Yonghui Superstores (601933.SH) has been plagued by its food safety issues recently.
“It is impossible to detect all the products in more than 3,000 batches of self-testing.” On April 12, the relevant person in charge of Yonghui Superstores said in an interview with Chinese media that Yonghui Superstores self-tested more than 3,000 batches every day, in one quarter – 90 days, basically nearly 300,000 tests, there were only 15 batches of unqualified, “You said too much?” The person in charge asked rhetorically.
As soon as this remark came out, Chinese consumers became even more annoyed. The 15 batches of unqualified products originated from the announcement of the Fujian Provincial Market Supervision and Administration Bureau. The announcement showed that in the first quarter of this year, Yonghui Superstores had 15 batches of unqualified food in many stores in many places. Among them, the unqualified products that are sampled involve ofloxacin, enrofloxacin, cadmium, etc., after long-term intake, it can cause symptoms such as dizziness, headache, poor sleep, and gastrointestinal irritation.
“There were 15 batches of unqualified sampling inspections. What about inspecting all the foods?” Chinese netizens commented on the reply of the above-mentioned person in charge.
In response to questions from netizens, on April 14th, Zhang Li (a pseudonym) in the food safety inspection industry stated that the current market supervision bureau’s sampling inspection approach was mainly to find problems, and there may be a certain deviation between the unqualified rate of product sampling and the actual situation. “Fresh food production is basically still in a very primitive state, and the test pass rate is much lower than that of other categories. In addition to quality problems prone to occur in the production and circulation links, there are also detection accuracy problems in the rapid test industry.” Zhang Li said.
This is not the first time Yonghui Superstores has been “named”.
In the second half of 2020, according to the data of China’s national and provincial market supervision departments, among the top 100 supermarkets in the “blacklist” of random inspections, Yonghui Superstores had 41 unqualified random inspections, ranking first. In addition, in March 2021, the e-commerce platform of Yonghui Superstores was exploded and sold Moutai only to receive payment but not to deliver goods, which was questioned by consumers.
As a well-known retail company in China, Yonghui Superstores frequently has food safety issues and consumer rights protection incidents, which damage the brand reputation and fall into a crisis of consumer trust.
On April 13th, in response to the food sampling incident and related development issues, a Times Weekly reporter contacted Yonghui Superstores and sent an interview outline. As of press time, no response has been received.
New retail exploration
As one of the first companies to introduce fresh agricultural products into modern supermarkets, Yonghui Superstores, which has been established for 20 years, has already occupied a certain position in Chinese retail.
In 2010, Yonghui Superstores was listed on the A-share market. According to the official website, Yonghui Superstores has now developed over a thousand chain supermarkets in China, with business covering 29 provinces, 572 cities, and an operating area of more than 7.5 million square meters.
But under expansion, performance fluctuated repeatedly.
Wind data show that from 2010 to 2015, Yonghui Superstores’ revenue continued to rise, but its net profit fell by 28.9% in 2015, and the year-on-year growth rate of revenue fell from 45.33% to 14.75%. The growth rate was slowing down.
In the 2015 annual report, regarding the slowdown in revenue growth, it failed to achieve its business goals. Yonghui Superstores explained that it was mainly affected by changes in organizational structure, business cluster reform and the retail industry boom; and the decline in net profit, Yonghui Superstores believed that it was caused by a sharp drop in investment income.
It was in this year that Yonghui Superstores actively sought online efforts to open up offline stores and online services.
In 2015, Yonghui Superstores hatched Yonghui Yunchuang, aiming to combine supply chain and technology to give Yonghui Superstores online genes. Promote the format innovation of fresh retail. To this end, Yonghui Yunchuang gradually launched Yonghui Life Store, Super Species, Yonghui Life Home, and other businesses.
A year later, Yonghui Superstores reached cooperation with JD.com and obtained a strategic investment of 4.31 billion yuan from JD.com. Yonghui Store landed on JD Daojia’s platform to jointly expand the fresh O2O market and gradually enter new retail.
At the same time, Yonghui Superstores continues to expand its supply chain system.
In March 2017, Yonghui Superstores participated in the acquisition of 40% of the shares of Daman Company in the United States to accelerate the promotion of retail reform and the development of new formats and new businesses; in December of the same year, Yonghui Superstores attracted Tencent to become a shareholder.
On April 13, Bo Wenxi, chief economist of IPGlobal China, told Times Weekly that Yonghui Superstores has been acquiring mergers and acquisitions over the years, which has strengthened the construction of supply chain capabilities to a certain extent and promoted the reform and development of new retail.
But the exploration of new retail has not been smooth.
The focused Yonghui Yunchuang failed to achieve its initial goals, and even continued to lose money, causing performance drag. The financial report shows that in 2018, Yonghui Yunchuang lost 945 million yuan, plus the loss of 116 million yuan in 2016 and the loss of 267 million yuan in 2017, resulting in a cumulative loss of 1.328 billion yuan in the past three years.
