---
title: "MissFresh's Predicament: Xu Zheng's Fresh Produce Adventure"
description: "Xu Zheng, a model of success, led MissFresh to IPO but faced years of losses totaling nearly 10 billion yuan and a delisting warning. The company's stock price fell continuously, and its capital-intensive model struggled to achieve profitability."
author: "王琳"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2022-06-30"
language: "en"
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# MissFresh's Predicament: Xu Zheng's Fresh Produce Adventure

> Xu Zheng, a model of success, led MissFresh to IPO but faced years of losses totaling nearly 10 billion yuan and a delisting warning. The company's stock price fell continuously, and its capital-intensive model struggled to achieve profitability.

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Xu Zheng, born in the 1980s, is a model of the "other people's child": at 15, he won first prize in an Olympiad math competition; in his sophomore year of high school, he was recommended for admission to the University of Science and Technology of China, where he majored in mathematics with a minor in business administration, earning a double degree. At 33, he started his own business; at 40, he led his company to an IPO and achieved financial freedom.
However, the other side of the coin is that under Xu Zheng's leadership, MissFresh has suffered consecutive losses, totaling nearly 10 billion yuan over eight years, and now faces a delisting warning.
MissFresh's stock price has been declining since its first day of listing, dashing employees' hopes of wealth creation. A mid-level employee at MissFresh told Tech Planet that the exercise price was $10, meaning that except for the first day of listing, the stock price has been below the exercise price. "We originally wanted to hold on until we could exercise the options, but now we can't hold on any longer."
Xu Zheng entered an industry that is both complex and vast. By pioneering the front-warehouse model, he found another possibility for the fresh produce industry.
In Xu Zheng's view, the barriers to entry in the fresh produce industry are difficult to establish, but once established, they are high, allowing the company to last longer. However, the reality is that continuous capital infusion and an unproven profit model have pushed MissFresh to the brink of danger.
Cover image source: Tuchong Creative
In the past, MissFresh could resolve every crisis with capital, but after taking all the money it could, and as the investment logic of the capital market has shifted, how can MissFresh save itself?
**1**
**Crazy 3 Months, 1 Billion Yuan to Attack the Market**
MissFresh was born in 2014, when the internet dividend was overflowing. At that time, as long as Chinese internet projects grew crazily and squeezed into the first tier, they could get a continuous stream of financing to sustain themselves. Expansion was their first consideration, not profit. Internet companies had tried many ways to provide fresh produce to urban residents, but all ended in failure. MissFresh's pioneering front-warehouse concept offered a possibility. This warehousing model moves fresh goods from large warehouses to small warehouses near communities in advance, with the goal of delivering goods to homes as quickly as possible. In its first five years, MissFresh had almost no competitors, until Dingdong Maicai appeared. Unlike Xu Zheng, who received angel funding from Guangxin Capital even before "the company name and logo were finalized," and a $10 million Series A from Tencent in 2015, Dingdong Maicai's first financing was extremely difficult. Liang Changlin, a military veteran, met with investors daily, seeing over 150 investment institutions without getting any money. At the hardest time, Liang even mortgaged his house to the bank. It wasn't until May 2018 that Liang received his first Pre-A round from Gaorong Capital. Subsequently, Dingdong Maicai's financing went smoothly, completing six rounds in the second year after launch and quickly capturing most of Shanghai's community market. The biggest competitor had appeared. On May 16 of the following year, MissFresh's CFO Wang Jun revealed plans to invest over 1 billion yuan to attack the Shanghai market and launch comprehensive competition in Shenzhen, Wuhan, and the southwest region. A MissFresh employee revealed that the company rented a six-story building at Shanghai's Shangpu Center as its office, with over 500 people in the East China region at its peak. "At the time, the company was worried about not having enough workstations." According to "Third Eye Retail," an insider revealed that in just two months, MissFresh's capital consumption reached as high as 800 million yuan. An East China employee told Tech Planet that the subsidies were mainly used in the summer, burning about 1 billion yuan in one quarter. Users naturally love bargains, and MissFresh's order volume grew rapidly. An employee familiar with backend data told Tech Planet that order volume could reach several million orders. However, after the subsidies ended, order volume returned to normal: hovering around 1 million orders per day. An operations staff member who joined MissFresh in 2018 said that initially, their assessment standard was to achieve a gross margin within -25%, with the main metric being GMV, requiring a month-on-month growth of about 20%. This subsidy war lasted for three months before being paused. A mid-level employee explained, "We ran out of money." According to Tianyancha data, from September 2018 to May 2020, nearly 20 months, MissFresh did not receive any financing. Compared to the pace of one or even two rounds per year, this was indeed a decline. A Shanghai employee said that by the end of that year, the East China group chat had only about 200 people left. However, MissFresh's gross margin requirements began to increase: they were required to turn positive. An employee recalled to Tech Planet that those three months in 2019 were almost the most glorious time for MissFresh.
