China Food

Lucky returns to life


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Since April this year, after the financial fraud, Ruixing delisted and re entered the OTC market, and gradually returned to the coffee business. But can it survive?
 ”

Open the wechat app “lucky coffee”, and you can order a cup of coffee with a 4.8% discount. Although the discount is not as strong as before, consumers can still buy cheap coffee online. The founder invested 1.4 billion yuan to leverage the company’s equity and debt financing of 17.3 billion yuan, and the business story of a market value of more than 85 billion yuan at its peak is not over.

 

Rumor has been that after seeking cooperation for more than six months, in October 26, 2020, Rui Xing coffee announced that it was hungry in the official account of WeChat third. The order is still delivered by the merchant himself. Compared with the possible cooperation in distribution capacity in the future, lucky tries more to obtain new traffic on the third-party platform.

 

This is in line with lucky’s self-help method. Yang feizeng, Chief Marketing Officer (CMO), said Ruixing’s operation strategy has been adjusted this year, mainly using community to stabilize users, focusing on improving the retention and frequency of existing users.

 

Compared with the financial fraud of China capital stock company in 2010, Ruixing did not start the mode of clearance sale quickly. Since April this year, after the financial fraud, Ruixing delisted and re entered the OTC market, and gradually returned to the coffee business. But can it survive?

save oneself

In Beijing, the wechat app “Ruixing coffee” is used to place an order and deliver it nearby. Within 30 minutes, new users can still drink a cup of coffee for 8 yuan. This is a little cheaper than the original coupons can be as low as 3-6 yuan a cup, but it is more cost-effective than the convenience store coffee of more than 10 yuan, which can still attract price sensitive people.

 

Ma Shuai, a distributor, said, “some stores can sell 300 orders a day, while others can only deliver dozens.”. It depends on the location of the store. The store I’m in charge of (located near an office building in the North Third Ring Road) can sell about 100 orders a day

 

On average, he delivers more than ten orders a day, and he can earn an average of 6 yuan for a single order. He will also subsidize 1-3 yuan for orders with long distance according to the mileage. According to the money earned from an order, Ma Shuai may belong to a third-party crowdsourcing distributor. Tan Jing, another distributor, said that at present, Shunfeng’s distribution service accounts for about 80%. He can run about 30 orders a day and earn 7-8 yuan for each order.

 

The order volume of this single store is almost the same as that before Ruixing’s listing. Just because of the fraud, the brand reputation was damaged, Ruixing stores once had almost no customer flow.

In 2018, the brain hole of Zhao Jianfei, a senior financial writer, has become a reality. In October 2018, he assumed that if Ruixing closed all its offline stores one to three years later, it would still retain its mobile phone app to sell coffee and even become an open platform to buy some other things, such as desserts and light food.

Recently, when placing an order with Ruixing, new users will be pulled closer to the enterprise wechat group of stores. Lucky, chief welfare officer of robot, will share 3-4 preferential messages every day to try to retain new users and attract new ones. At the end of July, Yang feizeng disclosed that there were more than 50 million Ruixing mobile app users and 2.6 million social users, including nearly 10000 wechat community users.

Through community operation, coupons are distributed, old users bring new users, and users who want to drink cheap coffee can be stabilized with low cost, so that they can spend more. This is Ruixing online to save the main way.

 

For this reason, Ruixing is still on sale, but not as fierce as before. Before the general 1.8% discount, 3.8% discount, now the majority of 4.8% discount. In addition, Ruixing’s restored stores also accelerated the launch of new products. After April 2, it launched nearly 60 products, launched a number of new series of products, and upgraded some light food products.

 

 

In Xiamen headquarters, Ruixing started the mid year national work conference in August this year. According to the data released during the period, except for more than 300 university stores temporarily closed due to the impact of the epidemic, Ruixing has realized positive cash flow in single store in July for the remaining 4000 stores. If this data is true and can be maintained, then lucky will achieve overall profitability in 2021.

 

In just 18 months, lucky, the world’s fastest IPO, seems to be recovering rapidly.

Is it alive?

Fortunately, Rui’s senior management has been involved in clearing up the fraud.

This year, Ruixing’s Chairman Lu Zhengyao, directors Li Hui, Liu Erhai and Shao Xiaoheng were removed from office at the special shareholders’ meeting on July 5. Earlier, Ruixing had fired Qian Zhiya, the former CEO, and Liu Jian, the COO, for forgery.

 

At present, Ruixing co-founder Guo Jinyi is acting CEO, and Cao Wenbao and Wu Gang are appointed directors of the company. However, according to Tianyan data, since August this year, Guo Jinyi has withdrawn from a number of supervisors of Ruixing affiliated companies, including Ruixing (Beijing) Co., Ltd. and Beijing qianlei Ruiyan restaurant Co., Ltd.

 

However, the actual operation of lucky or senior industry.

 

Cao Wenbao has 23 years of experience in the operation of world catering chain brands. He was the first manager of McDonald’s in China. He is in charge of the operations line business. In charge of national business north and south. Within half a month after taking office, Ruixing’s business level has been reduced from three levels to two levels. The original 12 districts have been re divided into three regions in the north and the south, with the cities directly under the regions.

 

In addition, Wu Gang, with 20 years of civil aviation experience, took over the supply chain business. Yin Honglei from Ali is in charge of personnel. Zhou Weiming from meituan is in charge of the product center. They all report to acting CEO Guo Jingyi.

