"China's offline supermarkets are facing a once-in-20-years structural opportunity."
On the evening of September 23, just hours after the official announcement of the acquisition of a 29.4% stake in Yonghui Supermarket (601933.SH), the founder and CEO of Miniso (09896.HK), Ye Guofu, talked about the consideration of this investment, saying that the success of Sam's, Costco, and Miniso in China has proven that it's not that offline retail is not working, but that the business model of traditional retail and traditional supermarkets has problems.
Ye Guofu has visited the supermarket "internet celebrity" Pang Donglai many times, and he believes that the Pang Donglai model is the only way out for Chinese supermarkets.
Yonghui Supermarket has seen significant effects after adopting the Pang Donglai model, and Yonghui Supermarket has a good foundation, which makes Ye Guofu believe that "if it continues on the current path, Yonghui Supermarket's business will be transformed in the next few years."
On September 23, Yonghui Supermarket ushered in an important change in equity.
Miniso announced that it would acquire a 29.4% stake in Yonghui Supermarket for 6.27 billion yuan, and after the transaction is completed, Miniso will become the largest shareholder of Yonghui Supermarket.
The previous major shareholder, Hong Kong Dairy Farm Group, plans to exit, and JD.com will significantly reduce its stake in Yonghui Supermarket.
This means that Yonghui Supermarket, which has successively attracted retail industry strategic investment, shareholders of internet giants, and has gone through a series of changes and challenges such as offline channel internet impact, continuous poor performance, and self-rescue, has reached a turning point in its fate.
The specific operation of this major shareholder change is that Juncai International, a subsidiary of Miniso, will use its own and self-raised funds to acquire 21.08%, 6.98%, and 4.27% of the shares from Milk Company, JD World Trade, and Suqian Hanbang (a person acting in concert with JD World Trade) respectively.
After the transaction is completed, the Hong Kong Dairy Farm Group, which is affiliated with the Milk Company, will clear its shares, and the equity of JD World Trade will be 2.94%.
Miniso is a new retail consumer enterprise that was established in 2013, driven by design and development, and has developed both online and offline.
As of March 2024, Miniso has more than 6,600 stores in 111 countries and regions worldwide.
In 2020, Miniso went public on the New York Stock Exchange, and in 2022, it was listed on the Hong Kong Stock Exchange.
Miniso's Chief Financial Officer, Zhang Jingjing, said in a phone call on September 23 that the two parties have completed the signing of the agreement, and the transaction is expected to be completed in the first half of 2025.
After the transaction is completed, Miniso will become the largest shareholder of Yonghui Supermarket, but it is expected not to control the majority of the seats on the board of directors of Yonghui Supermarket, so it will not act as the controlling shareholder, the actual controller, nor will it consolidate the financial statements.
Regarding the later management of Yonghui Supermarket, Ye Guofu said that the management team of Yonghui Supermarket is very mature and believes that it can continue to adjust and improve by itself.
Yonghui Supermarket, established in 2001, started with "agricultural reform to supermarkets" and is one of the first circulation enterprises in China to introduce fresh agricultural products into modern supermarkets.
After going public on the A-share market in 2010, Yonghui Supermarket was once very popular.
In 2014, Yonghui Supermarket reached a turning point and introduced the multinational retail giant Milk Company as a major shareholder.
At that time, the introduction of this strategic investment was evaluated by the outside world as promoting the upgrade and transformation of Yonghui Supermarket and carrying out a new round of retail transformation.
In the following year of 2015, JD.com announced its stake in Yonghui Supermarket.
In 2017, Tencent also invested in Yonghui Supermarket.
Yonghui Supermarket also injected the genes of the internet and took the express train of O2O (offline business model).
Looking at the performance of Yonghui Supermarket in recent years, the revenue in 2020 was 93.2 billion yuan, and the net profit was 1.794 billion yuan.
In the following three years, the revenue of Yonghui Supermarket decreased year by year, and the net profit began to lose money from 2021, with a cumulative loss of nearly 8 billion yuan in three years.
