Behind The Little Fat Sheep Waiting For Marriage: Growth Faces The Ceiling

This is the biggest restaurant chain in China brand There is another secret behind Baisheng's intention to return to an Standardization After the problem, it is still unable to break through the growth ceiling.

In spite of Yum's ? Brands has done a lot to adapt to China consumption However, the western fast food giant is still determined to take an unprecedented step forward: to control a Chinese restaurant chain brand.

On the morning of May 13, yum! And Xiaofeiyang Group Co., Ltd. jointly announced that Yum would increase its shareholding ratio in Xiaofeiyang from 27.2% to 93.2% with HK $6.50 per share in cash. The remaining 6.8% is still held by the founder of little sheep. The offer price is smaller and fat sheep's closing price of HK $5 on April 21 has a premium of about 30%.

If the acquisition is successful, this will be the first case of foreign capital merging Chinese chain catering brands. It seems that the regulatory authorities have no reason to veto the deal, making it go through the same mistake as Coca Cola's acquisition of Huiyuan juice was rejected. Xiaofeiyang is the largest Chinese food chain brand in China. However, it is ridiculous to forbid Yum to control it for the reason of national brand protection, and it will not involve "threatening industrial security". In this highly dispersed market, Xiaofeiyang has little gap with other competitors. In 2010, its revenue increased by 23%, but only RMB 1.9 billion, and the number of shops was about 480. The market share is less than 2%.

There are early signs of this. In September last year, Gu haozhong, vice president of business development of China business division of Yum! Brands, visited Xiaofeiyang Shanghai branch and Baotou headquarters. The industry interpreted this as a signal from Yum for increasing capital and holding shares. Lu Wenbing, CEO of Xiaofeiyang, also said before: "the venture shareholders of Xiaofeiyang are not always in the position of major shareholders, otherwise they would not choose to go public at the beginning." In March 2009, yum spent $63 million to acquire 20% of Xiaofeiyang's equity, which increased to 27.2% and became the second largest shareholder.

"It's a reasonable deal." Pei Liang, Secretary General of China chain operation association, said to Global Entrepreneur. China's catering market is very large, but the degree of intensification has been low for a long time. In 2008, the catering market capacity has reached 1.5 trillion yuan, but the sales volume of Yum plus Xiaofeiyang is about 32 billion yuan, accounting for only 2% of the market share“ We should encourage further intensification of the industry. " Pei said.

Fair trade

Zhang Gang, 47, is an important figure in China's catering industry. Xiaofeiyang ranked 57th in the list of top 100 Chinese chain stores released by China Chain Store Association, and ranked first in Chinese food for 8 consecutive years. It is the largest and the first mutton processor to obtain organic certification in China, which is not well known to most people.

Torsten, head of consumer goods business in Asia Pacific region of moliter group ? Stocker) ? For Global Entrepreneur, the deal is crucial for Yum to win the Chinese market. Merger and acquisition has the effect of three birds with one stone: first, change the disadvantages of Yum in the field of Chinese food with Xiaofeiyang's popularity and market advantages; The second is to effectively obtain market information, deepen the understanding of local eating habits, and provide more localized products; Third, the hot pot industry is easy to flow shop, with a large consumer group. Xiaofeiyang has international development experience in Canada, the United States and other places before, and is expected to further expand the international market.

By the end of March this year, there were 3200, 640 and 20 restaurants in KFC, Pizza Hut and Dongfang Yibai, respectively, which are the fastest growing and most potential market in the world. Last year, its profit in China accounted for 43% of total operating profit, with an annual growth rate of 26%, compared with a growth rate of only 3% in the United States. In the first quarter of this year, China's single stores grew by 13% year-on-year, and business in China accounted for 54% of the group's total profit. Single store sales in the United States fell 1% over the same period“ Yum must enrich its new menu to really adapt to local tastes. " Guo Huiyong, an industry analyst at Dongfang Aige Agricultural Consulting Co., Ltd., told Global Entrepreneur, "in the next few years, KFC, Pizza Hut and other growth rates will certainly slow down. If you want to win more market share, you can only find other channels. There is not much choice for yum, except for M & A

