永辉超市分析报告-生鲜超市行业

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ProposalforYonghuiSupermarketFinaldocumentMay5th,2013Thisreportissolelyfortheuseofclientpersonnel.Nopartofitmaybecirculated,quotedorreproducedwithoutpriorwrittenapprovalfromAurora&company Yonghui Supermarket Execu&ve Summary ForeseenindustrydynamicsRationalesanddatasupports▪AChinesegroceryretailmarketisabigand▪The“otherretailchannel”accountsfor76%ofretailmarket,therecomplicatedone.Localgrocerystoremarketarearehugeamountsofsmalllocalgrocerystoresthebigandseparatewhilesupermarketindustry▪Thesuperandhypermarketindustryisconcentratedduetolargearehighlyconcentratedmarketshareoftop5players(forsupermarkets,thenationalstatisticisnotthathighbuttop5players’sharewithincityislarge)▪BAsofregions,2,3tiercitiesareveryattractive▪Largechainstoresareentering2,3tiercitymarketsandconqueringduetotheircurrentcondition.Asofchannels,localgrocerystores,thereareopportunitiesforchainstorestoentermodernretailchannelsandspecialiststores▪Datasupportreflectsthetrendofconsumers’transferringfromarepreferred.Asofproducts,therearetraditionalretailchanneltomodernchannelsuchassupermarkets.opportunitiesforsupermarketstocreatenew▪Supermarketprivatebrandgoodsarewelcomedfortheirbetterpriceshoppingstylestomeetconsumerdemandandbrandimage(themarketitselfhasgoodreputation)▪CDuetoYonghui’skeyadvantageofFreshFood▪Dataindicatesthatpeoplebuymorefoodfrommodernchannels,centraldirectprocurementandself-operating,weandresearchhasshownthatpeopletendtoshopatthesamestorethinkYonghui’sexpandingstrategyistaking▪Duetoconsumer’sincreasingdemandonfoodquality(freshness,advantageoftheFreshFoodmode,establishinghealth),theFreshFoodmodewouldenhancecustomervisits,anda“FreshFood2.0Mode”thuspromoteothersalessectionsaswell▪Centraldirectprocurementandself-operatingfreshfoodmodearestrongbarrier,FreshFoodmodeishardtocopy▪D“Freshfood2.0”modeincludesinnovationsof▪Introducingprivatelabeledfoodproductspositionedonhigh-quality,privatelabeledproducts,centralizedmarketsafety-ensuredproducts,tomeetincreasingdemandofhealthfoodexpansionandappropriateentrymodel▪Centralizedexpansion(focusononecity)atonetimeisbetterthan(acquisition).expandingintodifferentmarketsincequickemergeinthemarketwouldbemoreattractiveandgeneratedeepermarketpenetration▪Throughacquisition,wecouldachievesynergybenefits,obtainoriginalcustomersandgainmarketsharemorequicklySOURCE: Team Aurora & Company 丨1 AgendaChineseRetailMarketConditionSuperMarketIndustrialTrendYonghui’sandcompetitors’conditionYonghui’sopportunityandstrategyProjectTimeline Yonghui Supermarket ROUGH ESTIMATES ChinaRetailMarketOverview–Supermarketretailorstakestablemargin,butscatteredmarketMarket SizeShare of top 5   RMB billion, 2012  Gross MarginplayersSegment  Examples Characteris&c / Func&on  502.34 371.00 •C.P. Lotus: 18.49% •Size over 6,000 square meters(SM+) 274.00 •Beber life: 15.09% •Combining supermarket & department store 56% Hyper Market •Hualian: 10.84% •All most of kind of retail products •Wumart: 8.95% •One‐stop shopping service 2008 2010 2012 912.00 993.83 •Size between 3,000 SM and 6,000 SM 768.00 •Yonghui: 16.33% •Wide variety of food & household products •Lianhua: 14.72% 15% Super Market •Basically meet household demand •Renrenle: 11.13% •For weekly shopping 2008 2010 2012 •Various in size 201.67 Food/Drink/•Specialize in certain kind of goods  135.00 165.00 •Jinfeng: 55.33%* Tobacco •Shuanghui: 18.19% •Professional retail service in certain area  specialists •For specialized