China Food

Cluck cluck, will rural chicken become the first stock of Chinese fast food?

why has Chinese fast food been “silent” for a long time in the capital market?

Wen: Shi Wei   

Source: EURONET (ID: i-yiou)


Since the delisting of rural base in Waterloo in 2016, the throne of “the first share of Chinese fast food” has been vacant.

However, the market does not wait. The localization process of Western fast food such as McDonald’s and KFC has accelerated. More than 30 years into the Chinese market, KFC and McDonald’s have opened more than 8000 and more than 5000 stores respectively, and the market share of Chinese fast food has been squeezed.

Fortunately, while Helens, Naixue’s tea, Laowang, green tea and other catering enterprises are preparing for IPO or successful listing, Chinese fast food has ushered in the dawn of capital: Recently, it is reported that the rice fast food brand hometown chicken is receiving listing guidance, and the old uncle of another similar brand is also preparing for IPO. Who can become the “first share of Chinese fast food” It immediately became a hot topic for investors.

During the epidemic, the chairman’s “hand tearing the joint letter of employee salary reduction” became popular, which was favored by many people.

Although the hometown chicken is known by netizens because of its frequent marketing activities, such as “inviting Yue Yunpeng to speak” and “clucking official micro”, in terms of the number of stores, the hometown chicken after 18 years of development has become the first real Chinese fast food, with more than 1000 stores in the country, all of which are directly operated stores.

The purpose of this listing of Laoxiang chicken is to raise funds for expansion. Its counseling and filing report shows that in order to expand the company’s market sales channels, increase the company’s central kitchen production capacity, improve market share and overall competitive strength, and promote the long-term and healthy development of the enterprise, Laoxiang chicken hopes to realize equity financing through the securities market, enhance capital strength and promote the accelerated development of its main business.

Why did the rural chicken, which has been developing for 18 years, choose to be listed at this time? Is the Chinese fast food it represents a good business? Why has the Chinese fast food with a broad market been “silent” in the capital market for a long time?

From “raising chicken” to “eating chicken”

The development process of rural chicken can be summarized as “from raising chicken to eating chicken”.

In 1982, Shu Congxuan, the founder, bought more than 1000 chickens with the money given by her parents when she got married and set up a chicken farm for more than 10 years. After efforts, Shu Congxuan became the largest farmer in Hefei, but with the increasingly fierce market competition, the profits of the chicken farm fell again and again. After attending a fast-food franchise training, Shu Congxuan germinated the transformation from the upstream supply chain The idea of opening a store downstream.

The first thing to solve is the dishes. On the one hand, learning from KFC, on the other hand, relying on its own breeding advantages, Shu Congxuan chose to make Chinese fast food focusing on chicken and chicken soup. In order to establish a competitive barrier, Shu Congxuan chose to use Feixi old hens with long feeding cycle but better taste as raw materials. According to rumors from the outside, in order to develop menus, Shu Congxuan killed them There are more than a thousand chickens.

After a series of preparations, the first Feixi old hen fast food restaurant officially opened on Shucheng road in downtown Hefei. The store mainly focuses on Chinese dishes and chicken soup stews.

Since then, Shu Congxuan’s fast food business has become bigger and bigger, and he began to shift the focus of his career to catering.

In 2005, Shu Congxuan changed the name of the breeding company “Zhengwang” since 1990 to “Feixi old hen”. In 2012, Feixi old hen had more than 100 direct stores in Anhui fast food restaurants. In 2013, Shu Congxuan cut off diversified businesses such as raw poultry retail under the suggestion of trout company, and officially changed the name of “Feixi old hen” to “hometown chicken” , and spent 50 million yuan to promote brand upgrading. It must be mentioned that the consultation fee for this renaming is as high as 4 million yuan, which is two-thirds of the profit of that year.

Subsequently, the native chicken took root in Anhui Province, which has a taste bonus, and tried to expand to other provinces in a small scale. Official data show that by 2020, the native chicken has served 600 million consumers, an average of 500000 people a day and an annual sales of more than 3 billion yuan.

