Only those who have lived in or visited Wuhan know how densely Zhongbai is distributed across the city. There is a Zhongbai store on nearly every street, near every business district, and at the entrance of every residential community. Starting from Wuhan, Zhongbai Group expanded deeply into the Hubei market and planted a flag in Chongqing to the west, becoming the largest supermarket brand in central and western China with the most outlets. However, in recent years, Zhongbai has been closing stores continuously, with the most severe closures in Chongqing, exposing the pain that has plagued this central and western supermarket king for years. Zhongbai Group's performance began to decline in 2012. In 2016 alone, it closed 116 stores, and last year its net profit excluding non-recurring items was a loss of 233 million yuan. For the past three years, it has been selling assets to make ends meet. Zebra Consumption's analysis found that the struggling Zhongbai Group has been trying to find a way out. For example, it partnered with Lawson to open convenience stores, relied on Yonghui to develop its fresh food business, and cooperated with the more professional Gongmao Home Appliances to sell electronics... However, judging from its performance, there has been no significant improvement in the short term. In the capital market, Yonghui Superstores has long coveted Zhongbai. After multiple rounds of stake purchases, it became the second-largest shareholder of Zhongbai Group, with its stake only one threshold away from the actual controller, Wuhan State-owned Assets Supervision and Administration Commission. Survival: Selling Buildings, Land, and Banks In early September, the sudden closure of Zhongbai Warehouse Yichang Shopping Plaza shocked the industry. In reality, this is just one of the hundreds of stores Zhongbai has closed in recent years. Zhongbai Group (000759.SZ) was established in 1989 and listed on the Shenzhen Stock Exchange in 1997. For years, it held the top position in central and western China's supermarket sector. In 2012, Zhongbai began to slide downhill with declining profitability. In 2014, this 20-plus-year-old company faced a major turning point: both revenue and profit declined. By 2016, its operating revenue was 15.366 billion yuan, and its net profit excluding non-recurring items was -233 million yuan. In recent years, the supermarket industry has had a tough time, with frequent reports of losses and store closures. However, overall, regional supermarkets focused on second- and third-tier cities have fared slightly better. In Wuhan, besides Zhongbai Group, there are also Wuhan Zhongshang (000785.SZ), Ewushang A (000501.SZ), and Hanshang Group (600774.SH), with four major commercial giants competing on the same stage. Zhongbai Group generates over 10 billion yuan in annual revenue but ends up not making money. To protect its listing status, it has had to sell off assets year after year. When it rains, it pours. Almost simultaneously with Zhongbai's performance decline, another supermarket giant, Yonghui Superstores (601933.SH), took advantage of the situation and made five rounds of stake purchases in Zhongbai Group. Currently, Yonghui Superstores, the second-largest shareholder, holds 25% of Zhongbai Group, while the actual controller, Wuhan State-owned Assets Supervision and Administration Commission, holds 32%. Both sides have strong intentions to increase their stakes. Struggling to Survive: Closing Stores Internally and Seeking Cooperation Externally Zhongbai Group knows that relying on selling off assets to maintain performance is not a long-term solution. The first move it came up with was closing stores. In 2016, Zhongbai Warehouse closed 63 stores and opened 2 new ones, while Zhongbai Convenience Stores closed 53 and opened 72 new ones. Of course, among Zhongbai's various store formats, most of the closures were Zhongbai Warehouse, which are large and medium-sized supermarkets. The total number of Zhongbai Convenience Stores has been increasing, with the highlight being the Zhongbai Lawson convenience stores, a partnership between Zhongbai and Lawson. In May 2016, the first Zhongbai Lawson store opened. As of June 30, 2017, a total of 116 Zhongbai Lawson stores had been opened, including 55 franchise stores. As early as 2002, Zhongbai experimented with a convenience store called "Haobang" that stayed open until 11 PM, but it closed soon after. In 2011, "Haobang" made a comeback with 24-hour convenience stores, but to date, only 42 franchise stores have been opened. When these old-school supermarket giants like Zhongbai lower themselves to compete head-on with convenience stores tucked away in city corners, it's hard to say whether they can replicate their past glory. Not to mention that the convenience store market is becoming fiercely competitive. In the Wuhan market alone, Today Convenience Store, which copied the 7-Eleven model, has already opened more than 200 stores, many of them directly across from Zhongbai convenience stores. After Yonghui became the second-largest shareholder of Zhongbai, the two became strategic partners. Yonghui sent a team of dozens of people to help Zhongbai escape its performance quagmire by leveraging its advantages in the fresh food sector. So far, the transformation in Zhongbai's fresh food sector seems to be working. In 2016, fresh food sales grew by 29.18% on a comparable basis, and gross profit increased by 30.55%. The traditional electronics sales business is clearly unlikely to become a strong pillar for Zhongbai Group's performance. Zhongbai partnered its home appliance segment with Wuhan-based Gongmao Home Appliances. However, under the siege of e-commerce, former electronics chain giants like Gome and Suning are embracing the internet. Even if the electronics sales business can still make money, for Zhongbai Group, it's just a drop in the bucket. Source: Zebra Consumption (banmaxiaofei) The 3rd (CFIC) China FMCG + Internet Conference will be held in Chongqing in November 2017. The conference will closely focus on the theme "New Forces, New Ecosystem" and invite 1,000+ distributors, 500+ brand owners, 200+ B2B platform founders, and 100+ investment and financing institutions to explore a new chapter of cross-industry integration! Core Topics of This Conference:
How can the FMCG industry leverage B2B to achieve new growth opportunities?
How should the new supply chain behind new retail be built?
How can intra-city logistics help B2B achieve leapfrog development?
Highlights of This Conference:
The industry's first "2017 China FMCG B2B Industry Competitiveness White Paper"
Case studies of excellent distributors undergoing transformation and upgrading
Upgraded conference + exhibition, with Hall 6 Internet Technology Exhibition strengthening connections
Leaders from Alibaba Retail Link, GL Capital, EASIA Supply Chain, Best Store Plus, Yijiupi, and Hdian will deliver speeches and share pioneering insights.
Registration is now open. Long press the QR code below or click "Read Original" to register. Early bird tickets before September 17 enjoy a 30% discount! Add as friend and note "Conference Registration" Click the links below to review the highlights of the 1st and 2nd FMCG + Internet Conferences: 2016 "FMCG + Internet" Summit Forum 2017 (2nd) China FMCG + Internet Conference Click the links below to review the highlights of the 1st and 2nd FMCG + Internet Conferences: 2016 "FMCG + Internet" Summit Forum -END-