---
title: "Explosive Rise and Fall: Eight Sober Predictions for the Fresh Food Cold Chain Industry - Return to Fundamentals, Wait for the Flowers to Bloom!"
description: "The COVID-19 pandemic has lasted 739 days, affecting three Spring Festivals, and the fresh food cold chain industry has experienced dramatic ups and downs. This article offers eight sober predictions for the industry's future, emphasizing a return to fundamentals and long-term thinking."
author: "钟贤柏"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2022-02-11"
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# Explosive Rise and Fall: Eight Sober Predictions for the Fresh Food Cold Chain Industry - Return to Fundamentals, Wait for the Flowers to Bloom!

> The COVID-19 pandemic has lasted 739 days, affecting three Spring Festivals, and the fresh food cold chain industry has experienced dramatic ups and downs. This article offers eight sober predictions for the industry's future, emphasizing a return to fundamentals and long-term thinking.

At 2 a.m. on January 23, 2020, Wuhan announced a lockdown. By this year's Spring Festival Eve, the pandemic had lasted through three Spring Festivals, a total of 739 days.
Behind the global pandemic and export surge, China's zero-COVID policy and sporadic outbreaks in various cities have continued to impact the tertiary industry, including tourism, catering, and hotels. Issues such as Sino-US confrontation, common prosperity, regulation of tutoring, real estate controls, and population growth continue to affect every individual.
The 2022 Central Economic Work Conference summarized the situation as facing "three pressures: demand contraction, supply shocks, and weakening expectations," indicating severe challenges for economic development.
In 2020 and 2021, the Yunleng Industry Research Institute made consecutive predictions on the development trends of the fresh food cold chain industry, and most of these views have been verified in practice.
In 2021, the fresh food cold chain sector was turbulent: community group buying fell from its peak, Shihuituan and Tongcheng Life hovered on the brink of bankruptcy, and some fresh food B2B companies fell into difficulties of layoffs, contraction, and transformation.
On one hand, capital-driven fresh food cold chain business models cooled down; on the other hand, the national cold chain logistics 14th Five-Year Plan was released. The industry's development has been full of ups and downs, making in-depth research and reflection crucial for the future of the fresh food cold chain industry.
**Dual Epidemics Stir the Cold Chain, But It Will Eventually Return to Normal**
The COVID-19 pandemic has affected us for three Spring Festivals. We may now be accustomed to news of positive cases and mass testing, but outbreaks at Nanjing Airport, Zhangjiajie, and Inner Mongolia still poured cold water on the industry's anticipated summer travel market.
Over 700 days of repeated outbreaks have made even bottom-fishing companies like Haidilao and Sexy Tea suffer; more small restaurants, tourism, and hotels are struggling, with many closing down.
With the continuous increase in domestic vaccination rates and the reduced fatality rate of virus variants, we believe 2022 will be a turning point, and the pre-pandemic normal life will return.
At the same time, the African swine fever outbreak in August 2018 directly affected the supply of pork, the most important source of animal protein on Chinese tables, creating a dual epidemic overlay.
In the past two years, China's cold chain practitioners have experienced extraordinary times. However, the pandemic is not the norm. Clarifying what changes and what remains constant, and grasping objective laws, remains key to investment in the fresh food cold chain industry:
**1. Policy Guidance, but Investment Needs to Be Pragmatic, Scientific, and Rational:**
2021 marked the start of the 14th Five-Year Plan. According to incomplete statistics, the national level issued dozens of cold chain logistics-related policies, including rural express delivery system construction, modern comprehensive transportation system development, backbone cold chain logistics base construction, and commercial logistics system construction, guiding and promoting the healthy development of the cold chain logistics industry.
At the end of 2021, the "14th Five-Year Plan for Cold Chain Logistics Development" was officially released, painting a beautiful blueprint for the industry's future.
On one hand, the state and ministries provide policy support for the cold chain industry; on the other hand, local governments, state-owned enterprises, and private enterprises are eager to enter the cold chain industry. Some provinces have introduced plans for million-ton cold storage construction, with state-owned enterprises investing heavily in cold chain infrastructure.
