It is easy to conquer a country, but difficult to defend it
Author: Peng Ke
Editor: Xiaoyu
Style: Zhizhi
Source: Rhodium Finance-Rhodium Finance Research Institute
The more the rice is eaten, the more delicious it becomes, and the more the melon is eaten, the bigger it gets.
has been hotly searched in recent days, and it is quite overwhelming. In addition to "top star" Wu Yifan, fast food tycoon Wallace also unexpectedly overturned.
On July 17, Wallace, known as "country KFC ", topped the hot search list due to the food safety scandal!
01
How to have zero tolerance?
LAOCAI
On July 8, the "Insider Patrol Bureau" of Station B UP released the video "How Dirty is Wallace and Korean Fried Chicken, the Two Best-Selling Fried Chicken Restaurants on the Two Takeaway Platforms":
The well-made fried chicken is here Leave it aside without any cover, and the detergent falls directly into the oil pan;
What should I do if the fried chicken accidentally falls on the ground? The store manager did not allow it to be thrown away, but continued to use it;
During the epidemic, Wallace’s kitchen staff made fried chicken and burgers with bare hands without wearing masks or gloves;
There were flies “checking in” in the “freezer”; for fried chicken The oil will not be replaced until it turns black, and the oil will even be filtered, and then mixed with new oil to continue using...
As soon as the video came out, it went straight to the frying pan. The shocking sanitary conditions made netizens shout that they couldn't stand it: "I don't dare to eat it", "No wonder I have diarrhea every time I eat it"...
As public opinion fell, on the evening of July 17, Wallace's official Weibo released Apology statement: The company attaches great importance to this and has launched an investigation as soon as possible. As of July 17, the Beijing Huoying branch of the restaurant involved has been closed for rectification; all employees in the area have been trained again to reiterate and implement various product operating specifications and operating procedures; an inspection team has been dispatched to conduct rectification inspections of the restaurant to ensure All measures are implemented. In the future, we will continue to strengthen the food safety audit and inspection system and check various business processes of the restaurant to ensure a safe and reliable dining experience.
Wallace emphasized that Wallace has a zero-tolerance attitude towards any food safety incident and will never tolerate it once discovered. He is deeply sorry for the trouble this incident has caused everyone.
has attitude and practicality, and his actions are also quick, which deserves recognition.
However, the final effect still needs time to be tested.
is not deliberately false. Looking at the past, Wallace, who claims to have zero tolerance for food safety, has experienced many "overturns" in food safety.
On December 5, 2020, according to the website of the People’s Government of Huangzhou District, Huanggang City, Hubei Province, seven Wallace restaurants in Huangzhou District, Huanggang City, Hubei Province were recently banned due to illegal purchases and sales of frozen and refrigerated meat products that have not been tested by the disease control department. Local law enforcement authorities seized it and the relevant persons responsible were detained.
In October 2019, Wallace store in Hohhot City illegally sold waste grease and was heavily fined by the local regulatory authorities.
In March 2019, Jiangxi's " Jiangnan Metropolis Daily " conducted an undercover investigation on Wallace and exposed problems such as the continued sale of chicken wings in local stores after they fell on the floor, the continued use of hamburger embryos that had expired for two days, and the messy kitchen environment. . Afterwards, Wallace immediately apologized and closed the store.
In October 2017, media reported that a Wallace fast food restaurant near the Civil Affairs Vocational College on Xiangzhang Road, Yuhua District, Changsha City had problems such as a dirty and messy back kitchen. Subsequently, after verification, the relevant departments ordered the fast food restaurant to make immediate rectifications. He also stated that he would review it during future inspections.
In addition, through the keyword "Wallace" and "food safety" searches, there are more than 5.39 million related results.
browse Black Cat complained about . As of 20:00 on July 21, there were 566 complaints about Wallace.
On July 15, an anonymous user said, “I ordered a fried chicken and burger at Wallace on the afternoon of the 13th. The fried chicken was raw meat (the order number was 2680 3720 9879 9604 6). The merchant involved was Wallace Whole Chicken Burger. Huiyuan store, complaints against Wallace merchants have been fruitless”;
Another anonymous user complained on July 7 that “Wallace Shanghai Auto Market store, the food is raw, blood and water come out, and you have diarrhea after eating.”
In addition, "user 7633642003" complained that "I bought food at Wallace, and the food became sour and the food spoiled."
The above complaints were all reviewed by the platform.
Can’t you see these “zero tolerance” Wallaces? Why only fix the problem after the problem is exposed? How much substantial change can this overturn bring?
Hua Huaiyu, founder of Wallace, once said that "the food industry is a conscience industry." However, looking at Wallace's past, how far has it been achieved and whether its words and deeds are consistent?