China’s regulatory authorities have also put an end to the punishment of Ruixing.

 

Because Ruixing was not listed in China, the subject of this punishment is the General Administration of market supervision, and the punishment is also based on the Anti Unfair Competition Law of the people’s Republic of China, mainly involving false publicity. On September 23, it was fined about 2 million by the Municipal Supervision Bureau.

 

In addition, Ruixing may also receive fines from the Ministry of Finance and the Ministry of Taxation, but according to specific regulations, the amount of penalty will not be very large, ranging from 30000 to 50000. If the huge fine continues, lucky has no room for survival. But it is not necessary for the domestic regulatory authorities to completely eliminate the part of lucky that survived.

 

However, Meng Qingbin, a professor of business school at Renmin University of China, believes that the punishment subject of Ruixing’s financial fraud depends more on the American Securities Regulatory Commission and the overseas class action claims of investors. Financial fraud in the U.S. market, may be punished to ruin.

 

For example, the Enron incident in 2001. Enron not only received US $500 million (about RMB 3.4 billion) from the US Securities Regulatory Commission, but also paid US $7.2 billion (about 48.3 billion yuan) in the class action settlement. Enron, the world’s largest energy company, applied for bankruptcy protection in 2001 due to financial fraud, becoming the second largest bankruptcy case in the history of the United States.

 

Once the punished boots are finally landed, we have a clear expectation of the situation. As long as Ruixing is not cool, every step is going out of the bottom.

 

As a result, lucky had to return to the corporate culture management, single store revenue, and the business rules of customer first. Instead of expanding shop frenzy, the capital bubble is blowing. Now, lucky official wechat has not announced the city and number of new stores for six consecutive months.

Can I buy stocks?

It would be a very risky investment to buy lucky stock now. It’s not for everyone.

 

After all, some investors are still suing to get their lost money back. The U.S. class action case against lucky has appointed a lead plaintiff and a law firm, according to the news agency. The two funds disclosed that the investment lost 6.9 million US dollars (about 46.31 million yuan).

 

Other investors are looking at Dorothy. Since its resumption in the OTC market, many secondary market investors have made a wave. On June 3, US Eastern time, lucky closed at US $2.58 (about 17.31 yuan). Based on this calculation, the stock price of lucky rose by more than 113.56% for two consecutive days.

 

Behind the intense trading in the stock, analysts speculate that there are three possibilities.

 

First, large companies will buy lucky. There are rumors that Tencent and Yum China may take over the offer.

 

Second, short covering arbitrage. Ihor dusaniwsky of S3 partners, a financial analyst, once explained that “if these short sellers find that a lot of their unrealized profits are beginning to be swallowed up by the stock market rebound, they are likely to start buying stocks to lock in the remaining profits.”

 

Third, after the securities fraud, lucky may be seriously underestimated.

 

Luce Lango, a market analyst at investorplace, an investment community, believes that lucky, with a market capitalization of less than $1.5 billion (about 10 billion yuan), is in the process of recovery.

 

According to Lango, lucky is still China’s largest coffee chain with 4500 stores. The business model focusing on online takeaway orders is suitable for opening up the market in China with cheap coffee. The consumption habits of Chinese young people are more and more close to those of Europe and America, and the consumption of coffee is also increasing year by year.

 

He also calculated an account, and predicted that in the next 10 years, Ruixing will be able to open 30000 stores and the sales efficiency will reach half of that of Starbucks. By then, the company’s annual sales will reach 6 billion US dollars (about 40.268 billion yuan).

 

According to its research, lucky owns 35% of the retail coffee market. Assuming that it can maintain this market share, China’s coffee retail market may have 70000 stores by 2030, while lucky alone will open 25000 coffee shops in China. If we expand to Southeast Asian markets such as Japan, the number will be expanded to 30000.

 

Compared with Starbucks, its single store turnover in the United States is 1.3 million US dollars, the sales per square foot is 775 dollars, and it will reach 1000 dollars in the next ten years. Assuming that lucky can only operate half the level of Starbucks, and the average area of its cache store is only one tenth of that of Starbucks, the single store income is 200000 US dollars (about 1.34 million yuan).

 

pic/caixin

 

With reference to Starbucks’ 15% profit margin and 20% tax deduction, lucky can make 720 million dollars (about 4.84 billion yuan) a year. On this basis, multiplied by 28 times the median price earnings ratio of Starbucks in the past ten years, the future valuation of lucky will be close to 20 billion US dollars (about 134.2 billion yuan).

 

The valuation means there is nearly 20 times more potential upside for the stock. Currently, the market value of lucky is US $1.136 billion (about RMB 7.624 billion).

 

Investors who look at duoruixing mostly hold the above views. They believe that lucky is in the center of China’s consumption upgrading and the rise of coffee retail market. According to Euromonitor International, the number of specialty coffee and tea shops has soared by 50% in 2018 and 2019, while China now has 18350 stores, more than triple the number in 2014. Now, many convenience stores and fast food restaurants also sell coffee.

 

The problem with Langos, though, is that he may be too optimistic about lucky and the Chinese coffee market. As usual, Ruixing will release quarterly results in November, when we can see whether the new financial data can restore the confidence and enthusiasm of investors after the fraud scandal.

Source: Sina Finance and Economics
Source: Ruiwen record (ID: tigerrecord), reprint authorized.
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