However, the reality shows a stark contrast in operational status: at the end of 2021, a large cold chain project in a prefecture-level city invited the Yunleng Research Institute to provide advice due to operational difficulties.
We conducted an on-site inspection:
The project is located in a prefecture-level city with a permanent population of over 6 million and a 2020 GDP exceeding 350 billion yuan, typical of Chinese prefecture-level cities. The cold chain project has been in operation for over five years, with a 35,000-square-meter cold storage facility, but the occupancy rate is only 20%, and rent only covers energy costs and management fees. It is too early to talk about return on investment, far from the conclusions of the original "feasibility study report."
This project serves as a warning to the industry: development still follows objective laws. Only with scientific understanding, rational decision-making, and scientific operation can our investments move in the right direction.
**2. Pigs Can't Fly Forever; Walking on the Ground Is More Stable:**
In last year's industry review, the Yunleng Research Institute predicted that compared with 2020, pork prices would inevitably fall in 2021: hog prices would remain around 12 yuan in the first half of 2021 and likely drop below 10 yuan in the second half.
But even with such predictions, we did not expect the price drop to come so fast and so fiercely!
In August 2021, the escalation of Shuanghui's "father-son infighting" again exposed industry secrets: Shuanghui had purchased 100,000 tons of frozen pork at high prices at the end of February, causing a potential loss of 1 billion yuan for the listed company, meaning a price drop of 10,000 yuan per ton. By September, the market price had fallen below 12,000 yuan per ton.
Many frozen pork importers who ordered at 21,000-22,000 yuan per ton at the beginning of the year had already lost more than 50%, including financial and storage costs.
The frozen meat import price trend is just a microcosm of the pork market; the fresh meat spot market is no exception:
The pork price increase triggered by the August 2018 outbreak came to an abrupt halt in mid-January 2021. The three-year increase fell to the bottom in half a year, a drop of -74%. The decline in pork prices is also reflected in the 2021 performance forecasts of pork listed companies:
Wens Foodstuff Group's 2021 performance forecast shows an expected loss of 13-13.8 billion yuan; Tech-bank Food disclosed a forecast loss of 3.5-4 billion yuan, compared with a profit of 3.24 billion yuan in the same period last year;
New Hope Liuhe Co., Ltd. (New Hope, 000876.SZ) 2021 performance forecast: net profit attributable to shareholders of the listed company is a loss of 8.6-9.6 billion yuan, a decrease of 273.94%-294.17% year-on-year, compared with a profit of 4.9 billion yuan in the same period last year.
The threat of African swine fever to the entire industry's safety remains. Epidemic prevention has permanently raised farming costs and increased the entry barriers and risks of the breeding industry.
After the African swine fever outbreak, farming operations generally increased prevention investment. The biosecurity systems established at pig farms, including disinfection and washing centers, transfer stations, and other internal facilities, have raised breeding costs. The prevention cost for leading listed companies is around 0.5 yuan per jin, with limited impact on costs.
In the long run, the super-roller-coaster price fluctuations under the dual epidemics will come to an end, and the opportunity for sudden wealth may not appear again in the short term.
From 2018 to 2021, the CR10 of the pig farming industry increased from 6.22% to 19.37%, and CR20 from 7.91% to 22.72%, showing increasing industry concentration. However, the fundamental pattern dominated by smallholders has not changed, and the pig cycle will continue.
In October 2021, hog prices were observed as low as 10.78 yuan/kg. The second bottom of this cycle is expected to occur in the second half of 2022, so the period of cheap pork for ordinary people may continue for a while.
**3. Cold Chain Import Growth Slows, a New Normal:**
In 2021, China imported nearly 9.38 million tons of meat in total, down 5.4% from 2020 (in 2020, China imported 9.91 million tons of meat, up 60.4% year-on-year). Among this, pork imports totaled 3.71 million tons, down 15.5% year-on-year.
