---
title: "Hema, in Charge of Its Own Destiny, Accelerates Its Quest for Survival"
description: "Hema, now in charge of its own destiny, is accelerating its quest for survival. According to Hema's official Weibo account, the company plans to open up its fresh produce supply chain this year, delivering its fresh products to corporate cafeterias. Currently, Hema has partnered with two companies in Shanghai to test the business, starting with meat and eggs. Hema stated it will optimize ordering and delivery processes, focus on high-frequency ingredients, and collaborate with cafeteria chefs to develop a 'weekly menu' to plan ingredients in advance. Earlier, Ctrip and Meituan also announced B2B strategies, as the C-end market becomes saturated."
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published: "2023-07-21"
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# Hema, in Charge of Its Own Destiny, Accelerates Its Quest for Survival

> Hema, now in charge of its own destiny, is accelerating its quest for survival. According to Hema's official Weibo account, the company plans to open up its fresh produce supply chain this year, delivering its fresh products to corporate cafeterias. Currently, Hema has partnered with two companies in Shanghai to test the business, starting with meat and eggs. Hema stated it will optimize ordering and delivery processes, focus on high-frequency ingredients, and collaborate with cafeteria chefs to develop a 'weekly menu' to plan ingredients in advance. Earlier, Ctrip and Meituan also announced B2B strategies, as the C-end market becomes saturated.

Hema, now in charge of its own destiny, is accelerating its quest for survival.
According to Hema's official Weibo account, Hema plans to open up its fresh produce supply chain this year, delivering its fresh products to corporate cafeterias. Currently, Hema has partnered with two companies in Shanghai to test the business, starting with meat and eggs.
Hema stated it will optimize ordering and delivery processes, focus on high-frequency ingredients, and collaborate with cafeteria chefs to develop a 'weekly menu' to plan ingredients in advance.
Earlier, Ctrip and Meituan also announced B2B strategies, as the C-end market becomes saturated, making B-end scenarios a common choice for enterprises.
Previously, Pony Ma pointed out at Tencent's internal senior meeting that the C-end market dividend is essentially over, and the next wealth opportunity lies in the B-end, with industrial internet ushering in a prosperous era.
However, given the characteristics of the fresh produce industry, Hema's B2B service faces significant challenges.

**Traditional catering industry urgently needs digital upgrade**
It should be noted that Ctrip and Meituan have both commonalities and differences in B-end services. In common, they aggregate consumption scenarios, provide one-stop services, and adopt business-to-business settlement to reduce pain points in traditional reimbursement processes, optimizing corporate reimbursement while achieving cost reduction and efficiency gains.
Image source: "China Business Travel Industry Development White Paper 2022"
In terms of differences, Ctrip focuses on business travel accommodation, while Meituan offers services covering food, housing, and more. However, both face difficulties in the B2B business travel market. According to BigData, 71.2% of Chinese corporate travel managers consider high travel costs the biggest pain point. Additionally, issues like fragmented management, complex processes, difficult control, and employee safety concerns are also worries. These concerns have kept the penetration rate of corporate travel management in China at only 8.5% in 2021.
Image source: "China Business Travel Industry Development White Paper 2022"
The relatively low B-end penetration means Ctrip Business Travel and Meituan Enterprise face challenges in customer acquisition and long conversion cycles. Moreover, many companies, due to data privacy concerns, prefer customized business travel services, which bring long delivery cycles and high costs.
Image source: "China Business Travel Industry Development White Paper 2022"
From another perspective, Chinese enterprises have shifted from rapid growth to refined operations. The Golden Tax Phase IV emphasizes using big data to connect networks across enterprises, banks, and tax authorities, making legal and secure expense control and paperless operations mandatory. These factors have expanded the corporate travel management market. As industry leaders, Ctrip Business Travel and Meituan Enterprise can continue to capture market share if they address enterprise pain points.
Image source: "China Business Travel Industry Development White Paper 2022"
For China's catering industry, leveraging digitalization to transform traditional supply chains and achieve refined operations has become essential. Since 2023, the domestic catering industry has seen a wave of revenge store openings. According to Qichacha data, from January to June (27th) this year, new registrations of catering-related enterprises reached 2.022 million, equivalent to 84% of the total new registrations in 2019. While supply increases, these catering enterprises are mostly small and medium-sized, with low-price group-buying packages, rising rents, and ingredient costs eroding profits. Additionally, their supply chains remain traditional. Lu Yang, owner of a restaurant in Fuyang, Anhui, told us that his daily fresh ingredients are almost all purchased from local agricultural wholesale markets, with quantities based on personal experience. Payment is via Alipay/WeChat. He is unclear about how to handle price fluctuations or the cost proportion of each ingredient in each dish.
From Lu Yang's words, we can see several issues in traditional catering supply chains: First, due to smallholder farming dominance, fresh produce transactions involve multiple layers: farmers → agricultural brokers (known as agents) → primary wholesalers → secondary wholesalers. This long chain leads to inefficiency and higher procurement costs for small and medium-sized restaurants.
Image source: Guojin Securities
Second, with consumers increasingly concerned about freshness, purchasing based on experience often leads to significant waste, raising operating costs.
Third, the isolation of procurement, finance, and sales creates 'information silos,' leaving many restaurants unable to identify where to cut costs.
In response to digitalization needs, several companies are experimenting. For example, Meituan launched Kuailv Jinhuo for upstream procurement, offering affordable rice, flour, oil, and tableware. According to Meituan's official website, it provides nearly 50,000 SKUs, mainly serving small B-end merchants. In midstream operations, it offers one-stop solutions for ordering, cashier, delivery management, and business reports. Meituan also provides small loans to address financing difficulties. Downstream, it leverages its marketing experience and delivery fleet.
Therefore, if Hema can address pain points from a digital supply chain perspective, it may find opportunities.

