is a huge gambler and relies heavily on joining.
“Before June this year, we thought that there were few old competitors in the Chinese market; after June, we saw some new competitors.” In October this year, a person close to the core of Ruixing said to Hu Xiang: Ruixing’s overall performance in 2022 met the company’s expectations (even some indicators exceeded the targets set at the beginning of the year), but Ruixing will not return to NASDAQ in 2022.
It may be waiting for a better price and time.
On November 22, Ruixing announced its financial report for the third quarter of 2022: its total revenue in the quarter was 3.894 billion yuan, up 65.7% year on year; The operating profit under American accounting standards was 585 million yuan, up 88.3% year on year.
In the past quarter and even in the whole 2022, Ruixing has made great efforts to improve its operational efficiency. In the third quarter, Ruixing’s operating profit margin (GAAP) reached 15% in the quarter, which is the first time that Ruixing has achieved double digits since its establishment.
Hidden behind the financial report is the new situation of the competition for the first brother in the Chinese coffee market: by the end of the third quarter, the total number of Ruixing stores had reached 7846, and the average number of monthly trading customers had reached 25.1 million; During the same period, the total number of Starbucks stores reached 6021, and the number of active members of the Star Club exceeded 17 million.
However, it is worth noting that Ruixing, who has handed over a good report card, did not cause “a chorus” in the capital market. After the release of the financial report, Ruixing once fell by 5% in the US stock market, and by the end of November 22, Ruixing had fallen by 4.21%. (Pink sheet market: a kind of stock circulation mode for OTC trading of enterprises that cannot be listed on the three major stock exchanges in the United States)
Compared with the second quarter, the “store level profit margin” of Ruixing’s self operated stores in the third quarter fell by 1.4% to 29.2% month on month, and the year-on-year growth rate decreased from 7.5% in the previous quarter to 4% in this quarter. At the same time, the year-on-year growth rate of Ruixing’s income also showed a downward trend, from 72.4% in the previous quarter to 65.7% in this quarter.
The epidemic is one of Ruixing’s pressure points. According to the data provided by Ruixing, the average number of stores in the “temporary closing” state every day from July to August 2022 is about 108; From September to October, the number rose to 330; In November, the latest statistics of Ruixing showed that on average, about 500 stores were in the state of “temporary closing” every day.
Rising costs are also testing Ruixing’s profitability. In the quarter, the material cost of Ruixing rose 56.6% year on year, and the store rent and other operating costs rose 49.4% year on year.
“Ruixing is one of the companies that still maintain growth in the Chinese stock market in the US stock market. The pink list market itself has a high degree of uncertainty. If you look at the timeline in the long term, you can see Ruixing’s growth. On November 30, 2020, Ruixing’s closing price in the pink list market was $4.55, while the latest closing price was $17.99, an increase of 2.95 times in two years.” US equity analysts
According to the internal information from Ruixing, the resource difference of products with different ratings is even reflected in the “cup body”: at present, Ruixing has matched some core products with a cup body with a separate IP. “Some S and S+products will get special cup body design, promotion resources, IP co branding and even spokespersons. These are all pre positioned. Ruixing will generally select products, formulate promotion and publicity strategies six months in advance.” The above person disclosed to Hu Xiang.
It is worth noting that the price band of Ruixing’s products will be more widely distributed in 2022. In addition to the traditional low-cost products, the “get it” price of its core S-class and S+class products will generally be between 15 and 20 yuan.
An analyst who did not want to be named said to Hu Xiang that according to the reissued financial report of Ruixing later, if Ruixing in the Lu Zhengyao period could achieve “the average number of cups sold by the store is 300, and the average customer price is 15-20 yuan”, then the Ruixing model was likely to make money at that time. “According to the model of Ruixing at that time, if the average customer price was less than 10 yuan, its single store operation might be in a loss situation. But the subtle thing is that if the cup volume remained unchanged, the average customer price rose to 15 to 20 yuan, and some of Ruixing’s single stores at that time could be profitable.”
The above people believe that this may be the key logic of Ruixing’s new team’s trading: on the one hand, it is the foundation of Ruixing to increase the cup output of single stores; On the other hand, it is the secret of Ruixing’s profitability to increase the customer price or optimize the profit space.
In Ruixing’s financial report, there is a paragraph of Guo Jinyi’s summary of Ruixing in the past quarter, which coincides with the above logic: “We continue to use our operating efficiency and expanding scale to further improve our profitability, and the operating profit margin in the third quarter was 15%.”