The Chinese food brand Dongfang Jibai, a Chinese food brand under yum, opened in Shanghai in 2005. After six years of layout, it is still weak in growth, with only about 20 stores“ The merger and acquisition will help Yum to extend its products to the hot pot field, avoid the development lag brought by the differences between Chinese and Western food, and expand its competitive advantage in the Chinese catering niche market. " Zhou siran, a researcher in the food industry of CIC consultant, told the global entrepreneur that "since the competition space in the East is getting smaller and smaller, it has obviously failed, but Yum is not willing to admit it."

In the Chinese fast food market, yum's rivals are like clouds, including not only local players such as zhenkungfu and rural base, but also foreign-funded chains such as Yonghe King and Yoshino. But to the small fat sheep from the equity participation to the realization of control, it seems to be a clever move of Yum. According to the data of China Cuisine Association, there are about 200000 hot pot catering outlets in China, with an annual turnover of 140 billion yuan. Among the top 100 catering enterprises of the year, the business volume of hot pot enterprises accounts for nearly 30%“ Chinese food standardization R & D resistance is too big, and the hotpot industry is the fastest Chinese food internationalization category. " Qiu Yi, CEO of Chongqing Jiayong Little Swan catering Co., Ltd., said to Global Entrepreneur. The three major product pillars of hot pot industry are base material, small food and food materials. The first two products have been industrialized for a long time by Xiaofeiyang. The only short board is the industrialization of food materials, and the integration of supply chain is the strong point of Yum.

In terms of standardization, little sheep has made great achievements. It has the largest and most modern mutton processing workshop in China. Each piece of mutton can be traced back to the factory and pasture through barcode. In terms of kitchen management, the degree of standardization is also high. The error of dishes is controlled within 5g. How to place and cut a green vegetable is strictly regulated.

"The short board of Chinese food is not standardization, but personnel management and refined evaluation system, such as the final evaluation standard of food, which can not be completed overnight." Zhou Yueming, vice president of DongLaiShun, said to Global Entrepreneur. For example, Chinese food has not yet involved more core indicators such as spicy degree, which is what foreign giants are good at.

Worries of little fat sheep

But in the past few years, even though the little sheep have run fast enough, they have inevitably touched the growing ceiling. As for the catering industry, he Guangqi, chairman of Gabu Gabu Catering Management Co., Ltd., believes that the growth mainly depends on two aspects: one is to rely on the existing stores to improve the single store profit, and the most key indicators are the unit price of customers and the average efficiency ratio; The second is to expand new stores to achieve extensive growth, relying on the number and scale of stores to obtain procurement cost advantage.

But little sheep's data in these areas are worrying. In 2009, the sales of Xiaofeiyang in the same store increased by only 1.7%, and the average consumption of customers was 52.45 yuan, down 2.7% year on year. Although the performance improved last year, the same store sales growth rose to 8%, but the gross profit margin decreased by 2.7% over the same period, and the per capita consumption of customers dropped by 1.2% to 51.8 yuan. From January to April this year, the sales growth rate of the same store was basically the same as that of the same store, which was far lower than the 5% growth expected in the annual report.

Last year, the net profit of Xiaofeiyang was only 190 million yuan, but the cost of inventory sold was as high as 850 million yuan, with a year-on-year growth rate of 30.7%. Due to the increase of sales volume and raw material cost, a huge amount of capital occupation makes Xiaofeiyang encounter huge financial pressure in the shop expansion.

In terms of supply chain, Gabu focuses on leafy vegetables with high profits, and adopts the order light asset model, which takes up little capital; Small fat sheep prefer meat with low profit, so it needs to invest a lot of equipment in the processing process. It must adopt the mode of heavy assets, which takes up a lot of capital and has a long return period. After harvesting, washing, peeling, cutting and packaging, the time to transport the dishes to the central kitchen can be controlled in about five hours, which is higher than that of small fat sheep.