shopping 2008 2010 2012 383.00 422.99 •Less than 3,000 SM 314.00 Retail Stores Small Grocery •Frequently consumed food & goods •CVS: 19.1%** Retailers •Large number of stores, convenient •Target on “small purchase” 2008 2010 2012 4.00 4.00 •Various in size 3.00 •Providing discounted, named‐brand goods Discounters •Not announced •Target on price sensi^ve consumer •Good place for promo^on 2008 2010 2012 •Other forms of retailers 7175 5655 Other grocery •Shopping centers, local stores and etc. 4406 This segment consists of independent retailers stores, special product retailors, shopping centers, etc. 2008 2010 2012 *As of Jinfeng’s gross margin, it is the overall gross margin of the company, no official data for specialist retail stores ** As of CVS data, it is the sample average number of China Retail Enterprise Research Report SOURCE: Access Asia , HSBC China Retail Report, China Chain Retail Enterprise Research Report  Aurora & Company 丨2 Yonghui Supermarket ROUGH ESTIMATES ChinaRetailMarketOverview–FoodretailmarketsharegrowsfasterthangeneralmerchandiseHouseholdRetailFoodRetailCateringCAGR09-121tier:ShanghaiRetailMarket(RMBbillion)WestChina12.4%2009 1399547281 18.2%MiddleChina2012 22910465398 3.7%EastChina11.85%2tier:WuhanRetailMarket(RMBbillion)11.64%2009 50 45 21 116 14%2012 74 56 31 161 7.76%13.91%3tier:LhasaRetailMarket(RMBbillion)12.62%2009 16 14 166 35 16.03%2012 25 18 7 50 8.7%5.2%CityClassificationDescriptionCurrentMarketConditionMarketgrowthpotential1tiercities•Maturemarket•Almostsaturated•Newbusinessmodel•Highpopulationsizeaswellasdensity•Clearmarketsegmentation•Fashion&populargoods•Highesthouseholdincomeandexpenditure•Fierceprice&qualitycompetition•Flagshipstores2tiercities•Growingmarket•Haveimprovingspace•ConvenientStores•Highpopulationsizeanddensity•LackofCVS•Standardized&chainmarkets•Mediumincomeandexpenditure•Increasingattentiononquality3tiercities•Emergingmarket•Greatpotentialinthefuture•AllkindsofmodernRetail•Highpopulationbutlowdensity•HypersandlocalstoresarepopularChannels•Lowincomeandexpenditure•MostlysensitivetopriceSOURCE: Access Asia ,  2012 China Retail Year Book Aurora & Company 丨3 AgendaChineseRetailMarketConditionSuperMarketIndustrialTrendYonghui’sandcompetitors’conditionYonghui’sopportunityandstrategyProjectTimeline Yonghui Supermarket Trendsonretailmarket–Customerbehaviorleadsmarketrevolution,Onlineshoppingand2/3tiercitiesmarketboomsKey Drivers  Environment / Policy Case  ▪From wet market ▪“The twelkh Five‐Year plan” push ▪Already has over 3800 Switch to        ‐ Food safety is a major concern wet market switching to local supermarket in China Supermarket         ‐ Young genera^on preference  supermarket  ▪Focus on 1 ^er ci^es ▪From hyper market ▪Food safety regula^on ▪Yearly sales 7.2 billion RMB        ‐ pursuit of freshness ▪Well‐known B2C stores ▪Reliable logis^cs outsource •Already has 5 distribu^on Switch to Online ▪Convenience ▪Physical store’s fame backup centers in Shanghai, Beijing, Shopping  ▪Young genera^on preference ▪Sounder Regula^on environment Guangzhou, Wuhan, Chengdu ▪Physical store’s frame backup •Fresh food delivery in Shanghai ▪Increasing household income ▪“The twelkh Five‐Year plan” •Already has over 2000 stores in Switch to 2/3 leads to higher purchase power Accelerated urbaniza^on China, currently opened 300 stores in 2012. &er Ci&es of 2/3 ^er city consumers ▪Compara^vely lower compe^^on •Focus on 2/3 ^er ci^es ▪Consumer’s individual demand ▪Consumer’s brand