differentiate in the product itself. In addition, the production process is similar, the looks are similar, and the living space in product recognition is also very small.
Therefore, Heytea can be differentiated by adding fruit, cake and honey snow ice city, and Zhou Black Duck can only make a fuss about packaging and store decoration.
(2) Whether the duck neck is sold well or not has little to do with the taste. The consumption scene of duck neck is closer to "impulse consumption", and it is often the flow of people + convenience that determines the sales of stores. As evidence, the stores with the highest efficiency of Absolute Taste and Zhou Black Duck Ping are basically in the closed space with large traffic at the airport and high-speed rail station.
On the other hand, due to the low degree of product differentiation, it is more the exposure of the store that determines the brand effect. The two companies recently released an interim report showing that the number of stores has reached 13,136, while Zhou Black Duck has only 2,270. From this point of view, the franchise model has natural advantages.
(3) The core of duck neck/duck brine is supply chain management capabilities. For example, raw material cost control, production end standardization, transportation radius management, and fine operation of stores. Whether it is the bargaining power of the upstream or the cost transfer ability of the downstream, the franchise system also has natural advantages.
In other words, what determines the space for category development is more or the scale. If we continue to maintain the high pricing + direct operation model, whether it is the expansion of first- and second-tier cities or the sinking market to obtain increments, the space is very limited. In the first half of this year, Zhou Black Duck also adjusted its new product strategy, supplementing more low-priced products of 9.9 yuan to 25 yuan.
On the contrary, the low pricing + franchise model is more conducive to the continued expansion of the sinking market.
Among the franchisees with absolute taste, the franchisees with only 1 store account for nearly 70%, and the franchised stores with an annual purchase volume of 250,000-500,000 yuan are the mainstream. In other words, the target of the expansion of the tasteless is more mom-and-pop shops and family brine shops in lower-tier cities. Some brokers have done calculations, and the expansion of the taste is about 20,000. Under the advantage of upstream factory density and transportation radius, the marginal cost of new stores will become lower and lower.
One is difficult to continue to increase prices, one can continue to expand, reflected in the company's performance and the attitude of the capital market, that is, whether it is revenue or market value, the taste has doubled the gap between Zhou Black Duck and Zhou.
03
Barriers: The difficulty of supply
For many businesses, the moat is often not in the technical content or brand advantage, but in the difficulty of creating a new supply.
For example, SF Express and Nongfu Spring, due to the natural administrative barriers to buying airplanes/water sources, for such companies, they have a natural first-mover advantage in the face of latecomers. For Internet platforms such as Meituan and Shell, when the share expands to an infrastructure-like existence, almost no one can afford the amount of investment needed to create new supply.
For catering enterprises such as Haidilao, Mixue Ice City and Absolute Taste, although there are no administrative barriers, there is no infrastructure attribute, and there is no dividend of market concentration. However, due to the difficulty of supply chain management under the scale, many times the scale itself will become a moat.
On the other hand, the vast territory and huge population size are also doomed, whether it is the channel overlords such as Morning Light Stationery and Bull Electrical Appliances, or the ten thousand store giants such as Honey Snow Ice City and Absolute Duck Neck, their stories are far from the end of the day.
End of full text. Thank you for your patience in reading.