Prepared dishes are hot. Following community group buying and the metaverse, prepared dishes have become the hottest track at the start of 2022. Lu Zhengyao, who was just kicked out of Luckin Coffee, has officially entered the prepared dishes sector. At the end of last month, the Shejian Technology Group founded by Lu Zhengyao held a low-key investment promotion event for its incubated prepared dishes project 'Shejian Workshop' at a hotel in Xiamen. According to official introduction, the Shejian Workshop model involves sourcing fresh raw materials from origin, processing them into semi-finished products, then storing them via quick freezing or refrigeration, and transporting them to retail terminals via cold chain. After purchase, terminal consumers only need simple home cooking to enjoy dishes comparable to hotel chefs' skills. It can be said that Lu Zhengyao's Shejian Workshop model is not novel; it can basically be seen as another imitator in the prepared dishes market. However, unlike similar enterprises in the market, Shejian Workshop is not a prepared dishes enterprise targeting a single city, but a chain enterprise aiming to occupy the national prepared dishes market. Shejian Workshop adopts a franchise model. Currently, besides opening a self-operated store on the East Fifth Ring Road in Beijing, it is also actively communicating with potential franchise partners. On the day of project launch on January 4, it secured 30 letters of intent for cooperation. In addition to Lu Zhengyao's entrepreneurial halo, Shejian Workshop's ability to secure so many letters of intent relies more on its low franchise threshold. Currently, only a 10,000 yuan deposit, an investment of 30,000 yuan, and an 8-square-meter store are needed to set up a Shejian Workshop franchise store. Compared to other fast-moving consumer goods franchise stores, the threshold is indeed low. Therefore, we can boldly predict that in the coming period, Shejian Workshop's franchise partners will definitely increase due to such a low franchise threshold. Under the pandemic, prepared dishes have gradually shifted from the B-end catering market to C-end consumption scenarios, and the New Year's Eve dinner has become a must-grab trend. Traditional catering enterprises such as Xibei, Meizhou Dongpo, and Yunhaiyao; listed companies like Weizhixiang and Qianweiyangchu; new startups like Zhenwei Xiaomeiyuan and Lixiangguo; and fresh food e-commerce companies like Hema, Dingdong Maicai, and Miss Fresh are all successively developing prepared dishes, rushing to people's dining tables. Factory production, 2C and 2B channel distribution, "using prepared dishes reduces kitchen labor costs and solves the problem of quick meal service." Almost all finished prepared dishes, using boiling water, wok, microwave, etc., can be served in 2-3 minutes instead of the original ten minutes. At the same time, consumers entering fast-food restaurants generally focus on their phones, and almost no one pays attention to how the kitchen serves meals or what ingredients are used. Not only fast-food restaurants, but many well-known catering enterprises are also using 'prepared dishes', and many prepared dishes have entered ordinary households through retail terminals such as supermarkets and e-commerce channels. Prepared dishes seem to have become an inevitable trend. In addition to fast meal service, prepared dishes also greatly reduce raw material and labor costs for catering enterprises. Because using prepared dishes not only saves steps like washing vegetables, but merchants can also hire fewer or even no chefs. After all, the simple processing method of prepared dishes determines that it almost requires no cooking skills. Since so many brands and capital are flooding into prepared dishes, today we will give our distributor friends a thorough interpretation of what prepared dishes are, and since it's so hot, can we distributors get on board? What are prepared dishes? Prepared dishes, also known as semi-finished products, are pre-made dishes. Using agricultural, livestock, poultry, and aquatic products as raw materials, with various auxiliary ingredients, they are pre-processed (mixing, marinating, cutting, seasoning, etc.) in a central kitchen. There are four main categories: ready-to-eat, ready-to-heat, ready-to-cook, and ready-to-prepare. According to the degree of processing required, prepared dishes can be briefly summarized into four categories: ready-to-eat food, ready-to-heat food, ready-to-cook food, and ready-to-prepare food. Among them, ready-to-eat food can be eaten directly after opening, while ready-to-prepare food requires self-preparation of vegetables, seasoning, and cooking. Affected by the pandemic, prepared dishes have become a trend. Last year's Double 11, prepared dishes became a 'hot item' on major e-commerce platforms. Tmall data shows that during last year's Double 11, the transaction amount of prepared dishes increased by about 2 times year-on-year, ranking among the 'Top 10 Trend Items' released by Tmall New Life Research Institute. Dingdong Maicai's quick-cook dishes and hot pot set a record of selling 200,000 pots in a single day. The earliest and most frequent prepared dish product that Chinese consumers came into contact with is actually the food in KFC stores. Employees only need to fry the prepared chicken legs, burgers, and fries in the oil pan, and then they can sell them directly. Behind