loyalty increases ▪More than 500 stores in China Specialist chain ▪Specialized fame ▪Food safety regula^on (especially ▪Horizontal integra^on of stores ▪Convenience meat and seafood manufactory, distribu^on and ▪Match neighborhood taste retail process High value‐add ▪Higher profit margin ▪Some compe^tors enhance quality ▪Walmart OEM products account ▪More purchase op^ons of OEM strategy for 25% of sales products ▪Suppliers’ willingness to build ▪Gross margin 15% for private consumer loyalty labels comparing to 5% for non‐private labels. SOURCE: Enterprise Websites Aurora & Company 丨4 Yonghui Supermarket ROUGH ESTIMATES Trendsonretailmarket–Fooddemandsarehighlysensitivewithlowgrowthrate,differentiationstrategyleadsanewroundofgrowth1 2 3 General Merchandise Food Kni8ng & tex8leCAGRCAGR31%CAGR60%3690.64 3582.77 28%4027.94 2159.00 2449.00 1263.00 1489.00 1396.73 544.51 2008 2010 2012 2008 2010 2012 2008 2010 2012      General  merchandise 16.65%   Fresh food 8.8%          Food 11.5% Kni&ng  & tex&le 26.62% •Sanjiang 17.73% •Sanjiang 10.47% •Sanjiang 12.40% •Sanjiang 23.06%% Profit Margin •Xinhuadu 19.02% •Xinhuadu 11.59% •Xinhuadu 12.97% •Xinhuadu 29.60% •Renrenle 14.60% •Renrenle 6.34% •Renrenle 10.27% •Renrenle 22.15% Market •Increasing brand loyalty •Price sensi^ve •Brand compe^^on in high‐end market •Brand compe^^on fierce •Freshness sensi^ve •Price compe^^on in low‐end market Condi&on •Market size keep growing •Low brand loyalty •Fierce compe^^on from E‐commerce •Brand centralizing (i.e. M&A) •Emerging food label (i.e.Aisen Meat) •“E‐commerce + Real Store” Mode Market Trend •Quick growth in 2,3 Tier ci^es •Increasing loyalty on labeled food if •Both standardized products and •Swarm into E‐commerce ensuring health & safety differen^ated products Supermarket private label Opportuni&es for Private label merchandise Health, Fresh, Standardized food Standardized and low‐price clothing Supermarkets low price, high brand commitment Differen8ate from wet market Differen8ate from clothing shops SOURCE: Access Asia Aurora & Company 丨5 Yonghui Supermarket Trendsonretailmarket–Fiercecompetitionforhypermarket,supermarketisthebestmethodforfoodretailorstoenternewregionsHypermarket  Supermarket & CVS Compe&&on ▪Modest compe^^on, scabered: Local players take •Fierce compe^^on, integra^ng:  Top 5 na^onal chain share, Top 5 na^onal chain stores only take 15% stores take 45% share share ▪Supermarkets depend on Regional scale efficiency ▪Costs local distribu^on center, Costs Hypermarkets depend on rela^vely low cost regional distribu^on ▪Feasible procurement center,  rela&vely high enables rapid access to a Volume cost Volume new region Market size Hyper market size ▪Hypermarket retail Billion RMB ▪Supermarket retail size Supermarket size size will reach 0.6 0.6 will reach 1.8 trillion in Billion RMB 1.8 0.5 trillion in 2015 +8 0.4 2015 1.7 ▪▪Rela^vely modest +7 1.6 Rapid growth, 2/3 &er ci&es have 2009 2012 2015 growth, 1/2 &er cites higher contribu^on  have higher contribu^on 2009 2012 2015 Growth poten&al for Food retail ▪Wet market makes up 85% food purchase ▪Hypermarket growth is mainly due to catering in China, which is the biggest business & general merchandise resource of supermarket ▪Fresh food sec^ons are oken outsourced SOURCE: Access Asia, Annual Reports Aurora & Company 丨6 AgendaChineseRetailMarketConditionSuperMarketIndustrialTrendYonghui’sandcompetitors’conditionYonghui’sopportunityandstrategyProjectTimeline Yonghui