China Food

Founded 19 years ago, more than 6000 stores and roadside businesses will also be listed

Yang Guofu, 19, decided to embrace capital. It’s just that others didn’t tell the story of counter trend expansion well. Can he?

Marching towards the scale of WanDian

At the beginning of the new year, many chain catering enterprises such as rural base, rural chicken and Hefu Laomian came out with IPO news one after another, including the spicy hot top stream “Yang Guofu”, which previously claimed that it was “not bad for money”.
The International Department of the CSRC recently disclosed that Shanghai yangguofu enterprise management (Group) Co., Ltd., the main company of Yang Guofu Malatang, has submitted the application materials for the approval of overseas initial public offering of shares by joint stock companies to the CSRC. This means that once accepted, Yang Guofu Malatang can submit a prospectus on the Hong Kong stock exchange, which is expected to become the “first share of Malatang”.
On the one hand, for many ordinary consumers, it is difficult to think that spicy hot, which originated from roadside stalls and can be seen everywhere in the streets, can also be listed; On the other hand, in the 19 years since its establishment, Yang Guofu has never had any financing behavior. Even if he encountered huge investment such as investment and construction of factories and buying office buildings in Shanghai, he has not relied on the power of the capital market. Always “not bad for money”, the sudden announcement of “embracing” the capital market inevitably leads to speculation.
Public information shows that Yang Guofu’s first store of Malatang was born in Binxian County, Harbin in 2003, which was also called “Yang Ji Malatang” at that time. In order to adapt to the Northeast People’s eating habit of not eating spicy food, Yang Guofu abandoned the traditional Sichuan spicy red oil soup bottom, chose to boil it with bone soup, and added milk and sugar to the soup to reduce the spicy degree and improve the freshness. It is this improvement that makes Yang Guofu hot and spicy hot become popular, step by step from the northeast to the whole country and even the world. By the end of 2021, Yang Guofu had more than 6000 spicy hot stores in 31 provinces and cities across the country, covering five overseas countries such as Singapore, Australia, South Korea, Japan and Canada.
Yang Guofu’s rapid expansion is due to the opening of the franchise model. After the successful registration of the brand name in 2007, Yang Guofu quickly used the franchise model to run horses and enclosure across the country, and the goal is far from the current 6000. Instead, it is planned that by 2025, the total number of stores at home and abroad will reach 10000, and the overall revenue of the group will reach 10 billion yuan.
About the first tier cities, the official information of Yang Guofu’s official account shows that there are four grades of franchise, including 27900 yuan in each city, 39999 yuan in Hong Kong, Macao and Taiwan each year, 23900 yuan in other prefecture level cities and municipalities, and 19900 yuan in towns and counties. In addition, on the basis of this fee, a brand deposit ranging from 10000 to 30000 yuan will be charged to each franchisee. In this way, the total franchise fee is not low. The highest region in Hong Kong, Macao and Taiwan needs nearly 70000 yuan in the first year, and the first tier cities in China also need nearly 50000 yuan.
Although the franchise fee is not low and there are many franchise stores, the franchise fee income accounts for only a small part in Yang Guofu’s revenue structure. Yang Guofu, the founder of the company, once said in an interview that the company’s total revenue in 2019 was 1.3 billion yuan, of which only 20% of the franchise expenses accounted for, and the bulk of the revenue was contributed by the commerce and trade sector. The so-called trade means that Yang Guofu sells condiments, kitchen equipment and restaurant furniture to franchisees.
Different from Zhang Liang’s mode that Malatang is only responsible for brand management and raw materials need to be imported rather than self-produced, Yang Guofu has a relatively complete supply chain system. In 2018, the self built factory and R & D center were put into use, which are specially used to produce spicy hot base, seasoning and other raw materials required by the store. The advantages in the supply chain not only enhance the profit margin of the company, but also lay the foundation for scale expansion. There is a view that, like the rural base, qixintian and other chain catering enterprises that gathered together for the IPO, speeding up the opening of stores will be Yang Guofu’s key plan after listing and financing. “If the infrastructure is built, once there is capital intervention, it can expand rapidly and open a gap with competitors”.

