At the turn of summer and autumn, the harvest season for the fruit industry has arrived. From September 6th to 8th, the 16th Asia Fruit and Logistics Exhibition was held at the AsiaWorld-Expo in Hong Kong. More than 700 professional exhibitors and buyers from all over the world attended the event to find new opportunities for the fruit industry to grow bigger and stronger.
During the exhibition, a special signing session attracted outside attention. 18 leading global fruit companies, including Zespri, Driscoll's, and Prize, have signed strategic cooperation agreements with Pagoda Group, "China's No. 1 fruit chain retail chain."
At the International Supplier Conference held by Pagoda, Yu Huiyong, founder and chairman of Pagoda Group, pointed out that the fruit industry has three major development opportunities: retail opportunities, ToB opportunities, and category opportunities . Judging from the position of the industrial chain, leading fruit companies are often relatively strong in the upstream, but this strength is concentrated in certain categories or brands, and the overall brand pattern is still fragmented. On the downstream side, consumers’ awareness of fruits is still mainly based on types, and they do not have a deep understanding of brands.
It can be seen that 18 of the world's leading fruit companies have joined hands with Pagoda, trying to find the password to break through the status quo and explore new growth opportunities in the latter.
Global suppliers, embrace Pagoda
The Asia Fruit and Logistics Exhibition returned to Hong Kong for the first time in four years, and Pagoda has gained a lot. 18 world-class fruit companies all have strong industry strength in their segments. For example, New Zealand Zespri's kiwifruit is New Zealand's "national fruit". Its sales once accounted for 30% of the world's total kiwifruit market sales, and it is the industry's top brand supplier. Zhuo Berry Company was founded in California, USA in 1872, and is the world's largest berry company. Yi Ke Berry is its berry brand. With 22 planting bases across six continents around the world, it has firmly maintained its brand professionalism and is in the consumer market. The reputation among them is first-rate.
(Pagoda and Zespri signed a strategic cooperation agreement. Source: Pagoda)
Therefore, when many of these leading groups in the fruit industry join hands with Baiguoyuan, it will inevitably arouse curiosity from the outside world: already having established a solid presence in the world market, why do they still have the willingness to "join forces" with Baiguoyuan? What value can Baiguoyuan bring to these world fruit giants? In fact, this can be interpreted from the characteristics of the Chinese fruit market, the development strategies of fruit giants in the Chinese market, and Pagoda's own advantages.
Take Yikeberry as an example. According to reports from the English version of China Daily and Xinhua Finance, it has been a critical ten years since Yikeberry entered China in 2013. It has established more than 30,000 acres of berry plantations in Yunnan, China. By 2022 The annual output is 15,000 tons of berries with sales of 1.7 billion yuan. Miles Reiter, chairman and CEO of Yi Ke Berry, said that in the next five years, they will at least triple their investment in the Chinese market, achieve an annual brand growth rate of 20%-30% in the next five years, and promote domestic production starting this year. Blueberry export.
However, despite being a fruit industry giant that has been deeply involved in the Chinese market for ten years, Yikeberry still needs to face the constraints of the supply chain on brand growth. Zheshang Securities pointed out in a research report that the total volume and prospects of China's fruit market are huge, but the characteristics of high frequency, low price, unplanned consumption, and wide geographical distribution of fruit consumption have led to a fragmented retail landscape, which has increased circulation. Probability of loss during the process.
For example, Yikeberry's berry products have strict requirements on cold chain and other logistics conditions. To reach more consumers, supply chain efficiency must be continuously improved. At this time, it is difficult to achieve the ultimate turnover efficiency by taking the traditional wholesale and redistribution route. It also requires additional costs to maintain high-quality fruits before reaching consumers. However, if there is a direct "channel" in the supply chain, the source brand's access to the market can be expanded, and its operating results are expected to be significantly improved.
Pagoda is just such a channel that has both circulation efficiency value and brand value. GF Securities pointed out that Pagoda "has the largest retail network and is one of the few companies in China's fruit industry that has both well-known product brands and channel brands."
Pagoda's recently released semi-annual performance report shows that as of June 30, 2023, it had 5,958 stores in 150 cities across the country, and the proportion of offline orders reached 71.2%. This channel network has undoubtedly expanded the distribution scope of fruit products, especially the turnover rate of fragile products such as fruit. On the other hand, it has 29 distribution centers covering an area of more than 194,700 square meters across the country. Even for vulnerable fruits such as blueberries, it can quickly connect to the supply chain of the source brand and speed up the delivery of goods while maintaining quality and quantity. circulation.
(Baiguoyuan performance briefing. Source: Baiguoyuan)
Therefore, the global fruit industry giant can obtain more worry-free and labor-saving sales link support in Pagoda's national layout, reach more consumers, and expand brand effect in collaboration with Pagoda. In the future, Pagoda's expansion plan will also share dividends with fruit industry giants who want to achieve higher growth rates.
Judging from future expectations, on the one hand, Pagoda will continue to expand its retail network and plans to open 30,000 terminal stores in the future to further tap greater market potential. For its B-side partners, the broader and deeper the market coverage, the greater the opportunity to incubate products, categories, brands and expand sales scale. For example, Yikeberry is vigorously promoting blackberries and raspberries in addition to blueberries. With the help of Pagoda's channel advantages, its development speed is expected to be accelerated.
On the other hand, fruits have high requirements on the supply chain, and Pagoda has built a supply chain system with clear service value based on the needs of China's local market environment through vertical integration. Whether it is the configuration of hardware such as distribution centers or the soft power of exporting agricultural technology and supply chain technology, Pagoda has established a leading position in China's fruit industry. If fruit industry giants want to further explore the value of the Chinese market, they naturally need to obtain the supply chain management value of Pagoda.