Supermarket Yonghui’s procurement model is a core compe&&ve edge against compe&tors  First level Second level Descrip&on on retail market Producer Retailer business mode distributor distributor Direct sell model Local Retail Mode Purchase goods from Second Level Distributor and sell in local level.Typically individual stores. Local grocery stores Earn small value chainFood/ Drink/  Tobacco Specialists Chain Store ModeCVS Large, chain stores such as Wal‐Mart. Second level Other local stores Through strong brand and logis&c ability, distributor central direct procurement goods from first level distributor. First level  Earn rela8ve larger value chain Producers distributor Central direct procurement Mode Purchase goods directly from producers. Chain supermarkets & hypermarkets Require very strong purchase and supply (Wal‐Mart) chain management system. Earn large propor8on of value chain Produce + Retail Mode Central direct procurement model (Yonghui) Hard for large producers to implement. Typically individual producers. Could earn all of the value chain Self produce, Self retail SOURCE: Rising Securi^es Aurora & Company 丨7 Yonghui Supermarket Yonghui’s is in early stage of expanding, Revenue CAGR is expected to decline YonghuiRetailGeographicalRevenueExpandProcurementCompetitiveedgebreakdown247•29newstoresin•Centraldirect•Freshfoodfocus•Fujian39%2011procurement67%•Hugechannel•Chongqing37%•47newstoresin•Localprocurementadvantage•Beijing13.29%762012bystores11%•Matureprofitcycle•Jiangsu&Anhui8%•Asintegration•Other22%•Efficient•North-east2%difficultyandgrossmanagementand2012  2013Q1Freshfood•Henan1%margindrops,highgrossmarginfood•Grossmargin:expandingwillslow•LocalleaderOther13.2%downYonghui’sgrowthstageincomparisonYonghui’sheadstartinwithWholeFoodGroupRevenue(USA)supermarketfreshfoodretailUSD millionSlow growth ▪Directprocurefromorigin12000 Steady growth CAGR=10.3% High▪ProfessionalsuppliersCAGR=21.3% logistics10000 ▪Combinationoflocalandrequirementcentralprocurement8000 ▪Adjustorderaccordingto6000 demandsideRapid 4000 growth ▪KnowdiversifiedlocalCAGR>40%Differentiate2000 fromcustomerneedcompetitiors▪Widerangeoffreshproduct0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Yonghui  CAGR=40% in rapid growth stage   Growth will slow downSOURCE:AnnualReportsAurora & Company 丨8 Yonghui Supermarket Yonghui’s exis&ng and poten&al compe&tors OperatingconditionSegmentGeographicalRevenueExpandBusinessmodeCompetitionthreats1RenrenleFeature:Food/fresh•MidChina65%•29newstoresin•Economygoods•Directfood•NorthChina15%1282011•Combinationofcompetitor•SouthChina3%•Nostoreopenedhypermarketsand•Nationalplayerin2012supermarkets•Similartarget35•Comprehensivecustomerscheapprivatebrand•Growthslow2012  2013Q1downFreshfoodfoodOther2Hualian•Foodretail73%•NorthChina35%123•29newstores•BHGincitycenter•Potential•South-west17%in2012high-endandcompetitor••30newstoresimportedgoods•NationalplayerEastChina13%35in2011•Hualianmarket••North-west11%Leaderin1tierFreshfood,cheap•SouthChina11%2012  2013Q1privatebrand•Diversifiedgoods3Hongqi•generalmerchandise100••Chengdu65%•235newstoresin•CombinationofParallelplayer•Othercitiesin2012(includingsupermarketsand•SichuanlocalSichuan35%32CVS)CVSmarket•>100newstores•Focusonregional•Fewfreshfoodin2011marketapproaches2012  2013Q14Zhongbai•Freshfoodmarket•Fujian46%157•110newstoresin•Focusonregional•Current/Local2012supermarketandcompetitor•Chongqing39%•159newstoresinCVs•Appliedinsome•Beijing9%462011•Nationalareas,hasprocurementcenteralreadybegun2012  