**2**
**Huge Funding Gap**
MissFresh went public at almost the best time, listing on Nasdaq just four days before Dingdong Maicai, but raising more than three times the funds. For a company that had not yet proven its profit model, more money meant a longer lifespan and a higher tolerance for mistakes. But MissFresh seems not to have enjoyed this dividend. Due to the delay in disclosing its 2021 annual report and the stock price being below $1 for over 70 consecutive days, it received warning letters from Nasdaq's listing qualifications department twice. In response, MissFresh told the media that the Nasdaq notice had no impact on its business operations, and that it would actively take reasonable and effective measures to regain compliance with the stock price requirements, while also accelerating the disclosure of its annual report. Not only that, in May of this year, news that MissFresh had become an enforcement target shocked the industry, with the enforced amount being 5.33 million yuan. In August last year, MissFresh's Q3 financial report showed that its cash and cash equivalents were only 2.172 billion yuan, while its current liabilities were as high as 3.232 billion yuan. A supplier of MissFresh told Tech Planet that the original payment period was two months, but now it has become 105 days. A supplier of grain and oil products told Tech Planet that since the end of last year, they have not received payment from MissFresh, with the amount accumulating to 8 million yuan. Now they dare not supply goods to MissFresh. "There was no sign before; it just felt like the order volume was much higher than usual." MissFresh owes suppliers 1.6 billion yuan, and some suppliers have come to the company to demand payment. In response, MissFresh told the Securities Daily that this 1.652 billion yuan debt is "accounts payable within the payment period, not overdue payments to suppliers." This is not the largest amount. Multiple suppliers told Tech Planet that many are owed tens of millions. However, this has not affected MissFresh's headquarters employees. Several headquarters employees calmly told Tech Planet that their salaries are still paid on time. MissFresh has almost taken all the money it could get, including domestic VCs, international VCs, government funds, and big tech companies. The IPO was its last resort. To raise more money, during the new share subscription period, MissFresh launched a "recharge and get extra allocation" activity with Futu Securities and Tiger Brokers, where recharging 50 yuan on the MissFresh app would result in an allocation of 10 shares.
**3**
**Capital Is Not the Solution**
Few companies have been as controversial as MissFresh since their inception. A mid-level employee told Tech Planet that since its establishment, MissFresh has faced three cash flow crises: one before Tencent invested, one at the end of 2019, and the current one. The first crisis is easy to understand. At that time, MissFresh was a startup just one year old, in its early stages, with an unproven business model, and it was normal to lack money; many startups only have enough funds to survive three months. The second was in 2019, also the most intense period of competition with Dingdong Maicai. Subsequently, the pandemic "saved" MissFresh, and it received new funding. In the eyes of many MissFresh employees, they are not the same species as Hema Fresh or Duoduo Maicai; Hema has higher average order values, and MissFresh also has higher average order values than Duoduo Maicai. A mid-level employee told Tech Planet that a model like theirs requires constantly finding funds until profits can sustain the company. Over 20 years of internet development, many business models emphasize economies of scale, meaning that when scale reaches a certain critical point, profitability can be achieved. The aforementioned mid-level employee told Tech Planet that theoretically, there is a critical point, but in practice, it is difficult to reach. But capital now believes that this model has problems and that profitability is difficult. A former employee said that even if they found money, it would only alleviate short-term anxiety. "It's like a patient in the ICU; a ventilator can keep you alive, but can it make you stand up? If you look closely at Dingdong Maicai's financial reports, you'll see that even during the pandemic, they only improved cash flow but still didn't make a profit." Hema CEO Hou Yi has expressed his views on the front-warehouse model multiple times. In Hou Yi's view, the front-warehouse model is not reasonable unless large-scale logistics fees are charged to recover logistics costs, which might achieve profitability, but in today's landscape, no player has yet achieved profitability. One of the logistics costs is cold chain. A veteran in the fresh produce industry gave an example to Tech Planet: cold chain needs to maintain -18°C, which means drivers spend about 3 yuan per kilometer on fuel, and almost no driver is willing to do that. "Now, to reduce logistics costs, many refrigerated trucks are at -10°C." "You need to find that special group of people who are willing to trade time for money, but such a group is very rare in China. Who would spend 40 or 50 yuan to buy groceries and cook themselves when they can order takeout for 20 or 30 yuan? Maybe only a few million people." A veteran practitioner in the fresh produce industry said, "Fresh produce is not an industry that can be rushed; you need to do the basics well, or directly invest in full automation, but the latter is too costly; tens of millions can't even open a factory." Xu Zheng said in an interview that MissFresh is waiting for a point in time: retail is an industry where slow variables are the major factors, and this slow factor is user behavior, and the arithmetic model brought by corresponding scale will also undergo qualitative changes. "When the earth's crust moves, the surface movements don't matter," Xu Zheng said. The question now is, how can MissFresh hold on until that moment?
Source: Tech Planet (ID: tech618)


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