In summary, the significance of overseas suppliers joining hands with Pagoda includes but is not limited to improving their own brand operation efficiency, increasing input-output rate, building brand value, and building brand reputation. Pagoda also has a richer and more stable supply guarantee. , the weight of market development increases. This is a win-win decision based on the current market conditions and a two-way journey.
Deconstructing Pagoda: How to better realize market expectations?
By returning to Pagoda's own operations, Pagoda can win the trust of many fruit industry leaders, and the core lies in solving problems.
As mentioned earlier, if a fruit brand wants to expand its operations, in addition to continuously improving its logistics and other aspects, there are still several traditional difficulties that always exist. These difficulties are mainly dependent on the traditional distribution system and are difficult to overcome by the brand itself. Pagoda's strategy is unique. It relies on its self-built business network and brand development paradigm to vertically improve the business quality of the fruit market and adapt to market demand.
First of all, although the traditional wholesale network has maintained the operation of the industry for many years, it has two major flaws determined by the business model.
First, due to considerations of capability boundaries and return on investment, the marginal value of traditional dealers will become lower after reaching a certain expansion boundary. Therefore, the market they can reach is limited, and brands cannot interfere in overly fragmented markets such as sinking markets. Secondly, there are too many levels of traditional distribution, which makes the fruit loss rate even worse. Citing data from iResearch Consulting, Zheshang Securities pointed out that each transfer of fresh agricultural products from the place of production to the end consumer will increase the loss rate by more than 4%, causing the final loss to expand.
(Schematic diagram of the loss rate of agricultural fresh food supply chain. Source: Zheshang Securities)
But Pagoda is different. Due to its strong supply chain capabilities and direct sales, Pagoda has shouldered the important task of opening up the market and achieved continuous breakthroughs in traditional difficult markets such as sinking markets, which helps expand the sales scale and improve the brand's sales. efficiency. Its distribution center reaches Sichuan in the west and Beijing in the north, covering cities of different energy levels from first-tier to fourth-tier and fifth-tier cities. It has strong control over the entire process and can improve logistics services to a higher standard.
Secondly, unlike traditional distribution models that only sell products, Pagoda also focuses on brand building in its market development process. The overall operation of Baiguoyuan is highlighted by the integration of warehouses and stores + member operations + online and offline collaboration.
The integration of warehouses and stores ensures the supply and offline ability to enhance users' awareness of the brand. In terms of members, Pagoda's semi-annual report shows that its total number of members exceeds 79 million, and the number of paid members increased significantly by 40% year-on-year to 1.14 million as of the first half of the year. Consumers' original awareness focused on fruit types, but because Pagoda focuses on membership operations and publicity, their attention is more easily directed to fruit brands, forming a clear understanding of the brand.
At this time, with the help of online and offline collaborative operations to promote sales, Pagoda was able to drive consumer demand to concentrate on stores and brands, and gradually build repurchase advantages. The semi-annual report shows that Pagoda’s WeChat community has more than 16.4 million fans, and the total number of store WeChat groups reaches 25,600, forming a huge user pool that can be called the “engine” of sales and brand building.
Therefore, the three advantages are integrated into one, making Pagoda's fruit sales link also become the mental link for Pagoda brand and fruit brand to deeply reach users. As Yu Huiyong, founder and chairman of Baiguoyuan Group, said, fruit brands have high thresholds and will benefit in the long term after forming mental barriers. This is obviously attractive to leading fruit companies that already have brand effects.
Finally, on top of this series of advantages, the synergy between supply chain management and brand operations in the fruit industry continues to improve: Pagoda’s exclusive model catalyzes the continuous improvement of supply chain vertical integration capabilities and brand operation capabilities, which in turn improves the overall Return. Outside of Pagoda, global suppliers can accelerate brand development by sharing their multi-faceted capabilities with Pagoda.
Pagoda's brand and operations bring traffic, and high-quality supplies work together to promote sales. The rewards are shared between Pagoda and its suppliers, and then invested in longer-term category cultivation and brand building. From a retail perspective, Pagoda has gradually become an “incubator”. User value, channel value, and brand value form a flywheel effect.
In fact, Pagoda has initially shown high growth quality. Its performance report shows that in the first half of 2023, Pagoda achieved revenue of 6.294 billion yuan, a year-on-year increase of 6.4%, and net profit attributable to the parent company of 261 million yuan, a year-on-year increase of 34.1%. Net interest rates were simultaneously optimized. The guarantee of independent hematopoietic ability has verified the vitality and value of the Baiguoyuan model. For its supplier partners, this undoubtedly shows the reliability of this leading retail company.
At this stage, Pagoda has specially set up three major business groups: retail business group, corporate customer (2B) business group, and category business group. From the organizational structure level, it focuses on providing specialized services for each strategic path.
(Division of Baiguoyuan business groups. Source: Baiguoyuan)
When many world-class fruit industry leaders and Pagoda form a development community, high-quality products, vertical supply chains and extremely efficient operations will be integrated into Pagoda's ecosystem. In this way, not only is Pagoda's fundamentals expected to be further strengthened and its value more recognized by the market, but these advantages will help safeguard my country's fruit supply at different levels, promote high-quality development of the industry, and help better serve consumers. , to promote the development of the industry. As the scale of the industry continues to increase, Pagoda's systematic long-term value will gradually gain popularity.
Source: Pinecone Finance