the brand we know well, Synear, there is also a prepared dishes company called Qianweiyangchu. The fried dough sticks you eat at KFC are products provided by Qianweiyangchu. In China, we have a relatively familiar brand built through prepared dishes: Kungfu. They use computer-controlled steaming equipment to achieve standardization of Chinese fast food. Trained employees only need to follow operating rules to serve meals within 80 seconds, with consistent taste. Kungfu's Chinese fast food no longer needs chefs, only operators. Prepared dishes originated in the United States, matured in Japan, and can be traced back to the 1990s in China. With the emergence of foreign fast-food chains, domestic clean vegetable distribution and processing enterprises appeared. After 2000, deep-processed semi-finished dish enterprises continued to emerge. With consumption upgrading and the change of young people's consumption concepts, in recent years, the domestic prepared dishes industry has accelerated development and is growing rapidly. Relevant data shows that in 2012, there were only 1,400 enterprises involved in prepared dish processing in China, but by April 2021, the number of prepared dish enterprises reached 71,900. In 2020 alone, 12,500 new prepared dish-related enterprises were registered. Currently, the market size of prepared dishes in China is 300 billion yuan. By 2025, the prepared dishes market size will reach trillions of yuan, and in the future, it is expected to exceed 3 trillion yuan. Overseas prepared dishes market situation Although it has just emerged in China, prepared dishes have already become a very mature and developed industry in the United States and Japan. Let's take Japan as an example to see the sales situation of prepared dishes in Japan: In Japan, people divide the food market into: Naishoku (eating in), Chushoku (eating out), and Gaishoku (eating out) , three major markets. Naishoku refers to the way of eating where all processing and production are completed at home. Gaishoku is the dine-in catering market where meals are eaten outside the home. Chushoku is the market where semi-processed or nearly fully processed food is taken home for simple cooking before eating. The core reason for this division is that the 'Chushoku' market has become a huge market that cannot be ignored in Japan's food industry. Japan's current total population is about 126 million. The revenue of Japan's prepared dishes industry in 2019 reached 51.441 billion yuan, with a total consumption of 1.9314 million tons. Now, China's total population is 1.413 billion, but according to 2020 data, the market size of prepared dishes in China is only 31.4 billion yuan (excluding quick-frozen dumplings and other speed foods). Compared to Japan, the domestic 'Chushoku' market is not yet able to compete with 'Naishoku' and 'Gaishoku', but over time, this situation may change rapidly... The main driving force for To C growth is the shrinking of Japanese family size and the expansion of single and elderly populations. A large one-person food market has replaced the family collective consumption market, causing the 'Gaishoku' population to gradually decrease and the 'Chushoku' population to continuously expand. At the same time, the growth of fried foods peaked during this period, and the main prepared dish products were mainly heated by microwave. During this period, Japan's per capita consumption of prepared dishes continued to hit new highs, reaching 23.4 kg/year. With the development of Japan's prepared dishes market from tapping incremental growth to stock competition, Japanese prepared dish enterprises have also begun to merge and integrate in recent years. The number of frozen food production factories in Japan decreased from 599 in 2010 to 442 in 2020, but production and output value showed a growth trend. Obviously, the final players in this track belong to giants. Where are the opportunities for prepared dishes in the Chinese market? The popularity of prepared dishes is partly due to the increased demand for home cooking scenarios under the pandemic, causing prepared dish enterprises to shift from B-end to C-end consumer layout. With the development of food delivery becoming more mature, people are more familiar with concepts such as meal kits. Zero One Venture Capital believes that from the dimensions of price and time, prepared dishes perfectly hit the home consumption demand of people who have certain time constraints but also want rich and high-quality dishes. According to Guosen Securities' forecast, compared with Japan's prepared dish penetration rate, the scale of China's prepared dish industry is expected to reach more than 3 trillion yuan. The domestic prepared dishes market is obviously developing faster than Japan's prepared dishes market. Due to more complete and unified development factors and more concentrated development momentum, China's prepared dishes outbreak opportunity is more obvious: 1. Prepared dishes opportunities under the population crisis As of 2021, China's total population is 1.413 billion, and the population growth in 2021 was only 480,000. As a populous country with a scale of billions, 480,000 obviously heralds the imminent era of negative population growth, and the nationwide demographic dividend has completely disappeared. At the same time, the number of people living alone in China has approached 100 million, reaching 92 million. This is equivalent to nearly 10 million more than the total population of Beijing, Shanghai, Guangzhou, and Shenzhen combined. 