On the way to the market for the third time, Baiguoyuan overturned. Recently, a blogger revealed that the two orchard stores secretly visited had the problem of making spoiled fruits into fruit cuts, selling small fruits at the price of large fruits, and treating moldy apples Laissez faire, overnight and cut fruit continue to sell and many other problems.
In this regard, the official of Baiguoyuan made an emergency response in the early morning of May 7, saying that the stores involved were Jianhe Road store in Chenghua District of Chengdu and Jianghan North Road store in Wuhan. At present, Baiguoyuan has been required to close down for rectification. At the same time, in order to prevent the recurrence of the incident, the operation and quality management of stores across the country will be checked again.
It is worth noting that just five days ago, Baiguoyuan just submitted its listing application to the Hong Kong stock exchange to impact the "first share of fruit retail" in China. At this time, the food safety problem was exposed. Can its listing dream still be achieved?
The clerk "knowingly committed a crime" and cut the spoiled fruit
Baiguoyuan, founded by Yu Huiyong and Xu Yanlin in 2001, opened its first store in Shenzhen in 2002 and became the first fruit franchise chain store in China. Now there are more than 5000 stores, which is known as the largest fruit retail enterprise in China.
As we all know, in the fresh business, the word "fresh" is emphasized, and Baiguoyuan naturally knows its way. Therefore, in its original fruit standard system, freshness is called "rise and fall line", safety is called "life and death line", and it is stipulated that "overnight fruit is not allowed to be sold".
However, the reality is surprising. On May 6, the popular science blogger "insider picket bureau" released an unannounced interview video on multiple platforms, showing that two stores in Baiguoyuan not only turned a blind eye to the requirements of the headquarters to prohibit the sale of overnight fruits, but also cut the deteriorated fruits into fruit and put them on the shelves for sale.
"We are not allowed to sell overnight fruits, such as half cut watermelon in summer. We need to clear the day at 9 o'clock (at night). If we are caught (selling overnight), we will be fined 500 for the first time and 1000 for the second time. But now the weather is cold, we can hide the melons that have not been sold that day. When we go to the headquarters for training next time, we will say that we have not sold overnight melons." In a hundred orchard store, the staff hid the half cut melon and pineapple on the shelf.
Source: microblog video screenshot
In another Baiguoyuan store, the staff also cut the melon that has fermented the taste of wine into fruit after "dispersing the taste" and ready to put it on the shelf for sale. For pears that have been put for a month and a half, and even moldy apples , the clerk would not throw it away, but sold it normally, and declared that "it's none of my business to have a problem with eating anyway. Who sells it is who's business" and "other stores have kept it longer than us, some for two or three months".
In addition, the video shows that the staff of a Baiguoyuan store labeled all the small pineapples as more expensive big pineapples, adding: "it doesn't matter. Anyway, people have money."
With the continuous fermentation of public opinion, in the early morning of May 7, Baiguoyuan issued an apology statement on its official microblog, saying that after self-examination, the stores involved were Jianhe Road store in Chenghua District, Chengdu and Jianghan North Road store in Wuhan. There were problems related to illegal grading of fruits, selling overnight fruits and deliberately avoiding the inspection of the headquarters. For the stores involved, Baiguoyuan said that it had closed down for rectification in accordance with the company's franchise management measures, and suspended and re educated the employees involved. The supervisor of the area where the store is located recorded a major demerit once, and gave a warning to the person in charge of the area and required them to make rectification in place.
Source: Official wechat of Baiguoyuan
In order to prevent the recurrence of the incident, Baiguoyuan also provided a series of ongoing rectification measures, including re inspection of the operation and quality management of stores across the country; Further strengthen store SOP operation training; Strengthen supervision, supervision and mystery customers to inspect and guide the freshness of fruits in stores from time to time, and strictly prevent any deteriorated fruits from being cut and sold.
But netizens don't seem to buy it. There are still many negative voices on social platforms such as microblog. Some even said that "if the brand does this, it won't buy any more".
The franchise system naturally has disadvantages, but its income contribution exceeds 80%
In fact, this is not the first time that the orchard has quality problems. According to the black cat complaint [complaint portal] platform, there have been nearly 1300 complaints related to the orchard, 57 complaints in the last month alone, with an average of about 1.9 complaints per day. Many of them involve quality problems, including "crushed fruit", "moldy longan", etc. In addition, there are problems such as high prices, wrong delivery of goods, poor service attitude of staff and so on.