02
Beware of scale traps A valuable wake-up call from the king of fast food
LAOCAI
The question is not unexpected.
Food safety is no small matter. Anyone who interferes willfully will challenge the bottom line of the market and supervision.
industry analyst Hao Rui said that businesses can be reopened after closure for rectification, but the repair of corporate business reputation is a systemic challenge. In the long run, companies with lack of goodwill and poor reputation will find it difficult to gain recognition from consumers.
Especially for large fast food companies like Wallace, the derivative effects cannot be ignored.
Speaking of Wallace, I believe most readers will be familiar with it. Public information shows that Fujian Wallace Food Co., Ltd. was established in 2009 and listed on the New Third Board in April 2016. Focusing on environmental protection and health, we will definitely use the highest quality raw materials to cook the highest quality life enjoyment.
The birth of the Wallace brand dates back to 2001.
In the 1990s, KFC and McDonald's quickly entered first-tier cities, and a "foreign fast food" craze began in China. This made Hua Huaiqing, who was working as an accountant in Wenzhou at the time, smell a business opportunity.
Public information shows that in 2001, Hua Huaiqing and his brother Hua Huaiyu pooled together 80,000 yuan and started selling foreign fast food in front of Fuzhou Normal University, named "Wallace".
At that time, there were no two giants in the second and third tier markets, so the Huahuaiyu brothers started to work hard.
In the beginning, Wallace imitated the Kenmai model. Its products were priced high and it rented several hundred square meters of store space. However, the market sales were mediocre. At the same time, Dicos also quickly entered second- and third-tier cities, and Wallace's situation became passive.
In the end, Wallace adopted a low-price strategy and launched the "Special 123" (1 yuan for Coke, 2 yuan for chicken legs and 3 yuan for hamburgers), which made him famous. From then on, the "affordable price strategy" was applied to all Wallace stores. superior.
However, it is not easy to maintain long-term low prices for products. So Wallace began to open a large number of stores to reduce marginal costs through the advantage of scale. Through constant exploration, Wallace explored a "cooperative chain model" with "store crowdfunding, employee partnership, and direct management" as the core.
Wallace decentralizes shares to employees or external partners through store crowdfunding, allowing them to form a community of interests with the company. Wallace provides technology, raw materials, logistics, brand output and other support, ensures the unification of operating standards through direct management, cooperates with store crowdfunding, complements each other's advantages, and achieves a deep partnership with two-way shareholding.
Taking advantage of this model and superimposed low-price strategy, Wallace expanded aggressively.
Ibis World’s 2013 report shows that Wallace is expanding at the rate of opening three new stores every day. By January 2014, Wallace had more than 4,800 chain stores nationwide. Data from "Narrow Door Restaurants" show that as of June 30, 2021, Wallace currently has more than 18,000 stores. The sales volume is greater than that of McDonald's and KFC combined, making it the well-deserved "King of Local Fast Food".
Meituan "China Catering Report 2029" shows that Wallace ranks first in order volume, surpassing McDonald's, KFC, Zhengxin Chicken Steak, etc.
Putting aside the doubts about copycats, from the perspective of performance alone, Wallace has indeed enjoyed the dividend of scale:
The financial report of Wallace’s parent company Huashi Food from 2016 to 2019 shows: revenue was 1.108 billion yuan, 1.645 billion yuan, 2.326 billion yuan, respectively. billion, 2.55 billion yuan, and net profits were 21.54 million yuan, 34.08 million yuan, 50.756 million yuan, and 54.604 million yuan respectively.
Despite the impact of the epidemic in 2020, it still achieved revenue of 3.494 billion yuan, a year-on-year increase of 37.0%, and net profit of 92 million yuan, an increase of 68.66%.
Ling Shubing, one of the controlling shareholders and director of Wallace, once stated that Huashi Food is a food trading company that mainly controls the procurement channels of food raw materials and equipment in terminal stores.
This is indeed different from the giant Cammax, or it may be an important password for it to become the king of fast food. However, the quality control and risk control concerns and daily management vacuum caused by this expansion should also be important considerations.
Constrained by the low-price strategy, Huashi Food's gross profit margin has never been able to increase. In 2020, the gross profit margin was only 4.70%, a year-on-year decrease of 2.06 percentage points, which is far lower than the industry average of about 20%.
Chinese food industry analyst Zhu Danpeng said that the asymmetry between frequent negative news and performance growth stems from Wallace’s positioning in the mid- to low-end market, and its main customer base is the general public who pays more attention to cost-effectiveness than food safety. Therefore, Wallace Despite the negative news, the overall performance is pretty good.