25% of households have only one person. 65% of post-90s food delivery orders are for one person. From this, it is not difficult to see that China's population crisis is creating new opportunities for the prepared dishes market. The trend of living alone has turned the family kitchen in China into an 'entertainment venue' rather than a 'production venue'. Prepared dishes will have more room to play. 2. Increased cost of dining in restaurants Nowadays, difficulty in recruiting staff and rising rents have become the norm for catering operators. The repeated pandemic has made catering business generally difficult, but high rent costs and labor costs have not decreased but increased. 2021 data shows that labor costs in the catering industry are rapidly eroding the profit margins of restaurant owners at a compound annual growth rate of 7.6%. Taking Japan as an example, the average net profit margin of the catering industry in Japan is now 2-3%, while in China this figure is still 7-8%, and there is still room for decline. 3. Improvement of cold chain infrastructure From 2013 to 2018, China's low-temperature warehouse cold storage capacity grew rapidly from 83.45 million cubic meters to 147 million cubic meters, with a compound annual growth rate of 12%. The number of refrigerated trucks on China's highway cold chain increased from 55,200 to 180,000, with a compound annual growth rate of 26.7%. The penetration rate of refrigerators in urban households is 100%, and the penetration rate of microwave ovens exceeds 50%. This has clearly prepared the infrastructure for the outbreak of the prepared dishes market. Track players According to Qichacha data, from 2011 to 2020, the number of registered prepared dish-related enterprises increased year by year, breaking 4,000 for the first time in 2015, breaking 8,000 in 2018, and exceeding 10,000 in 2020, a year-on-year increase of 9%. In addition to the aforementioned Shejian Workshop founded by Lu Zhengyao, various brands and capital have rushed in, roughly divided into two categories. First, catering chain brands: Haidilao, Xibei, Grandma's Home, and Green Tea have all built central kitchens, then produced prepared dishes and sold them directly to C-end consumers. Especially during the pandemic, when stores could not open normally, catering enterprises, out of self-rescue, used their self-built central kitchens to produce some semi-finished products and sell them to consumers. This part of the business was originally commonly called: 'catering new retail', which is actually selling prepared dishes. Haidilao's Shuhai Supply Chain is an early catering brand to enter convenient dishes. In 2020, it launched 16 semi-finished dishes, including Kung Pao shrimp balls, spicy diced chicken, tomato potato beef stew, sauerkraut fish, and big plate chicken. During the pandemic, the sales of quick-frozen dishes showed a blowout development, with growth rates ten or even dozens of times higher than usual. Brands such as Dadong, Taotaoju, Dalongyi, and Xiaolongkan all launched semi-finished products on Meituan's 'Delicious Home' service, either their signature dishes or hard dishes that are difficult to make at home, restoring the restaurant's taste at half the price, delivered to home within half an hour. After the pandemic, many catering enterprises gave up this business and focused on restaurant operations. But there are also many persistents, such as Xibei, which has been closely following the prepared dishes field. In 2020, Jiaguolong Kungfu Cuisine's Beijing Jinyuan store opened, attracting much industry attention. From the current situation, Jiaguolong Kungfu Cuisine has entered a rapid expansion trend. Grandma's Home also created 'Laoyaji', selling through dine-in + takeout + takeaway + new retail, which actually also sells prepared dishes. According to data from the China Chain Store & Franchise Association, more than 74% of domestic chain catering enterprises have built their own central kitchens, of which more than half are developing standardized finished products and prepared dishes. Large catering enterprises are selling 'prepared dishes' just to use their brand advantages to expand sales channels. Besides letting consumers eat in restaurants, they also want to occupy consumers' home dining tables. After all, the huge consumption volume on the C-end is obvious to all. Tmall's 'Chinese New Year's Eve Dinner Consumption Report' shows that online shopping for semi-finished New Year's Eve dinners has become a new choice for many consumers, especially post-80s and post-90s young consumers. According to Tmall's top ten new year goods data, during this year's Spring Festival, the sales of prepared dishes increased 16 times year-on-year. Dishes like Guangdong's pot dishes and Hangzhou's eight-treasure rice became hot items in the New Year goods live broadcast rooms. JD.com big data also shows that from around January 20 to February 20, the transaction amount of 1-2 person small package semi-finished dishes increased 3.5 times year-on-year, with dishes like boiled fish and Buddha jumping over the wall showing significant sales growth. For catering enterprises with funds, strength, and brands, if other unknown food enterprises can sell them, they certainly can too. Therefore, it is expected that more catering enterprises