Source: screenshot of black cat complaint
This is closely related to the operation system of Baiguoyuan.
For retail chain enterprises, the franchise model has always been an important means to achieve large-scale expansion. With the original intention of making fruit retail into a chain model, Yu Huiyong also chose to develop the franchise system, which not only saved the cost for the orchard in the early stage of entrepreneurship, but also accelerated its speed of attacking cities and land. It is understood that with this model, Baiguoyuan had more than 100 stores in 2008.
However, with the increase of the volume, the natural disadvantages of the franchise model are also exposed, that is, it is not convenient for unified management and operation, which makes it difficult to effectively solve the quality control and service problems of store goods. Although Baiguoyuan has tried to change, since 2011, it has successively taken back the franchise stores by means of equity participation, and began to encourage internal employee stock ownership to join, which has indeed played a positive role, it decided to open the franchise mode again after obtaining the capital increase for the first time in 2015.
According to its prospectus, by the end of 2021, Baiguoyuan had more than 5351 offline stores, including 5336 franchise stores, accounting for more than 99%; There are only 15 self operated stores.
Franchise stores do provide most of the revenue for Baiguoyuan. According to the data, from 2019 to 2021, the revenue of Baiguoyuan was 8.976 billion yuan, 8.854 billion yuan and 10.289 billion yuan respectively, of which the revenue from franchise stores was 7.687 billion yuan, 7.303 billion yuan and 8.125 billion yuan, accounting for 85.6%, 82.5% and 81.3% respectively. The rest came from self operated stores, regional agents and online channels.
Source: Baiguoyuan prospectus
However, theoretically, the more profit oriented franchise model has not brought it high profits. From 2019 to 2021, the net profits of Baiguoyuan were 248 million yuan, 46 million yuan and 226 million yuan respectively, and the profit margins were only 2.8%, 0.5% and 2.2% respectively.
This is mainly due to the relatively low gross profit margin of the fruit industry itself. "Compared with developed countries, China's traditional fruit value chain generally has low efficiency and multi-level distribution, resulting in high loss rate. According to frost Sullivan report, the loss rate of the industry generally fluctuates in the range of 35-45%, and the profit margin of the industry is low after adding multi-level distribution costs." Baiguoyuan said in the prospectus.
In addition, the meager profit of Baiguoyuan is also related to the repeated impact of the epidemic on offline operations, and the difficulty of online channel expansion. According to the data, from 2019 to 2021, the proportion of Baiguoyuan's online channel orders in the total orders was 19%, 22% and 23% respectively, increasing year by year, while the gross profit margin of the company's online channel sales of fruits and other foods was 2.8%, - 4.9% and - 0.3% respectively.
To investigate its root causes, Baiguoyuan launched the "big fresh" in 2019, expanded fresh and other categories on the basis of the original fruits, and further reduced the comprehensive gross profit margin of products; At the same time, the growth of online sales has led to the rise of the company's distribution expenses and packaging expenses; Coupled with the fierce competition in the industry, the growth of the company is difficult.
Fear of blocking the listing process
Will the exposure of food safety problems affect the listing process of Baiguoyuan?
You know, Baiguoyuan has long had the idea of listing, but the process is very slow and has suffered Waterloo several times. On June 1, 2020, Baiguoyuan submitted the approval of overseas initial public offering to the International Department of CSRC for the first time, and planned to be listed on the main board of HKEx, but failed; In November of the same year, Baiguoyuan also planned to IPO on the Shenzhen GEM and conducted counseling and filing at the Shenzhen Securities Regulatory Bureau, but there was no relevant news for more than a year.
Until May 2, not long ago this year, Baiguoyuan submitted its listing application to the Hong Kong stock exchange, which is the key period of its IPO. In this regard, Zhu danpeng, an analyst of China's food industry, said in an interview with China Singapore Jingwei that similar food safety incidents will have a great impact on its brand, which may affect its IPO.
"If things are serious, Baiguoyuan may be interviewed by the regulatory authorities and may face certain penalties. After this exposure, its IPO may not be lost, but Baiguoyuan may take the initiative to slow down the process."
It is worth mentioning that Baiguoyuan did not mention the risks of food safety and franchise stores in the prospectus. It said that failure to maintain food safety and consistent quality could have a significant adverse impact on Baiguoyuan's brand, business and financial performance; The performance of franchised stores has a significant impact on the company's operating performance. The company cannot control and may not be able to effectively monitor the operation of such stores or maintain the existing relationship with franchisees or regional agents.