**Fresh produce B2B: homogeneous low-price competition**
However, given the characteristics of the fresh produce supply industry, Hema's entry into fresh ingredient supply faces real pressures. Shen County, Shandong, is known as 'China's No.1 Vegetable County.' Zhao Ya, head of a local fresh supply chain company, told us that the biggest challenge is severe homogenization, forcing low-price competition. Unlike B2C, where products can be graded by quality, many restaurants, pre-made food companies, and clean vegetable processors have lower requirements, so they compare prices among multiple suppliers in the same origin. To secure orders, suppliers must lower prices, resulting in gross margins generally below 10%, with some items earning less than 0.1 yuan per jin.
As Zhao Ya said, when low prices become the norm, Hema's price advantage is not prominent, affecting customer acquisition. Hema sources from origin suppliers and must add a markup to maintain profits. But downstream customers, cost-conscious, may reject Hema's 'middleman' role.
Zhao Ya added that fresh supply chains face typical issues: First, loss control. B2B reduces circulation links, but if quality issues arise, customers may return entire trucks, increasing costs.
Image source: iResearch
Second, B2B services require strong cash flow. Upstream, transactions are usually cash-on-delivery, but downstream, there are payment terms. For example, when supplying Meituan Select and Duoduo Maicai, payment terms were typically 30 days.
Third, attention to detail is crucial. For instance, due to moisture loss during transit, contracts must specify loss rates differently for customers in Shandong versus southern regions.
From Zhao Ya's words, Hema's entry into fresh supply chain services presents both opportunities and challenges. On the plus side, Hema has years of experience and established warehousing and distribution centers nationwide, providing a foundation for B-end services. On the downside, Hema has traditionally been a buyer, and the shift from buyer to seller may be difficult for its staff. Also, while CEO Hou Yi mentioned Hema Fresh has achieved profitability, after Alibaba's restructuring, Hema is seeking independent listing and must be self-financing. Thus, Hema's current moves are all about going public, doing what benefits listing. But without Alibaba's financial support, whether Hema can sustain investment in B2B remains to be seen.

**Can Hema's supply chain make consumers better informed?**
In fact, Hema has long harbored B2B ambitions. In 2020, Hou Yi revealed plans for a new format called Cash & Carry, providing wholesale services to hotels, group meals, and restaurants. This B2B format, benchmarking Metro, targeting group meals and small restaurants, would help Hema complete cold chain logistics, ambient logistics, and processing centers in cities.
Hema's opening of its fresh supply chain can be seen as accelerating its B2B push. But it's not easy. The fresh B2B industry faces similar challenges to business travel: difficulty in acquiring downstream customers. The CR5 for catering supply chain enterprises in China is only 2%, compared to 15% in developed countries, indicating huge opportunities. In mature markets, leading companies enjoy significant benefits. Sysco, ranked 70th on the 2022 Fortune 500, has 332 distribution centers globally and serves over 600,000 customers, with FY2022 revenue exceeding $68.6 billion. In contrast, few Chinese catering supply chain leaders exceed 10 billion yuan in revenue. For example, Qianwei Central Kitchen, a leader in frozen rice and flour products, had revenue of only 1.489 billion yuan in 2022, a stark difference from Sysco.
Image source: Qianwei Central Kitchen
Moreover, due to frequent food safety incidents, many catering companies are building their own fresh supply chains. For instance, Mixue Bingcheng's lemon sourcing base is in Anyue, Sichuan, with future plants in Tongnan, Chongqing, and Chongzuo, Guangxi. Guming's digital light food ingredient processing base in Zhuji is under construction. Heytea has announced self-developed tea formulas and customized production.
An industry insider revealed that Hema's outlook on the fresh supply chain market is 'idealistic.' In reality, the group meal ingredient supply business has higher requirements than other catering demands: licenses must be complete, qualifications and bidding reviews are strict, and political and corporate connections may be needed. Additionally, competition in group meal ingredient distribution is intensifying. Besides large catering companies with self-built supply chains, third-party food distributors like Wangjiahuan, Lehe, and Caishixian are growing rapidly. For example, Caishixian's sales grew nearly 30% year-on-year in 2022, with annual transaction volume nearing 10 billion yuan.
In summary, Hema's B2B path faces various difficulties. But from another perspective, during its IPO preparation, expanding business lines and profitability potential could help Hema gain more support in the capital market.


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