Analyzing the monthly meat import data for the year, it is not difficult to find that monthly imports in 2021 began to fall below the same period last year from May, with differences reaching 153,000 tons and 140,000 tons in June and September, respectively. By December, the difference peaked at 310,000 tons.
The trend of the above data is consistent with the decline in domestic pork prices: as domestic pork supply becomes sufficient and prices fall, the price advantage of imported frozen meat, especially frozen pork, diminishes, and demand returns to normal.
The import growth rate of frozen pork in the chart above also follows a roller-coaster pattern, entering a downward channel after two consecutive years of rapid growth.
The rapid growth of frozen pork imports came from the supply shortage caused by the domestic African swine fever outbreak. When the key factor disappears, returning to normal is the norm. **When the demand for frozen meat storage driven by import growth and price fluctuations weakens, it is inevitable that the vacancy rate of port-type cold storage without operational capabilities will rise.**
**4. Cold Chain as Infrastructure and Underlying Logistics Assets Will Receive Long-Term Attention:**
On June 21, 2021, the first batch of domestic infrastructure public REITs debuted on the market, including two with warehouse logistics assets as underlying assets: Yangang REIT and Prologis REIT.
For the warehouse logistics industry, cyclical risks are unavoidable, but warehouse logistics itself is largely a rigid demand serving people's livelihoods, so its anti-cyclical nature is also very obvious. Especially under the pandemic, assets such as office buildings, complexes, and hotels have been significantly affected, while logistics assets' superior resilience has stood out and gained recognition from many investors.
With the smooth progress of China's infrastructure REITs pilot work, logistics real estate has gradually transformed from an alternative asset class to a core asset, with a bright market outlook both in policy and theory.
However, due to difficulties in acquiring land in core cities, logistics real estate developers began to circle land in second-tier cities and satellite cities around hot spots in previous years. In the early stages of project development, they encountered scarce land resources. After completion, due to lower-than-expected warehouse rental rates, development speed dropped sharply.
In contrast, platform e-commerce and express delivery companies with commercial flow and self-owned logistics volume have increased their land acquisition frequency.
For example, JD Logistics, with substantial business volume and tax contributions, not only has significant development increments but also, in early January this year, entered the final stage of acquiring China Logistics Asset Holdings. This signifies the arrival of an operations-oriented logistics real estate era, and the stage of "lying down to make money" in logistics real estate has ended.
Cold chain, as the jewel at the top of logistics real estate, yields higher returns than traditional high-standard warehouses. Currently, there is no domestic cold chain logistics real estate developer with true operational capabilities (this may be controversial; the Yunleng Research Institute believes that operational capability is not simply warehouse custody, in-warehouse operations, or urban distribution.
Rather, it is the ability to provide warehousing and logistics services that truly improve the efficiency of the cold chain supply chain, with high customer stickiness, not just simple cold storage leasing). Some enterprises that build cold storage or convert dry storage to cold storage using traditional high-standard warehouse models, simply imitating the leasing-style operation of high-standard warehouses, have not truly met the needs of industry users.
Against the backdrop of contraction in community group buying and e-commerce platforms, and a surge in cold storage supply, some city projects face severe vacancy and lack sustainable development capabilities.
The Yunleng Research Institute believes that cold chain logistics real estate enterprises with operational capabilities, supported by development intensity, cold chain rents, and higher occupancy rates, will overcome the difficulties of land acquisition and high land prices, and are expected to win in the next round of competition.
**5. "Prepared Dishes" Overheating? Long-Term Optimism, Sustained Medium Heat:**
In 2020, the Yunleng Research Institute believed: with Anjoy's outstanding performance, the performance of traditional frozen food leader Sanquan also grew significantly, further enhancing the effect of industry concentration toward the top.
In the capital market, startup companies that proposed the concept of prepared dishes last year developed extremely hot. The newly listed A-share prepared dish company Weizhixiang once hit 13 consecutive limit-ups, and its market value once exceeded 10 billion yuan. Although its annual revenue was only 622 million yuan, its net profit margin was quite good.