will sell prepared dishes under the banner of 'catering new retail'. Second, food enterprise representatives: Shuanghui, New Hope, Anjoy, Wangjiadu, etc. In the past two years, Shuanghui has been 'eager to try' in the prepared dishes field. For example, it launched 'Shuanghui Quick Kitchen'; highlighted the 'Shuanghui Shangcai Guan' prepared dish products and officially launched investment promotion; and signed a strategic cooperation with Hunan Xincongchu Food, claiming to make efforts in the prepared dishes market... Regardless of the actual effect, Shuanghui has created a full 'momentum'. Another meat processing enterprise: New Hope, has long been thriving in the prepared dishes field with a single product 'small crispy pork', and recently began to increase its efforts in the prepared dishes industry, expecting major moves soon. It is generally believed that from the perspective of economies of scale and convenience, meat processing plants have inherent advantages in building prepared dish factories, and their benefits far exceed those of general catering enterprises building their own central kitchens and general food factories. As a leader in quick-frozen hot pot ingredients, Anjoy Food launched the sub-brand 'Frozen Products Gentleman' in November 2020, positioning it as a central kitchen concept for the catering market, integrating upstream small and medium-sized ingredient manufacturers with a light asset operation model, researching and producing prepared dishes and hot pot peripheral ingredients. Better Life recently reached cooperation with Shuhai Supply Chain, and the two sides will cooperate in optimizing scenarios for clean vegetables and prepared dish factories, and front warehouse logistics. Better Life founder Wang Tian said they have been in the prepared dishes field for a long time. In addition to existing large food processing enterprises increasing their efforts in prepared dishes, there are also some industry newcomers that have risen rapidly in recent years. For example, Wangjiadu Food. Its predecessor was a central kitchen subsidiary under Meizhou Dongpo, mainly providing Sichuan-style prepared dishes for catering enterprises and families, launching popular prepared dishes such as Wangjiadu low-temperature luncheon meat sausage and low-temperature Sichuan-style sausage. This year, Wangjiadu Food completed a nearly 100 million yuan A-round financing and announced its listing plan. Zhenwei Xiaomeiyuan was established in 2019, recently received tens of millions of yuan in A-round financing, and opened a flagship store on JD.com, selling 15 products. Since 2020, five prepared dish enterprises have received financing. Among them, Wangjiadu Food and Baijia Food both received high financing of around 100 million yuan. From the sales channels of Zhenwei Xiaomeiyuan and Wangjiadu Food, besides serving restaurants, online e-commerce and offline retail are also their sales positions, which can be described as serving both B-end and C-end customers. Wangjiadu Food has opened flagship stores on e-commerce platforms such as JD.com, Tmall, and Pinduoduo, and entered retail supermarkets and convenience stores such as Wumart, Yonghui, FamilyMart, and Lawson. The channels are diverse and extensive, helping to enhance brand awareness and influence, establish a brand image in the prepared dishes track first, and seize a favorable position. Catering brands such as Kungfu, Xibei, Haidilao, Ajisen Ramen, and Nanchengxiang all serve most of their dishes by 'heating up'. According to Guosen Securities' calculation, the current stock of prepared dishes in China is about 300 billion yuan. In the next six or seven years, the market size is expected to reach 1 trillion yuan, and in the long run, it may even reach more than 3 trillion yuan. Capital entering the market accelerates the development of the industry and also causes a change in Chinese kitchens towards a Western-style transformation. Possible resistance to domestic prepared dishes Currently, on the household side, the penetration rate of prepared dishes in Chinese households is only 0.19%, while in Japan it is 3.69%, a market more than 20 times larger. But it is worth noting that Japan's food delivery market is far less developed than China's. Due to higher labor costs in Japan, food delivery platforms and merchants are clearly unable to bear the high delivery costs of eating out. However, China's food delivery market has always developed rapidly. We mentioned above that 65% of post-90s food delivery orders are for one person, meaning that the one-person food market has already been largely satisfied by food delivery before prepared dishes entered. Previously, prepared dish products that could be heated and served in 30 minutes appeared in the market, but sales failed to meet expectations. The important reason is that when we open a food delivery app, there are many options that can be delivered to home in 30 minutes, so naturally prepared dishes that take 30 minutes to heat and are more expensive do not have an advantage. What is more worthy of long-term attention is that with the frequent occurrence of social security and work injury issues for food delivery riders, platforms are looking for unmanned delivery solutions. It is known that Meituan's unmanned delivery is currently in internal testing and plans to scale unmanned delivery to the market. At that time, delivery efficiency will be faster, and