In the first half of 2024, the operating income of Yonghui Supermarket was 37.8 billion yuan, and the net profit turned from loss to profit, reaching 275 million yuan.
Yonghui Supermarket has also started self-rescue, and the most important action is to carry out internal adjustments.
According to the news of Yonghui Supermarket's 2023 annual shareholders' meeting, the adjustments of Yonghui Supermarket in 2024 include optimizing existing stores, optimizing and upgrading store operations and management, building product strength, and building the ability and incentives of grassroots employees.
The learning object of these adjustments is Pang Donglai.
Yonghui Supermarket said, "The current responsibility is to learn and introduce the good model of Pang Donglai and to implement it in the provinces."
The details of learning and adjusting from Pang Donglai include store planning, product structure, supply chain, optimizing store services, and employee compensation, and some of Pang Donglai's products are on the shelves of Yonghui Supermarket.
According to Yonghui Supermarket's reply to the inquiry from the Shanghai Stock Exchange in July this year, as of the end of 2023, the number of Yonghui Supermarket stores was 1,000, which has been optimized by more than 30% compared with the highest of 1,440 in 2019.
According to the announcement on September 23, the current number of Yonghui Supermarket stores nationwide is 850.
The supply chain and channel cooperation is exactly the learning from Pang Donglai, which attracts Miniso to invest in Yonghui Supermarket.
Ye Guofu said that after he visited various retail formats and models around the world, he found that the retail that is better than Sam's and Costco and more suitable for the Chinese market is the Pang Donglai model.
The common point of the three is the high attention to product strength, and the difference is that the Pang Donglai model pays more attention to customer experience and respects employees more.
Pang Donglai is also the retail enterprise with the highest floor efficiency and labor efficiency in the Chinese market.
In addition, Ye Guofu mentioned that the current adjustment effect of Yonghui Supermarket is relatively good.
For example, after the Zhengzhou Xinwan Plaza store was closed for adjustment for 19 days, the first day of business resumed, and the sales reached 1.88 million yuan, which is nearly 14 times the average daily sales before the adjustment.
Ye Guofu believes that Yonghui Supermarket has a good foundation and is at the turning point of business adjustment.
"As long as the Yonghui team insists on returning to the essence of retail adjustments, there is a great hope for success."
When talking about the future cooperation between the two parties, Ye Guofu said that they will share resources and complement each other's advantages in the supply chain and channels.
In terms of channel upgrading, Ye Guofu said that the number of Miniso stores is not enough, and Yonghui Supermarket occupies many good locations nationwide.
With the success of the adjustment, Yonghui Supermarket will become the main brand to attract customers for commercial real estate.
Miniso can take advantage of Yonghui Supermarket's advantages to upgrade channels and get the best position in the same format in more commercial real estate together.
In terms of supply chain collaboration, Miniso will not turn Yonghui Supermarket into a sales channel for the Miniso brand, but hopes to use Miniso's supply chain advantages to drive the scale of Yonghui Supermarket's channels and achieve pricing through volume.
Ye Guofu said that in the past two years, the annual revenue scale of Yonghui Supermarket has been around 80 billion to 90 billion yuan, of which about a quarter of the sales comes from living supplies, most of which are third-party brands, and the proprietary brand only accounts for a single digit of the total sales.
The advantage of Miniso is that it has accumulated more than 1,400 global suppliers, which can help Yonghui Supermarket develop better proprietary brand living supplies.
Miniso said in the announcement that with the supply chain advantages of Miniso, Yonghui Supermarket can develop higher quality proprietary brand products at a lower cost, which will also improve the differentiated competitiveness of Yonghui Supermarket.
Regarding the impact on its own business, Ye Guofu said that this investment will not affect the strategic planning of Miniso in the next five years.
On September 24, Yonghui Supermarket opened with a daily limit, reporting 2.48 yuan per share, with a market value of 22.506 billion yuan.
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