By September 6, 2021, "the first stock in the catering supply chain," Qianwei Central Kitchen (001215.SZ), listed on the A-share market, once again pushed the concept of prepared dishes to the top of hot searches, with a large amount of capital rushing into the "prepared dishes" track to find good targets.
However, prepared dishes are not a new product; they have been widely used for more than a decade. Behind the popularity of Hunan cuisine restaurants nationwide are hundreds of central kitchens in Hunan serving the catering industry, i.e., prepared dish companies. In the past, prepared dishes were mostly sold to the B-end, known in the industry as "hotel dishes."
The renewed popularity of prepared dishes comes from the move of various catering and fresh food retail leaders to sell directly to C-end users.
**The Yunleng Research Institute believes: B-end kitchen industrialization comes from the need to reduce costs and improve efficiency, while C-end prepared dishes represent a long-term, slow-changing process of lifestyle transformation. Although the habit of cooking at home cultivated during the pandemic is conducive to the rise of prepared dishes, it is too early to talk about an explosion. However, it is foreseeable that the track will remain moderately hot for a long time and is worth long-term investment.**
At the same time, the industry threshold for prepared dishes is extremely low, and the situation of fragmentation, small scale, and disorder may persist for a long time. Brand growth also requires a long process, and capital-driven growth may not necessarily work!
Historical experience also proves that when downstream demand has not yet exploded, relying solely on a hot capital market and supply-side explosion can easily lead to survival difficulties for enterprises. The new consumption track, which was overheated in the first half of last year, entered a frozen state in the second half, serving as a warning.
Lu Zhengyao, founder of Luckin Coffee, has opened the first store of his prepared dish project "Shejian Gongfang" in Beijing, reportedly planning to open 3,000 stores in 2022.
Perhaps only when the tide goes out will those swimming naked be revealed.
**6. Overestimated Barriers, Community Group Buying Enters a Turning Point:**
2021 was a very important year in the development of community group buying. It suddenly stepped from the hot 2020 into deep water. Drastic changes such as strict regulation, elimination rounds, and major reshuffling caught us off guard, but we also have a strong and firm perception: community group buying has entered a turning point.
**In the hot 2020 of community group buying, the Yunleng Research Institute, through long-term observation and research, believed:**
As a business model, **community group buying is essentially a combined system of social supply chain + logistics system + group leaders, supported by WeChat as the mobile internet infrastructure.** It is a decentralized, operation-heavy e-commerce model. Because of decentralization and heavy operations, companies like Didi, Meituan, and Pinduoduo were able to enter quickly.
Over time, as the model continues to iterate, **the business model of community group buying will become similar to today's supermarket model, with low barriers and not monopolized by a few giants. More enterprises will still have the opportunity to enjoy the dividends of the community group buying business model.**
Fast forward to 2021: in July, Tongcheng Life went bankrupt; in August, Jingxi Pinpin contracted; in September, Chengxin Youxuan retreated; in December, Shihuituan ceased operations. Capital-driven community group buying players, after burning tens of billions of yuan, did not achieve the desired results, and most ended in bankruptcy.
This also verifies the conclusion that the barriers to community group buying are not high. It is impossible to completely rely on capital to burn out scale and achieve a winner-take-all outcome. Decisive stop-loss or capital withdrawal due to lack of hope led to bankruptcy, becoming the fate of many capital-backed groups.
Even the capital groups still at the table, such as Xingsheng Youxuan, Meituan, and Duoduo, have begun to shift from capital operation to business operation, from excessive pursuit of GMV to pursuit of profit and moderate scale.
In the second half of 2021, Xingsheng Youxuan adopted a defensive strategy, neither expanding nor contracting, abandoning its expansion plan in the Northeast, and its northern frontier stopped at Shijiazhuang.