It is worth mentioning that in January 2018, Laoxiang chicken accepted the olive branch of capital for the first time and wholly acquired Wuhan local fast food brand Yonghe King with the funds of Jiahua capital, aiming to achieve scale expansion through “turnover acquisition and transformation” and gradually merge the organizational structure of Wuhan Yonghe and Laoxiang chicken.

The epidemic makes 2020 a difficult year for catering enterprises, but the villagers’ chickens further show their ambition.

In August 2020, after the “200 yuan local flavor conference”, the villagers released a video from Yue Yunpeng, which was “empty” and invited to speak of the hometown chicken brand. In the video, the beam announced officially from Beijing that it will enter the first tier cities of Shanghai, Shenzhen, Hangzhou and other new front-line cities.

In May 2021, the local chicken official announced that “there are more than 1000 fast food restaurants in China” According to its claim, the rural chicken has achieved a revenue of 1 billion yuan in 12 years and 2 billion yuan in two years; from 2011 to 2019, the profit has increased 33 times, the sales revenue has increased 32 times, and the average annual growth rate is about 40%; for the future 2023, the rural chicken has set up 1500 Direct stores and a revenue of 100 billion yuan.

“Local flavor” marketing master

Although there is a name that can be called “local flavor”, Lao Xiang chicken has always been in the forefront of marketing. Hot search topics such as “hand tearing employees’ joint salary reduction letter”, “selling cars and houses to pay employees”, “200 yuan press conference”, “inviting Yue Yunpeng to speak” and “clucking official wechat” have made the villagers’ chicken break the circle familiar to more netizens.

Source: WeChat official account

For example, during the epidemic, catering enterprises were struggling, and the villagers’ chickens were said to have a conservative estimate of a loss of 500 million yuan. In February 8, 2020, a video released by the WeChat official account showed that the staff showed a joint letter from employees, but later tore the letter and said, “even if we sell houses or sell cars, we must do everything possible to ensure that you have food and classes.” The video attracted the attention of many netizens. After it was released for more than 10 minutes, the broadcast volume exceeded 100000. Shu Congxuan also became popular on the Internet because of “tearing the joint salary reduction letter of employees by hand”.

After that, the local chicken released the “2020 local chicken strategy press conference” on March 18, and invited many media to participate, transmitting the news that “the business situation of the enterprise is OK, the expansion plan is planned, and the landing in Beijing, Shanghai, Guangzhou and Shenzhen”. Because of primitive props, scenes, wearing and the budget limit of only 200 pieces, the conference was dubbed “200 yuan soil flavor conference” by netizens, and the villagers also became popular again.

Source: WeChat official account

Recently, the villagers’ chicken also rubbed the hot spot of EDG hero league championship. On the day of winning the championship, the official microblog of “cluck cluck” cute rural chicken was often released. At more than 2 a.m., he excitedly tweeted that he wanted to call the chairman to wake him up. Shu Congxuan commented and replied that “what is a remote chicken”, and the two sang and boarded the hot search.

Source: Official microblog of local chicken

Fancy marketing of rural chicken seems to be “not doing business”, but it does have the support of hard strength behind it.

Looking back on the development process, the rural chicken can become the giant of more than 1000 directly operated fast food stores, thanks to the foundation of its farmers. In terms of operation mode, rural chickens cover the whole industrial chain of breeding, breeding, slaughter, deep processing and sales. On the one hand, they obtain higher profits through food deep processing, and use the good cash flow of catering business to feed the upstream supply chain. On the other hand, they can effectively grasp quality control, efficiently allocate financial, human and material resources, and improve commodity utilization and turnover.

Focusing on chicken soup also makes rural chickens occupy a certain consumer mind. Compared with the food package commonly used by fast food enterprises, taking chicken soup as the main dish, and then flexibly adjusting the small bowl dishes with chicken soup according to region, season and supply chain can improve the dining experience of fast food; At the same time, the supply and price of chicken are stable, which can ensure standardized production and resist the risk of rising food prices.

However, there are two sides to the coin, and the local chicken is also limited by regional taste preference, business model and so on.

The challenge faced by local chicken should not be underestimated if it wants to cater to the tastes of consumers in the new market. Just as Haidilao, which specializes in Sichuan hotpot, does not dare to open a shop in Sichuan, where there are many similar products, Laowang, which specializes in Guangdong hotpot, is based in Jiangsu, Zhejiang and Shanghai, which do not like spicy food. The local chicken, which focuses on fast food chicken soup, may not be able to meet the Cantonese who have higher requirements for the taste of soup. It is more difficult to conquer the northerners who do not have the habit of drinking soup.