With the upgrading of consumption, the improvement of users’ health concepts, and the tightening of industry supervision, the market’s tolerance for low-quality products and market chaos is also constantly decreasing, and the corresponding risks cannot be ignored.
Some public opinion analysts pointed out that the low gross profit strategy has caused Wallace stores to pursue high turnover and made quality control more difficult. The number of stores as high as 18,800 also tests the company's management capabilities. Once the scale exceeds its risk and internal control capabilities, it is reasonable for food safety chaos to occur frequently.
In short, scale effects also have scale risks. While pursuing scale, Wallace must also strengthen quality and be wary of scale traps. The entire supply chain and internal quality control system still need to be improved and polished. If we can't reflect on the pain and make up for our shortcomings, similar chaos may still happen in the future.
From now on, this video exposure is also a valuable wake-up call. The question is whether it can truly wake up the dreamer. How much time will the market give it?
03
Why does the "King of Fast Food" build high walls?
LAOCAI
It is worth noting that Nanwang Technology, a company owned by Hua Huaiyu’s spouse Huang Yanfei, is applying for an IPO.
On June 10, Nanwang Technology, a paper packaging supplier for McDonald’s, Uniqlo and other brands, submitted a prospectus.
The prospectus shows that in 2020, Nanwang Technology’s top five customers are Bisheng Food (KFC), Wallace, Tokyo Art (Japan’s Uniqlo packaging material supplier), Lexin Trading (McDonald’s), Xingmi Technology (Xi Mi Technology) tea), with sales amounts of 178 million yuan, 136 million yuan, 71.5037 million yuan, 46.9249 million yuan, and 29.8526 million yuan respectively. The top five customers accounted for approximately 55% of revenue during the same period, indicating a high degree of customer concentration.
At the same time, Red Star Capital Bureau once reported that the second and third largest shareholders of Nanwang Technology have close relationships with Wallace.
The second largest shareholder of Nanwang Technology is Hui'an Huaying Investment Center, and its executive partner Huang Yanfei is the spouse of Wallace's actual controller and chairman Hua Huaiyu; the third largest shareholder of Nanwang Technology is Hui'an Chuanghui Investment Center Hua Pengcheng, the limited partner of the limited partnership, is the son of Ling Shubing, another actual controller of Wallace. Chen Zhengli, the executive partner, is the fifth largest shareholder of Wallace and the chairman of the supervisory board. At the same time, Huang Rong, who holds 2.32% of the shares, is the niece of Hua Huaiyu; Chen Xiaofang, who holds 1.96% of the shares, is the daughter-in-law of Hua Huaiyu, uncle of Hua Huaiyu.
This has also led to doubts about the possible "interest transfer" of Nanwang Technology and Wallace.
However, Nanwang Technology denied this statement and emphasized that there was no situation where the price of related transactions was obviously unfair.
focuses on Wallace. The current actual controllers are Hua Huaiyu and his sister-in-law Ling Shubing, each holding 32% of the shares. The latter was not a shareholder of Wallace Foods when it was first established.
According to Zi Finance, from 2018 to 2019, Wallace Food paid a total of two dividends, 2.5 yuan for 10 shares and 2.3 yuan for 10 shares. In April 2021, the company carried out the largest dividend in history, with every 10 shares paying dividends. Stock distribution is 12 yuan. Through only three dividends, Ling Shubing received 55.7 million yuan, which was 3.5 times the amount of her investment.
In a market economy, there is nothing wrong with dividends. However, in the face of fierce market competition, it is worth considering whether it would be better to invest more in supplementing shortcomings and improving business.
After all, a pattern cannot always work. Faced with a rapidly iterating user market, Wallace needs to continue to evolve if it wants to remain the king of fast food. If it follows KFC and McDonald's, there are many challenges in developing sustainability and core competitiveness.
focuses on KFC and McDonald’s, and has accelerated localization and sinking in recent years. Its performance is remarkable in terms of marketing innovation, omni-channel layout, and menu updates.
industry analyst Yu Shengmei said that with the help of mature brands and super business capabilities, the subsequent innovation and market influence of KFC and McDonald's cannot be underestimated. As the barriers between the two become higher and higher, it also increases the difficulty for Wallace to follow and imitate.
According to data from Tianyancha and Phoenix.com , as of the end of 2020, Wallace Food had a total of 438 employees, including 61 administrative staff, 334 sales staff, and 43 financial staff. , food safety management personnel is 0.
A glimpse of the leopard in the tube is evident!
It is easy to conquer a country, but difficult to defend it. Behind the halo of "King of Fast Food", how to consolidate the foundation for development and build a high quality wall is still a serious question for Hua Huaiyu.
This article is original by Rhodium Finance
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