In early November 2019, Yuanchu Foods opened its first overseas flagship store in Vancouver, Canada. “As of now, Yuanchu Food may be the only Chinese fresh food retail company going overseas, and it is still in North America.” In an exclusive interview with 21CBR reporters, Chen Qiming, president and vice chairman of Yuanchu Food said.
Opening the road of overseas expansion is a “return” to food in the beginning of the Yuan Dynasty. As early as 2001, Xiamen Tianpai Import and Export Co., Ltd., the predecessor of Yuanchu Food, was specialized in China’s food export business.
In 2011, the company restructured to establish early food, entered a chain food supermarket, and sold food through community stores. After 8 years of development, the food store in the beginning of the Yuan Dynasty expanded to the North American market to serve overseas consumers in a more direct way.
Unlike most supermarket chains that operate on a platform, this Xiamen-based company’s core competitiveness lies in its own channels, its own branded products, and its own supply chain. According to Chen Qiming, more than 20% of the products of Yuanchu Food come from overseas sources, and private label accounts for nearly 60% of all product sales.
From food export traders to retail chain brands, how did Yuanchu Food achieve “leapfrogging”?
Chen Qiming witnessed the development of food in the early Yuan Dynasty. In 2008, he was also an investor in the Internet industry. He was concerned about the topic of food safety and met Su Lihui, the founder of Tianjiao Import and Export Corporation.
In 2011, in his communication with Su Lihui, Chen Qiming discovered a new opportunity for natural rewards: domestic consumers’ demand for food safety is increasing, and the company has selected Chinese high-quality food for export to the world in the past 10 years. “We have experience in operating high-quality foods. The establishment of Yuanchu Foods is to export domestic food.” Chen Qiming felt that a set of mature standards for controlling food quality was the biggest advantage of Yuanchu Foods.
At the beginning of its establishment, Yuanchu Foods chose to develop its own brand. Chen Qiming said that Wang Laoji and Coca-Cola were not sold in stores at first, and the zero-degree Coke was launched after consumers complained of “soda discrimination”. “We respect well-known brands, but from the perspective of health standards, early food does not encourage too much sugar. The retail shelves of stores must have a stand and attitude. ”
Within Yuanchu Food Company, the Commodity Development Center replaced the procurement department, and the “yuanchu standard” was used to measure whether the product needed to be introduced. Chen Qiming called it the “global optimal origin” principle. “In the process of product development, the choice of suppliers is not measured by ‘big, but determined by origin, standards, and taste.”
Through the cooperation foundation laid by the previous export trade, Yuanchu Food has accumulated a number of high-quality suppliers, such as explosive mushrooms and fungus. In the global market, Yuanchu is also constantly looking for new quality suppliers. For example, Chen Qiming said that a coconut water from Vietnam ’s own brand was sold at a food store in the early Yuan Dynasty. The supplier also supplies products to the EU market, which is coconut water produced by the same production line.
Fresh seafood private label is conducive to improving gross profit margin and consumer stickiness. According to the China Merchants Securities report, the proportion of fresh and own-owned brands will increase by 5 percentage points. The gross profit margins of Yonghui Supermarket and Jiajiayue will increase by 0.9 and 1.1 percentage points respectively. The repurchase rate is expected to be higher than 5 times.
However, exerting its own brand means that companies have to pay higher R & D costs, as well as more stringent supply chain management and high inventory risks. Moreover, if there are no users of a certain size, high operating costs will also dilute the gross profit of its own products.
According to company data, in the past two years, Early Food has established two major product R & D centers in Europe and North America in Hamburg, Germany and Vancouver, Canada. “During the R & D process, to understand the food requirements of different people around the world, to propose standards, formulas, improvement plans, and even pricing for the beginning of the year, these have become the core of the original food brand.”? Chen Qiming said.
Choosing to focus on own-brands is equivalent to abandoning the traditional non-operating fee-based profit model of traditional retailers, that is, the food at the beginning of the year can’t earn income through traditional racking fees and promotional fees. This is not easy for the food at the beginning of the Yuan Dynasty. Chen Qiming said that the company must “stand loneliness” and resist the temptation to make quick money. In the first few years of the establishment of Yuanchu Food, its development was supported by the profits of international trade. Five years later, the food of Yuanchu achieved its breakeven.
For the middle class
“With the growth of Yuanchu Food, along with the growth of domestic consumer demand, we can give them more international and higher-quality products.” According to Chen Qiming, compared with large supermarkets, Yuanchu Food is more distant from consumers. Recently, the first store was selected in the community, and the site selection strategy was subsequently continued, with stores near the community ranging from 100 to 300 square meters. The store is similar to a boutique supermarket with over 2,000 SKUs, including fresh and cooked food, rice noodles and oils, snack foods, daily necessities, etc. Most of the vegetables are pre-packaged net dishes, and the price is slightly more expensive than ordinary supermarkets.
Founded 8 years ago, food expansion in the early Yuan Dynasty was not fast. As far as the domestic market is concerned, in addition to its home base of Xiamen, it has more than 100 stores in 3 cities: Dalian, Quanzhou and Shenzhen. Chen Qiming explained that the company does not want to grow rapidly, and fast means to give up something.
In November 2019, Yuanyuan Foods received a capital injection of 100 million yuan from Mai Xing. Zheng Zhong, Managing Director of Maixing Investment, said that more and more young people are returning to new first-tier or provincial capital cities closer to their hometowns, which has led to the rapid urbanization of the latter. The emergence of new residents’ communities provides the development of supporting ecological systems for the community. The foundation. “‘What the Yuanchu model needs to do is to restructure the industry chain by focusing on users.”
In addition to fresh supermarkets, Yuanchu Food also launched 3 front-end stores, 6 convenience stores, and 2 Yuanchu cafeterias. According to Chen Qiming, Yuanchu Food will use the “building blocks” method to launch different retail formats, such as launching new formats such as the Yuanchu cafeteria near white-collar office buildings.
For the international market, Early Foods will continue to open stores in the North American market, with 15 stores expected to open within two years. The domestic market has accelerated the expansion of stores in Xiamen and new regions. Regardless of the international or domestic market, the opening of food in the beginning of the year will closely cooperate with the company’s progress in supply chain construction and food creation. Taking Dalian stores as an example, through the cooperation with local enterprises, Yuanchu Food brought Northeast rice and other products to Xiamen.
Relevant data show that the annual sales of food at the beginning of Yuan Dynasty are in the order of 1 billion yuan. According to Chen Qiming, the food at the beginning of the Yuan Dynasty has achieved profitability, and the current compound annual growth rate is more than 50%. “It will not burn money to expand, and the speed of opening stores will accelerate in the future, but it still has its own rhythm.”