In terms of business model, the business model of high cost, heavy assets and large structure will not only limit the development speed of rural chickens, but also force rural chickens to need more management talents. After experiencing the black swan incident, many Chinese food brands, including rural chicken and Xibei youmian village, have become more aware of the importance of capital for enterprises to resist risks and expand their stores.

Therefore, rural chicken hopes to use the power of the secondary market to assist its national expansion strategy, shorten the time required for enterprise expansion, and seize a greater market share.

Can you be “Chinese Macon”?

Chinese fast food is highly expected by the Chinese people. “Chinese version of Macon” is the dream of Chinese fast food all the time. It is expected to become the hometown chicken of “the first share of Chinese fast food”. Maybe it is a step further from this dream.

KFC and McDonald’s have been localized in China for more than 30 years. The two brands have opened more than 8000 and more than 5000 stores in China respectively. KFC’s localized meals have even gradually iterated from the old Beijing chicken roll to snail powder and string incense. However, in contrast to Chinese fast food, until November 2020, no Chinese fast food brand has achieved the ambition of breaking thousands of stores.

In the primary market, Chinese fast food brands are not so favored by capital. According to tianyancha data, there were about 125 investment and financing events in the catering industry in the first half of 2021 (as of July 15), with a total financing amount of about 7.5 billion yuan; A total of 18 catering categories are involved, of which the most are tea, coffee, pasta, baking, etc. there are relatively few financing events in the field of snacks and fast food.

In the secondary market, there are only two listed fast food brands, one is Yoshino’s Chinese agent Hexing catering, and the other is Ajisen China, which focuses on Japanese ramen. The rice fast food brand rural base was listed on the NYSE in 2010, then suffered a Waterloo in performance and net profit. It withdrew from the market in 2016, closed more than 10 stores in Beijing and Shanghai, and retreated to its base in Sichuan and Chongqing.

Compared with dinner, fast food is more rigid, more reproducible, easier to scale, and has higher taste acceptance. According to China catering report, the market scale of Chinese fast food is expected to reach more than 800 billion yuan in 2021, and the number of stores is close to 3 million. Among them, rice fast food is the largest segment of Chinese fast food, accounting for 52%.

However, at present, the current situation of Chinese fast food is that there are categories without brands. The number of stores of the three national fast food categories, braised chicken, Lanzhou ramen and Shaxian snacks, exceeds 10000 in China, but there is no leading brand in the huge number of stores.

Why Chinese fast food has been “silent” for a long time? There are three main reasons:

First, taste restrictions.

Several Chinese fast food players are rooted in the base camp with taste bonus. For example, the rural base is rooted in Sichuan and Chongqing, and its brand Mr. rice focuses on second tier cities such as Chongqing, Chengdu, Wuhan and Changsha; 80% of the more than 1000 local chicken stores are in Anhui Province; More than 85% of the stores of the old uncle who recently applied for IPO are in Jiangsu, Zhejiang and Shanghai; Food enterprises such as Hehegu and zhenkung Fu occupy the markets in North and South China.

There are eight major cuisines in China. There are great differences in ingredients, cooking skills and tastes, and they are subject to the local terrain and culture. Most of the categories that can break the regional restrictions rely on large-scale population migration. For example, Sichuan cuisine and Sichuan Chongqing hotpot are all over the country because of the contribution of Sichuan people in the major labor export province, as are braised chicken, Shaxian snacks and Lanzhou Ramen all over the country. In other words, places with a large number of immigrants will gather many cuisines.

Taste restriction is also a challenge for local chickens. In 2011, the local chicken tried to go out of Anhui, but faced with the problem of regional taste adaptation, it had to shrink back to the headquarters and continue to polish. It was not until August 2020 that the local chicken officially announced its entry into the first / new first tier cities such as Beijing, Shanghai, Shenzhen and Hangzhou. Before the official announcement, although the local chicken had expanded in other places, it only entered cities such as Wuhan and Nanjing with close geographical relations and large-scale population flow.