A detail that many people do not know is that today’s Ruixing is also a company managed based on the “OKR method”: every department of Ruixing has a detailed OKR. After the new leading team of Guo Jin Belt “took a firm seat in the lucky”, the “push OKR” model is the key measure of Guo Jin’s team.
“This is regarded as a means for Ruixing to pursue refined management and aspire to become a modern company.” An insider of Ruixing said that in Lu Zhengyao’s era, Ruixing was more like a “people based company” Today, Ruixing has “organized operation” through OKR and more detailed division of labor.
The above person mentioned a detail. In today’s meeting room of Ruixing, people will “brainstorm” fiercely, and even some young people who have just joined Ruixing will be “allowed to speak freely”. The person also said that Guo Jinyi gave Ruixing employees great “tolerance and freedom”, and that “in some key links, Mr. Guo is willing to delegate power to professionals, rather than go it alone”.
Another Ruixing employee who had experienced Lu Zhengyao’s and Guo Jinyi’s time said that the atmosphere in Ruixing today is very young and lively. In today’s Ruixing, except for special circumstances, there is no overtime or 996 at all
A person in charge of Ruixing’s promotion and investment promotion in the local market told Hu Xiang that this “hand to hand combat” was unprecedented since Ruixing was founded. “It is very fierce and fierce. The Snow City behind it is also very powerful, and it can afford to fight with us for a long time.”
After the expansion of franchise in January 2022, franchise stores have become the key weapon for Ruixing’s growth. Financial report data showed that in the third quarter, the number of Ruixing’s associated stores was 2473, accounting for 31.5% of the total number of Ruixing’s stores.
Franchise stores are also the key engine for Ruixing’s revenue growth: in the quarter, the revenue of Ruixing’s associated stores reached 899 million yuan, with a year-on-year growth of 116.1%, much higher than that of Ruixing’s self operated stores. The financial report data shows that the year-on-year growth rate of the same store sales of Ruixing’s self operated stores decreased from 94.5% in March 2021 to 19.4% in the third quarter of 2022.
From the opening speed of franchise stores, we can feel the “rivalry” between Lucky Coffee and Lucky Coffee: since 2022, Lucky Coffee has added 846 new franchise stores, while Lucky Coffee has added 801 new franchise stores according to the data of narrow door restaurants.
“Many of the new Lucky Cafe are close to the Lucky Cafe. In the same city, the two are still competing for the same investors. In the relatively depressed city, Lucky Cafe aims to attract customers through lower price products. There is competition between these products and Lucky Cafe.” Liu Chang, a new consumption analyst, believes that franchise stores play the role of Ruixing’s “new store engine” and “revenue growth engine”. Lucky coffee in the Snow City and Xicha, which has just opened its franchise, will bring competition to Ruixing’s franchise strategy.
An investor in the United States believed that the third quarter financial report showed that “Ruixing’s dependence on the franchise model has increased”. Under such circumstances, Ruixing needs to give investors more confidence to “prove the sustainability of the franchise model and its attractiveness and advantages in the face of greater competition.”
Some analysts pointed out that Ruixing may be faced with a situation of “front to back attack”. In addition to new competitors such as Snow City, Starbucks, an old rival, is also launching a new offensive. On September 14, Starbucks announced its “2025 China Strategic Vision”, which aims to achieve a 100% increase in net income and 400% increase in operating profit in the Chinese market in 2025 (compared with fiscal year 2022). Recently, Starbucks CEO Schultz once again expressed his attention to the Chinese market: “Starbucks is excited by the dawn of the recovery of the Chinese market in the fourth quarter. The Chinese market is the future of Starbucks.”
In order to find new growth points, Ruixing began to look overseas.
“We may have more actions at sea in 2023. The United States, Japan and Southeast Asia are all within the scope of Ruixing’s attention.” An insider of Ruixing told Tiger Smell that the successful cases of Snow City in Southeast Asia (Vietnam, Indonesia) had been studied in Ruixing, and the Japanese coffee market was also the focus of Ruixing.
At the same time, Ruixing also tried to find new S+projects besides raw coconut latte and raw cheese latte. “We now have two S+super blockbusters. If we launch new super blockbusters next year, our overall sales will reach a new high.”
The profit secret behind Ruixing’s financial report