2013Q1showingthemomentumSOURCE:AnnualReportsAurora & Company 丨9 AgendaChineseRetailMarketConditionSuperMarketIndustrialTrendYonghui’sandcompetitors’conditionYonghui’sopportunityandstrategyProjectTimeline Yonghui Supermarket Fresh food and supermarket is Yonghui’s advantageous niche  Value from direct procurement Drives store visit More fresh food in supermarket RetailStoreCostWhatdrivesastorevisit?JapanfoodconsumptiondistributionStructureI shopped at the same 56% ■Normal 13% 100% store I always do 2004 Stores 2% I just went to the 57% 10% closest store 1999 ■Supermarket 75% I shopped at a store that a colleague, 19% 1994 ■CVS friend or rela^ve had recommended I checked the newspaper or flyers for 21% 1984 ■Shopping coupons and went to abrac^ve stores mall I chose the store that I'd seen 12% 1969adver^sed recently ■OthersI heard of a new store and 11% 0%      25%       50%       75%    100%decided to try it I was visi^ng friends/family and went to 8% ▪Purchase Logis^cs Others Profit Sales a store that they usually shop at According to experience of developed I was passing a store that caught my 5% countries (Japan in this case), there is a trend ▪Purchase accounts for 75% of total sales. aben^on and tried it for consumer to purchase more foods in Thus reducing purchase cost would result None1% supermarket. in largest improvement in profit.   ▪Similar market trend exists in China. ▪Fresh foods are daily goods. Through providing ▪central direct procurement model could Meanwhile, the “Twelve‐Five‐year” plan is fresh foods, stores could generate visit volume largely reduce purchase cost since it skips s^mula^ng this trend.  and thus promote overall sales since people distributors in the value chain. ▪Current, 84% of fresh food are purchased in “shopped at the same store”. Wet marketThe reason for “Fresh Food” mode Fresh               Food Mode, Self‐opera^ng genera^ng •Fresh food sec^on has strong growing poten^al. Through fresh food mode, Yonghui can central direct visitorsprocurementdifferen^ate itself within compe^^on. •Yonghui have compe^^ve advantage in Fresh Food sec^on: specific supply chain and Economy of Scale, further High entry central direct procurement & retail mode, these are entry barriers to compe^tors.barrier, hard to reduce average copycost•Government policy provides a wonderful environment to implement the “Fresh Food” Mul^ moderegional expansionSOURCE: Huachuang Securi^es, Nielsen Report, Rising Securi^es Aurora & Company 丨10 Yonghui Supermarket concrete op&ons to play (opportuni&es and risks) have been developed for supermarket  players Freshfoodstrategy…Analyzingpresent……lookingforward……recommendingCurrentindustrystatusIndustrytrendsOpportunities▪SupermarketandCVSare▪Foodpurchasewillswitch▪GrowmarketthroughhighlyscatteredbutfromwetmarketandnewapplicationsIntegrationwillprobablyhypermarkettosupermarket▪Increasepenetrationbytakeplace▪Onlinesupermarketistakingcost-down(online)▪Differentvaluechainsshare▪Enterother1/2tier▪Specializedstoresare▪Foodretailhasgreatercitymarkettakingsharepotentialovernon-food▪…▪ConsumerbehaviorsRisks▪Threatsbycompetitors'valuechainplays▪Substitutionbynewproductsormode▪…AURORAproprietarytoolsandnetworkofexperts▪Supply/demandmodel▪Application-specificprofitpools▪ConjointconsumersurveySOURCE: Team Aurora & Company 丨11 Yonghui Supermarket KeyquestionsUniqueinsightsAURORAcancreate▪Howcanweaccuratelyestimatesupermarketand▪DemandandsupplymodelDemand/growthgivenuncertaintyonpenetrationratesandhyper&▪InsightsintoadoptiondriversandexpertsupplyCVSplayerchoices?opinionsonlikelytechnologicalforecast▪Howcanweparticipateinstronganticipateddevelopmentssupermarketfreshfoodgrowth?