Second, business model restrictions.

It is difficult to become a local snake food enterprise, and it is more difficult to expand across regions. The rural base is defeated by unstable foundation and blind expansion. The withdrawal of tea Yan Yuese, the overlord of Changsha drinks, from Shenzhen is also a failure case. On the one hand, the high rent in Shenzhen can not support the dense store layout strategy of tea Yan Yuese. On the other hand, its low customer unit price leads to low gross profit and is difficult to maintain the store operation.

The business models of different brands need to be adjusted according to local conditions in cities with different consumption power. For example, sipping in the first tier cities with low customer unit price becomes the representative of high consumption when sipping in the second tier cities, and one of the stores is located in the luxury shopping mall in Changsha. In 2018, the banner hanging outdoors said “small hot-pot/" 22375 rel="nofollow" target="_self">hot pot eaten in Beijing, Shanghai, Guangzhou and Shenzhen”.

In first tier cities such as Beijing and Shenzhen, rural chickens are also adjusting their business mode to adapt to local consumption power. For example, a variety of fried dishes have been launched to increase the customer unit price to meet the higher rent and labor cost. According to statistics, the customer unit price of local chicken stores in Hefei, Anhui Province is 21-27 yuan, while the customer unit price of stores in Beijing has risen to 36-45 yuan; The flagship store of rural chicken farm in Beijing xinhuicheng shopping center has a total area of 500-600 square meters, and other products such as fine brewing, bird burning (Japanese barbecue), coffee and tea have been added. The per capita customer unit price has been increased to 60-110 yuan; There is also a local chicken tavern in Shenzhen, which is open from 10 a.m. to 2 a.m., where consumers can taste freshly mixed cocktails.

Flagship store of Laoxiang chicken farm in Beijing xinhuicheng Shopping Center

Third, supply chain constraints.

A strong and stable supply chain can help support the cross regional expansion of food enterprises. In addition to the brand strength and operation capacity, what supports the regional expansion of McDonald’s and KFC is its strong supply chain.

For example, McDonald’s, 90% of its food, packaging, toys, uniforms and distribution services in China are provided by local farms and factories, and its suppliers include large state-owned and private enterprises such as shounong group, Sanyuan food, Shengnong group, Guangming dairy and Fengxiang food; Haidilao, the first catering stock, also divided its supply chain into enterprises with subdivided tracks such as Shuhai, Weihai and Yihai. On the contrary, the huge supply chain enterprises are also favored by many large chain restaurants. For example, the main customers of Qianwei central kitchen include pizza hut, KFC, Haidilao, Wallace and other Dalian lock brands.

The instability of the supply chain will bring great unstable factors to the operation of food enterprises. In the past pig cycle, the high price of pork made it difficult for many Chinese food enterprises, but the catering enterprises with chicken as the main raw material were hardly affected. Because the supply chain supply and price of chicken were stable, the taste was universal, the public acceptance was high, and there were big brands such as Macon for consumer education, so Wallace, Dexter Zhengxin chicken chops and other brands expand rapidly and in large quantities.

For native chickens, it is a great advantage to have a complete supply chain from breeding, breeding, slaughter, deep processing to sales. Strong supply chain capacity can help native chickens control the cost of raw materials, the taste of meals and sales standards, which is conducive to regional market expansion. However, the limited coverage area of the central kitchen and the high cost of cross regional logistics and transportation have also slowed down the national expansion of rural chickens.

As stated in the guidance filing report: “in order to expand the company’s market sales channels, increase the company’s central kitchen production capacity, improve the market share and overall competitive strength, and promote the long-term healthy development of the enterprise, villagers hope to realize equity financing through the securities market, enhance capital strength and promote the accelerated development of the main business.”

For Chinese fast food, the resistance that the “local snake” brand wants to become the “Chinese version of Macon” will be greater than when Macon expands in China. Limited taste and business model, limited management and supply chain capacity will be the main difficulties, which makes catering enterprises not only adapt to local consumption power and taste, but also need to consolidate the foundation and reduce the cost of operation and ingredients.

Rural chicken wants to become the “first share of Chinese fast food” recognized by the people. It is obviously not enough to “cackle” on microblog.

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