“Brave man”
expanding against the trend

However, although listing can quickly create blood for catering enterprises and solve the capital problems needed for expansion in the short term, it is not the “antidote” of enterprise operation in the long run, which has been verified from a number of listed catering enterprises. After listing, how to tell a good story and how to deal with stricter supervision are all problems that enterprises need to face.
At present, there are not many catering enterprises listed on a shares and Hong Kong shares. From the perspective of the Hong Kong stock market to be impacted by Yang Guofu this time, the more representative ones are Haidilao and Xiabu. As a kind of hot-pot/" 22375 rel="nofollow" target="_self">hot pot fast food, the performance of these two enterprises after listing and the performance of the secondary market also have a certain reference value for Yang Guofu.
Unfortunately, since the second half of last year, the two enterprises have fallen into the dilemma of turnover rate, continuous decline in revenue and continuous decline in share prices. Take Haidilao for example. Compared with the scenery when it was just listed, its current performance in the secondary market can be described as ice and fire. At the close of yesterday, Haidilao’s share price was HK $17.8, with a market value of HK $99.22 billion. Compared with the peak of HK $85.7 in February 2021, the share price fell by nearly 80%, and the market value evaporated by more than three quarters.
In the face of severe business difficulties, Haidilao started the closing strategy at the end of 2021, closing 300 poorly operated stores at one go. I wanted to take advantage of the “bottom reading” of the epidemic and expand against the trend. Who ever thought that after the normalization of the epidemic, the performance not only did not recover, but also continued to decline, “the bitter fruit can only be swallowed by ourselves”. Under the pressure of loss, Xiabu Xiabu also closed 200 stores in 2021.
The impact of the epidemic on the catering industry can not be underestimated. According to the data of China Cuisine Association, the growth rate of national catering revenue and the growth rate of catering revenue of units above the quota in 2020 decreased by 26% and 21.1% respectively compared with the same period of last year. Today, although the overall situation has been controlled, the recurrence of the epidemic still brings many unstable and uncertain factors. Any rapidly expanding catering enterprise may face the problem of unequal performance growth and store opening speed. Yang Guofu, who takes the franchise mode, although the main income comes from the “harvest” franchisees, the revenue of any franchise store will eventually affect the overall market.
In addition, as a kind of hot-pot/" 22375 rel="nofollow" target="_self">hot pot fast food snack, Malatang has stronger universality and lower threshold. Yang Guofu faces more competitors. In addition to chain brands such as Zhang Liang and Mi Jie, there are countless unknown brands and small shops all over the streets. In this regard, in addition to accelerating the horse racing enclosure and seizing more market share, Yang Guofu is also trying to extend to the retail business, launching self-supporting hot-pot/" 22375 rel="nofollow" target="_self">hot pot bottoms and self heating products for the C-end, trying to broaden the revenue structure. In Yang Guofu’s 10 billion target, the catering sector accounts for only 3.5 billion yuan, while the seasoning retail sector needs to achieve a revenue of 6.5 billion yuan.
Yang Guofu’s tmall official flagship store has been online since January 2021. It has been just a year. At present, there are 227000 fans and less than 20 SKUs in the store. Except for a hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning with a monthly sales of 20000 +, a self heating food with a monthly sales of 3000 +, the monthly sales of other products are less than 300. At present, the track of compound seasoning and self heating food is a red sea. As a new entrant, Yang Guofu is unlikely to make a great contribution to the performance in the short term.
In addition, going public means that enterprises are facing stricter supervision and greater profit pressure. The open franchise mode not only helps the rapid expansion of enterprises, but also brings hidden dangers to internal management and food safety guarantee. Yang Guofu has been named by regulators for his hot search on food safety related issues for many times. Listing means accepting more supervision from all aspects and paying more management costs. A slight difference will affect the company’s performance and stock price, which will be a great challenge for Yang Guofu.
Yang Guofu chose to list in Hong Kong stocks this time. It is estimated that on the one hand, considering the relatively rapid process of Hong Kong stocks, on the other hand, the audit of enterprise operation and profitability by Hong Kong stocks is not so strict compared with a shares. There have been successful cases of Haidilao and Xiabu before. Once the application is accepted, Yang Guofu will submit the prospectus as soon as February.
If it goes well, Yang Guofu may really win the “first share of Malatang”, but the story of “counter trend expansion” is not well told. Yang Guofu, really?
Author: Li Huanhuan; Source: FMCG (ID: fbc180), reprint has been authorized. Reprint authorization and media business cooperation: Amy (wechat: 13701559246); Join the community: Cherry (micro signal: 15240428449).
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