Behind the difficulties of capital groups, regional community group buying platforms have ushered in a third boom period. Under survival evolution, local groups from north to south, such as Daqing Jiubai Street, Zhengzhou Youjingyoutian, Changsha Zhihuazhiguo, Shenzhen Tudigong, and from west to east, Jingzhou Jiayijia, Hangzhou Shanzongqinxuan...
In 2021, they not only did not fall but also achieved several-fold growth, verifying the Yunleng Research Institute's view from last year:
Since community group buying is a major trend, it cannot be fleeting. As a business model, **community group buying will become a business model similar to today's supermarkets, not monopolized by a few giants, and more enterprises will still have the opportunity to enjoy the dividends of the community group buying business model.**
**The Yunleng Research Institute is long-term bullish on the community group buying track: community group buying is an iterative product derived from a large number of well-developed high-density residential areas, efficient and complete logistics distribution systems, and the cultivated national e-commerce habits. It has become the new infrastructure for China's fresh food cold chain retail.**
Community group buying will become an important retail channel, with the long-term market size estimated to approach 2 trillion yuan. Community group buying, along with fresh food, frozen food, and prepared dishes, serves three meals a day and will surely thrive endlessly.
**7. Fresh Food B2B Platforms Face Difficulties, Traditional Distributors Continue to Iterate:**
According to public information, Meicai.com was founded in 2014, implementing a "two ends, one chain, one platform" model, insisting on controlling goods and self-operation, connecting upstream fresh food producers and downstream merchants based on a cold chain logistics network. From 2014 to 2018, Meicai.com was favored by capital, with total financing of 8.418 billion yuan.
But since 2018, the market has not received any financing information from Meicai. After burning through billions in financing, in September last year, Meicai.com suspended services in some cities, began merging regions, and initiated continuous layoffs; at the beginning of this year, news spread that Meicai.com was relocating its headquarters and continuing layoffs.
Another player in fresh food B2B, Meituan Kuailu, even with Meituan's backing, adopted a contraction strategy in 2021, suspending operations in some third- and fourth-tier cities and retaining only first- and second-tier cities.
The Yunleng Research Institute has been continuously tracking and studying the impact of the fresh food B2B platform model on the industry. The Yunleng Research Institute believes:
China's catering market is diverse, with barbecue, tea drinks, and other segmented ingredients rising rapidly. Due to the diversity of catering ingredients, the variety of ingredients is extremely rich, and the industry chain is highly refined. What does "rich" mean?
Usually, small b faces the last layer of wholesalers, which are very small and offer only a few hundred SKUs, while Sysco offers 370,000! Wide product line wholesale business accounts for 87% of Sysco's revenue.
Meicai's business model also serves small and medium customers, but solving the challenge of supply chain management for 100,000+ SKUs is by no means a technical or business model issue!
China also has its own unique response: since a single wholesaler cannot meet the needs of various small b, just have more. Different types of wholesalers gather to form a wholesale market, and wholesalers act as each other's inventory, solving the problem of insufficient SKUs.
Secondly, among many ingredients, fresh fruit and vegetable supply chain management is the most difficult point. Due to the short shelf life and poor planning of fresh fruits and vegetables, price fluctuations are obvious, with daily changes of 50% not uncommon. This market's trading operations are only more difficult than futures market operations, which is probably a problem ignored by most fresh food entrepreneurs.
I know a first-tier wholesale boss in the fresh food industry who mainly deals in peppers. The largest daily throughput for peppers alone is 15 trucks, over 300 tons. Although he is not highly educated, he is smart and diligent, focusing on the supply chain management of a single product for over 20 years, from ordering in advance from the base (futures) to first-tier wholesale in the provincial capital (credit sales).
When the market is bad, losing tens of thousands per truck doesn't faze him; when the market is good, earning tens of thousands per truck is easy (considering a truck of 20 tons, earning just one yuan per jin means 40,000 yuan per truck). He is his own boss, independently operating agricultural product futures and bearing market risks. Which internet fresh food platform can do that?
