China Food

Durian, the first strand of fruit

In the
trillion fruit market, the business is not as good as expected, but the characteristics of high-frequency consumption do not affect the giants’ rush to enter the market.
Here comes the first fruit.
On September 5, Hongjiu fruit officially landed in Hong Kong stock market ahead of Baiguoyuan, with an issue price of HK $40 / share. As of today’s closing, each share was HK $40, with a total market value of HK $18.683 billion.
Hongjiu fruit has operated fruits for nearly 20 years and has an “end-to-end” supply chain. According to the data of ZhuoZhi consulting, in terms of sales revenue in 2021, Hongjiu fruit is the largest durian distributor in China and one of the top five distributors of pitaya, mangosteen and longan.
Unlike many fruit merchants who earn money at the C-end, Hongjiu fruit mainly earns money from terminal wholesalers. Fruit king, durian King… Under many labels, Hongjiu fruit tells different stories in the fierce competition for trillions of fruits in the Jianghu.
Revenue exceeded 10 billion yuan in three years
Consumers’ fruit freedom may not be fully realized, but Hongjiu fruit provides fruit freedom to fresh fruit distributors.
Data show that Hongjiu fruit focuses on the whole industrial chain operation of fruits mainly originating in China, Thailand, Vietnam and other places. At present, Hongjiu fruit has formed a fruit product portfolio of 49 categories with durian, mangosteen, longan, pitaya, chelizi and grape as the core. It is the largest private brand fresh fruit distributor in China and the largest imported fresh fruit distributor in Southeast Asia.
The revenue of Hongjiu fruit increased year by year. From 2019 to 2021, the revenue of Hongjiu fruit was 2.078 billion yuan, 5.771 billion yuan and 10.280 billion yuan respectively, and the net profit was 163 million yuan, 2.754 million yuan and 292 million yuan respectively; The adjusted profits were 228 million yuan, 662 million yuan and 1.09 billion yuan respectively, with a compound annual growth rate of 118.5%.
In the first five months of 2022, the revenue of Hongjiu fruit increased from 4.576 billion yuan in the same period of 2021 to 5.725 billion yuan; The adjusted profit increased by 39.6% from 533 million yuan in the same period of 2021 to 745 million yuan.
However, the gross profit of Hongjiu fruit is not high, and it has been declining in recent years until May this year. From 2019 to 2021 and the first five months of 2022, the gross profit of Hongjiu fruit was 393 million yuan, 957 million yuan, 1.613 billion yuan and 1.123 billion yuan respectively.
The turning point in the past two years is due to the “end-to-end” supply chain mode of Hongjiu fruit, which ensures that the strict standards set by Hongjiu are implemented in all links of the supply chain.
It is reported that the company’s “end-to-end” supply chain is composed of the following elements: in depth procurement and processing layout of fruit producing areas; A distribution network driven by digitalization with efficient removal of intermediate levels; National grid sales system.
Despite the impact of the epidemic, Yishe
Looking at the red orange vendors on the wharf, Deng Hongjiu had an idea and found scattered sales opportunities. Using the same pole, Deng Hongjiu joined the ranks of hawkers and sold fruits from street to street.
Deng Hongjiu once recalled: “in the first month, I made 80 yuan. I was so happy!” You should know that in those days, the average monthly salary of office workers was about 100 yuan.
Deng Hongjiu, who sold fruits and tasted the sweetness, used his brains. The bold one put all his wealth – 2000 yuan – into it, and brought more than 2 tons of red oranges from Changshou to Chongqing for sale. The purchase price was 0.3 yuan and the selling price was 0.6 yuan. They sold out in two days and earned more than 100 yuan.
Therefore, Deng Hongjiu resolutely gave up retail business and started wholesale business. In 2002, Deng Hongjiu and his wife Jiang Zongying jointly established Chongqing Hongjiu Fruit Co., Ltd., with Deng Hongjiu holding 90% and Jiang Zongying holding 10%.
In2005, a news that “15 kinds of Taiwan, China fruits will be imported with zero tariff” attracted Deng Hongjiu’s attention. Subsequently, at a trade show, Deng Hongjiu successfully reached cooperation with a Taiwanese company and introduced 4.4 tons of Taiwanese fruits to Chongqing in the first batch.
Unlike many fruit merchants, Hongjiu fruit has avoided competition in the domestic mass market. When selecting the main products, the rarity, characteristic flavor, nutritional level and origin of the fruit are comprehensively considered to ensure that it is relatively difficult to find substitutes in domestic fruits, so as to become a full industry chain supplier of high-end imported fruits and high-quality domestic fruits.
In addition, Deng Hongjiu also contracted hundreds of acres of land to drive local farmers to grow fruits and become rich, and joined hands with 23 most influential fruit wholesalers to invest in building a new fruit wholesale market in Jiangbei District.
Today, Hongjiu mainly deals in imported fruits from Southeast Asia. The company has formed a matrix of six core categories: Durian, pitaya, longan, grape, mangosteen and chelizi, accounting for more than half of the revenue. Durian is also the category with the largest revenue among the core fruits.
The gross profit rate of Hongjiu fruit’s core fruit is 17.5%, and the fruit with the highest gross profit rate is durian. In the past three years, the gross profit rate has been between 18.9% and 21%. The gross profit margin of four core fruits, namely pitaya, grape, longan and Mangosteen, is close to the comprehensive gross profit of the company.
Few people know that Hongjiu fruit is the largest durian distributor in China. In 2021, the durian procurement of Hongjiu fruit in Thailand accounted for 10.1% of the total durian imports from China to Thailand. It is no exaggeration to say that for every 10 durians the Chinese eat, one comes from Hong Jiu.
From 2019 to 2021, the sales scale of hongjiuguo durian was 473 million yuan, 2.107 billion yuan and 3.482 billion yuan, accounting for 22.8%, 36.5% and 33.9% of the company’s total revenue.
With the continuous increase of durian price and quantity, the profit contribution to Hongjiu fruit is becoming more and more important. Data show that durian contributed 99.562 million yuan and 3.9% of gross profit respectively from 2019 to 2021
In addition, emerging retail channels are also growing rapidly. Although traditional channels such as shopping malls, wife shops and vegetable markets are still the main channels of fresh fruit retail in China, emerging retail channels (community group shopping, community fresh food chain stores, instant e-commerce and integrated e-commerce) are rising rapidly, and it is expected that they will gradually become the mainstream channels for consumers to buy fruits.
But selling fruit is still a hard business. According to the prospectus, from 2019 to 2021, Baiguoyuan achieved a net profit of 248 million yuan, 45.658 million yuan and 226 million yuan respectively. In other words, the final net profit of Baiguoyuan and Hongjiu fruits, whose revenue exceeded 10 billion yuan in 2021, did not exceed 300 million yuan.
In the trillion yuan fruit market, business is not as good as expected, but the characteristics of high-frequency consumption do not affect the giant’s “scramble” to enter the market. Although the market concentration is low, the competition among the top players is fierce.
Either there is huge capital support or there is enough time to invest. With the continuous integration of upstream, middle and downstream supply chains, the fruit market is also developing towards digitalization, standardization and branding.

Cover image source: iStock Author: Wang tonton; Source: Guanchao new consumption (ID: tidesight), reprint has been authorized. Reprint authorization and media cooperation: Jennifer (wechat: 15151447934);
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Durian, the first strand of fruit



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