Another challenge is that the high price of mutton has greatly damaged the small sheep's industrial control. It had invested hundreds of millions of yuan to set up bases in Inner Mongolia, Xinjiang and other places, but by the beginning of this year, the price of local brand lamb slices in Inner Mongolia had risen to 53 yuan / kg. Xinjiang is no exception. According to the data of Xinjiang Agricultural Department, the market price of mutton in Xinjiang showed a strong high level last year, and the price in some areas of Southern Xinjiang reached 45 yuan / kg. The price of mutton is 1-4 times higher than that of pork and chicken, which is far beyond the affordability of the catering industry. The rise in mutton prices in the first half of last year directly led to a 14.2% decrease in operating profit of small fat sheep.

At the end of last year, Inner Mongolia suffered the worst snowfall in 30 years, more than 2.01 million livestock were affected, and mutton supply dropped sharply. Generally speaking, small sheep will complete bulk purchasing in August every year to lock in fixed costs during the mutton harvest season. However, the trend of high mutton prices is becoming more and more obvious, and it is expected to reach the price tipping point around August this year. Zhou Yueming confirmed to this journal that the purchasing price of mutton of DongLaiShun has increased by 30% to 40% in recent year, and now the bulk purchase price is as high as 40000 yuan / ton. As a result, the gross profit has decreased from 54% to 47%. In addition, the rent and labor costs have increased sharply. As a result, the net profit of DongLaiShun has doubled from the previous 28%.

Another fund worry is that the direct stores signed by Xiaofeiyang before and after the listing in June 2008 will soon expire in large quantities, and there will be great financial pressure for the renewal of lease or location selection in other places. According to the decoration cost of a single store with an area of 500 square meters, the decoration cost of dozens or even hundreds of shops will be extremely heavy. Two or three years ago, the daily rent was mostly 2 to 3 yuan per square meter. Now the price has risen to 7 to 8 yuan.

The soaring rent may destroy the tried and tested big store model that supports the traditional hotpot industry“ The life span of the past successful business model is getting shorter and shorter. If we continue the previous model, we are sure to lose money. " Qiu Yiming.

From the global trend, the essence of the catering industry is small shops, high efficiency“ McDonnell KFC general stores in 100 square meters or so, 300 square meters has been very big Qiu Yi thinks that the consumer group of cygnet is similar to Xiaofeiyang, and it is difficult to abandon the big store model from the perspective of customer orientation. If the customer price and turnover rate can not be improved, the big store model will be extremely dangerous. An industry insiders predict that the single consumption time of little fat sheep customers is about 90 minutes, and the daily turnover rate is about 3 times, while the corresponding number of sipping and sipping is 45 minutes and more than 8 times“ The low turnover rate means to increase the average price of each dish, which requires repositioning the customers and improving the brand premium ability. In the final analysis, it is the comprehensive operation ability of the store. " The person said.

But up to now, Xiaofeiyang has not solved the management problems in the expansion of its stores. The number of its stores has been in a violent fluctuation, and it has not been able to put it in and out freely.

"The loss of control of franchise is a group problem of Chinese catering industry, the root of which is the lack of fine management ability." Zhou said. The premise of scale is to get rid of the limitation of regionalization. Due to the huge differences in taste between the South and the north, food materials need to be adapted to local conditions, which requires a strong R & D system support“ Up to now, little sheep has made little achievements in the final research and development of its products. It is basically the same as it was more than a decade ago. " An industry person commented. Taking Chengdu and Chongqing markets as examples, little sheep entered the market in a large scale, but they all failed due to acclimatization.

Today, more than 40% of Xiaofeiyang's stores are still concentrated in the traditional East China region. In East China and South China, where the single customer consumption power is more strong, only 23% and 13% of the stores are in growth“ The market is changing too fast. We only know what consumers want to eat today, but we don't know what to do tomorrow. The era of hot pot industry is over. " Qiu Yi said.

This may be a challenge that Yum holdings must face up to after its success. Yum is likely to push Xiaofeiyang to develop into a small shop model of sipping and sipping, which is also the management specialty of Yum. Although little sheep has tried in overseas markets, Su said the domestic market is still the most needed market for little sheep.