Perhaps Meicai's business logic was idealized from the start... The emergence of fresh food B2B platforms, the rise of capital-driven community group buying, and the rise of group meal supply have not changed the basic logic of the fresh food cold chain:
In the industry, those who adapt, focus on categories, continuously iterate their thinking, and embrace change will always be the winners in the fresh food industry.
**8. Where Will Community Fresh Food and KA Supermarket Models Go?**
Behind the rise of community group buying is a huge impact on traditional supermarkets:
According to listed company performance forecasts, many supermarket chains expect varying degrees of losses: Yonghui Superstores forecast a loss of 3.9 billion yuan, Renrenle forecast a loss of 800 million yuan, Jiajiayue forecast a loss of 300 million yuan...
According to Bubugao's annual report, Yonghui Superstores' fresh food and processed products revenue accounted for 47.8% of its main business revenue in 2020, and the fresh food category is precisely the most competitive area of community group buying.
Fresh aquatic products, vegetables, fruits, eggs, and milk for the daily family table have become key categories for giants' "community group buying" business. In the early stage, to seize the market, "community group buying" often competed with extremely low or even negative gross margins.
In China, fresh food as a consumer product has the characteristics of rigid demand and high frequency. Yonghui Superstores' fresh food business has a strong price advantage, which brings a large and stable flow of customers to the supermarket. Consumers who buy cheap fresh food often also buy other items.
However, this strategy is powerless against community group buying, which directly attacked the home base of supermarket hypermarkets, causing a significant decrease in customer traffic, with declines generally reaching double digits, and both average transaction value and sales also declined to varying degrees.
Similarly, in recent years, many people have analyzed the model of Qian Dama: occupying communities, opening stores densely, discounting to clear inventory and speed up product turnover, and direct supply from production areas with a franchise model to ensure profitability... There is no denying that these are the basic conditions for Qian Dama's success.
With capital support, Qian Dama naturally began to expand nationwide. However, in today's difficult environment for physical stores, rent and labor costs are two mountains pressing on physical stores, and Qian Dama is no exception.
According to Qian Dama's own disclosure, new stores will incur losses within six months. From last year to now, many franchise stores have reported monthly losses of up to 10,000 yuan.
Although the franchise threshold and hard cost investment are transparent before joining, some franchisees have mentioned in disputes with Qian Dama that supervisors arbitrarily change orders, franchisees are forced to continue operating at a loss, and large-scale losses are common.
Although Qian Dama has responded to the losses of franchise stores, problems such as blind expansion, unreasonable store layout, and insufficient supply chain capabilities cannot be solved by a single response. These require significant effort from Qian Dama. The news on January 19 this year that Qian Dama closed all its stores in Beijing is a warning:
The "Qian Dama Fresh Official" WeChat public account issued a statement saying that the Beijing market has its particularities, and it underestimated the difficulty of the Beijing market and the operational pressure brought by high rents.
Traditional retail such as community fresh food and KA supermarkets has limited technological progress.
In the future, gradually applying new technologies and methods, improving labor efficiency, and reducing labor costs are inevitable trends. Disruptors like community group buying may accelerate the self-adjustment of traditional retail, or perhaps it is the future traditional retail model.
**Final Thoughts:**
The above eight points are my summary of the development of the fresh food cold chain industry over the past two years and an analysis of future development trends. Many of these views are consistent with those I held years ago when positioning the Yunleng No. 1 project.
During the more than two years of fighting the novel coronavirus, the pork market has experienced another super roller-coaster ride. Combined with the frenzy and subsequent calm of community group buying, the fresh food cold chain industry has undergone a century-changing transformation. The entire fresh food cold chain system is undergoing chemical reactions, and innovation has become the core keyword for the development of fresh food cold chain.
But the foundation of innovation remains in-depth research on the industry. The future has arrived, and the next era will surely be one where good people make money, an era where "professional spirit, long-termism, and strategic thinking" reign supreme.
Source: Qimangxing Yunxian Cold Chain Observation
(ID: gh_f6a524804711)
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