Even if Yonghui Superstores’ revenue growth improves, its net profit remains unstable. From 2016 to 2019, the year-on-year growth rate of Yonghui Superstores’ revenue was 16.82%, 19.01%, 20.35%, and 20.36%; the growth rate of net profit attributable to the parent was 105.18%, 46.28%, -18.52%, 5.63%, respectively. In 2018 Decline again this year.
In December 2018, Yonghui Yunchuang was divested of the listed company system. At the same time, the news that Yonghui Yunchuang’s business and Super Species have closed stores one after another have also been reported, and store opening plans for other businesses have been simultaneously reduced.
However, in July 2020, Yonghui Superstores announced the repurchase of Yonghui Yunchuang and regained control of its management and operation rights. In this regard, Bai Wenxi believes that behind Yonghui Superstores’ repurchase of Yonghui Yunchuang, it may be based on the maintenance of market value and the corresponding financial arrangements in terms of performance.
On April 13, Lai Yang, a member of the Expert Committee of the China Federation of Commerce, said to a reporter from Times Weekly that for new retail, in addition to online transformation and consumer experience, what is more important is the upgrade and transformation of the entire business system. “Yonghui Superstores also needs to look for more business developments in new retail, not only relying on the main hypermarket format. Although Yonghui Superstores is now exploring some small business formats, it does not have a business model that can form a new growth point,” Lai Yang said.
Fight in the community fresh market
In terms of new retail, Yonghui Superstores seems to be betting more on the fresh produce business.
The fresh food business has always been the core of Yonghui Superstores’ revenue. From 2010 to 2019, the fresh food and processing business of Yonghui Superstores’ main business has never been less than 40% of Yonghui Superstores’ revenue. Among them, in 2019, Yonghui Superstores’ fresh food and processing business achieved revenue of 41.448 billion yuan, accounting for 47.25% of total revenue.
At the same time, from 2010 to 2019, the gross profit margin of Yonghui Superstores’ fresh food and processing business was around 10%. Southwest Securities pointed out in the research report that the loss rate of the fresh food industry was about 20% to 30%, and the fresh food loss rate of Yonghui Superstores was only 3%-4%.
“As a traditional offline retail format, Yonghui Superstores has a competitive advantage in the fresh food market.” On April 13, Jiang Han, a senior researcher at Pangu Think Tank, told the Times Weekly reporter.
The high-frequency fresh food business has been gradually deriving its scale.
According to iiMedia Consulting’s data, the transaction scale of China’s fresh food market continued to expand from 2013 to 2019. In 2019, the transaction size of China’s fresh food market reached 2.04 trillion yuan, a year-on-year increase of 6.8%. Among them, community fresh food stores have one-third of the consumer groups in China’s fresh food market.
However, Yonghui Superstores has not established an industry advantage in community fresh food. In 2019, Yonghui Superstores launched the Yonghui Mini store, positioning itself as a community fresh food supermarket, adopting the form of “big stores with small stores”. Compared with Yonghui Life, which was previously positioned as a community fresh food convenience store, Yonghui Mini mainly focuses on expansion The supermarket-to-home business further “closes” to community fresh food.
Following this, the Yonghui Mini store adopted the “one store per day” speed of opening stores. As of September 30, 2019, there were 510 Mini stores, and as of the end of 2019, Mini stores had grown to 573. But only one year later, the number of new stores gradually fell short of the number of closed stores. In the first half of 2020, there were only 458 Yonghui Mini stores left, achieving sales of 1.451 billion yuan and a loss of 130 million yuan.
“The core reason for the loss of the Yonghui Mini store is that the supply chain and overall management system are still biased towards tradition, and there is no real comprehensive supply chain advantage.” Jiang Han believes that Yonghui Superstores has not only failed to consolidate the advantages of traditional large stores, there is no matching Internet advantage.
In contrast, Hema Xiansheng also launched the community fresh Hema Mini store, which was later than the Yonghui Mini store, but it has achieved overall profitability. In June 2020, Hou Yi, president of the Hema business group, revealed at the 2020 Linkshop conference that the Hema Mini store has only been established for about one year. The store opened for three months has daily sales of 200,000 yuan. The proportion exceeds 50%, and the opening of stores will be accelerated on a large scale in the future.
At the same time, in the traditional supermarkets, Wal-Mart’s community store model accelerated its expansion; RT-Mart tested the water mini store and RT-Mart; Gome launched the community fresh supermarket “Mei + Fresh”; e-commerce retail is still gearing up, JD.com and Suning plus large-scale community stores are launched, and Daily Fresh Food and Dingdong Shopping are striving to expand the regional market.
So it seems that there is a blockage in the front and a chaser in the back, with the fresh food business as the core of Yonghui Superstores, still slightly struggling in the exploration of new formats, and now frequently caught in the fresh food safety issues, the pressure can be imagined.
Source: Times Weekly