▪Whatdoesthecurrenttrendofhorizontalintegrationmean▪UnderstandingofsourcingrationalesofCompetitivefortheplayers’marketshareandprofitmargin?decisiontakersdynamics▪Howlargeisthethreatofenlargingpresenceofcompetitors?▪Whatdifferentiationstrategiesshouldwedevelopto▪ProfitpoolanalysisalongvaluechainWinningcompeteagainstRenrenle&Zhongbai(e.g.scale)?▪Analysisofrequiredupstreamcapabilitiesbusiness▪Whatwouldbethebenefitsofandrequiredcapabilitiesmodelsforintegrationintoanewcityorregion?▪Aretheresynergiestobeleveragedbetweenretailof▪AnalysisofcostadvantagefromeconomiessupplierFoodandGeneralmerchandise?ofscalelandscape▪Howwouldexploitingthesesynergiesalterthesupplier▪Deepdiveintotechnologicalbarriers/landscape?opportunitiesProduct▪Arethereanyotherpotentialretailstrategytobe▪Risk/opportunityassessmentofmarketingdevelopmentexpectedattractingcustomers?strategies.andimpactoninvestment,▪Ifso,whatarereasonablereactionsofcompetitors?businessmodelsSOURCE: Team Aurora & Company 丨12 Yonghui Supermarket “Fresh 2.0”– Strategy and Future Prospect SelectedImpactonLean  service  in  fresh market of YonghuisuitableMarketFeasibility/storePenetrationprobabilityRecommendationssize(SM)(2015)▪Aggressivelyvalueadded:differentiateproductportfoliosinSynergyCreationstorebyeconomicregions(categorizedbyGDP/capita)tothroughmatchlocalpurchasesystemanduniqueconsumptionhabits.Leanservice▪MultistepPricing:pricetheproductsbyitsfreshdegree.IncreaseproductsturnoverratetosellthefreshfoodsinitsSupermarketpeakvalue.Promotionsforlowerqualitygoods(2000-6000)SM▪Buildstandardizedprocurementsystem,providinghigh-qualityfreshfoodandhigh-qualitybrandimage▪Introduceprivatelabeled,positionedon“health&standardized”foodproducts,takingpricepremium▪Introduceprivatelabeledclothing,generalmerchandisesaswellExpansiontoEnternewmarketwithgrowingpotentialNewMarket▪Choose2tiercities,withconsumersofgrowingpurchasingpowerandincreasingdemandonhigh-quality,healthfoodsSupermarket▪Centralizedentrymode,focusononecityatonetime,buildup(2000-6000)SMlocallogisticsystem,obtaineconomyofscaleEntry&EstablishEnternewmarketintheformofacquisitionModeSupermarket▪Trytoacquireexistingsupermarketorhigh-levelwetmarketto(2000-6000)SMenjoysynergybenefitaswellasobtainingtheoriginalcustomersSOURCE: Team Aurora & Company 丨13 AgendaChineseRetailMarketConditionSuperMarketIndustrialTrendYonghui’sandcompetitors’conditionYonghui’sopportunityandstrategyProjectTimeline Yonghui Supermarket Proposed Work Plan Month 1 2 3 Modules and work streamsWeek     1 2 3 4 5 6 7 8 9 10 11 12 1. Understand Chinese Supermarket Industry Demand Side Landscape 1.a. Ar^culate Chinese supermarket size and growing poten^al 1.b. Survey on consumer behavior and future demand trend 1.c. Ar^culate regional difference between 1,2,3 ^er ci^es 2. Understand Client’s and Compe^tors’ Condi^on 2.a. Ar^culate client’s business model, and opera^ng cycle  2.b. Ar^culate on compe^tors’ key strategy and advantage  3. Build strategic plan and design expansion mode for our client 3.a. Understand regional factors and decide expansion sites 3.b. Understand implemen^ng feasibility and decide expansion mode 3.c. Survey on opera^ng feasibility and consumers’ response  of         introducing  new product mix SOURCE: Team Aurora & Company 丨14