delivery costs will drop to 3 yuan per order, which will further compete with the efficiency of home preparation of prepared dishes. Therefore, the real competitors of prepared dish brands are not entirely other prepared dish brands, but also the continuously improving food delivery. Sales models From the sales channel perspective, prepared dishes are divided into two major models: One is the To C model, where food enterprises or catering enterprises process some semi-finished products in factories and sell them to customers through supermarkets, catering stores, e-commerce platforms, and other channels. For example, affected by the pandemic, many restaurants in 2020 joined the ranks of selling prepared dishes for self-rescue. This temporary and random type belongs to the To C model. The other is the pure To B model, where the central kitchen produces semi-finished meal kits to meet the needs of catering enterprises, especially chain catering enterprises, and supplies them to restaurant stores for reheating and selling. Of course, the boundary between these two models is not clear. For example, some enterprises sell to the C-end through e-commerce and stores, and also supply to restaurants through channels. The development of prepared dishes matured in Japan. Due to Japan's high population density and dense distribution of convenience stores, the demand for quick-frozen and refrigerated fresh-keeping is large, leading to rapid development of prepared dishes. Now, the penetration rate of prepared dishes in Japanese convenience stores has reached more than 60%. The penetration rate of convenience stores in China is obviously not as high as in Japan. Therefore, compared to the two countries, the sales channels of prepared dishes will be quite different. Among them, including catering brands, a large number of new prepared dish brands mainly sell by establishing self-owned stores, stocking products in stores, and selling in dine-in scenarios. This sales method is obviously based on dine-in thinking rather than retail thinking, that is, treating prepared dishes as an increment to dine-in sales. This is both a channel advantage for catering brands. Then there are some prepared dish brands without stores, which quickly open up sales through e-commerce platforms such as Tmall, JD.com, and Douyin. But in the medium and long term, the rapid growth of convenience stores in China suggests that returning to offline retail channels may be the lever to pry open a larger market. From the data compiled by Guosen Securities Research Institute above, prepared dishes cover almost all food sales channels, including catering, supermarkets, farmers' markets, convenience stores, e-commerce, professional food delivery markets, general circulation, etc. Among them, prepared dishes perform most prominently in places closely related to dining table consumption, such as catering, supermarkets, and farmers' markets. Who to sell to? How expensive? Should prepared dishes be expensive or cheap? Different prepared dish brands have given different answers in the current relatively fragmented prepared dishes market. From the perspective of brand building, doing from high to low and carrying out a brand dimensionality reduction strike may be the correct method. But from the perspective of market space, it is obvious that the low-price market may have more space. Meituan's Q3 2021 financial report shows that the average price per food delivery order has risen to 49.3 yuan/order. From the perspective that food delivery and prepared dishes are substitutes in the one-person food market, if prepared dishes want to gain a better competitive advantage in this market, the average customer price needs to be equal to or slightly lower than the average per capita price of food delivery, that is, below 49.3 yuan. (Except for prepared dish products positioned for non-one-person dining scenarios) From the perspective of prepared dish category distribution, Japan's household prepared dishes market mainly has staple foods as the main products, that is, one prepared dish product completes all the needs of a meal. From this, it can also be seen that the main scenario for prepared dishes is one-person dining. At present, most domestic prepared dishes are mainly 'dishes', targeting middle-class white-collar workers for family gatherings and the 'third dish' on the family dining table. But in the long run, whether they have the ability to lower product and price levels determines the final brand development space. Where are the market opportunities for distributors to participate in prepared dishes? On the one hand, looking at online and Japanese development trends, the growth of prepared dishes on the C-end is very fast. But from the current actual data of leading prepared dish companies in the industry, in the short term, the B-end market will still be the mainstream. The C-end market has just begun. With the continuous education of online media and the gradual improvement of domestic cold chain, offline traditional KA, CVS, and community stores with some fresh food sales all have opportunities and possibilities for sales. But this is for distributors who already have cold chain capabilities. If the gross profit is appropriate and there are suitable hot products, it can be considered an opportunity point. However, considering that most domestic prepared dish manufacturers have not yet truly distributed through offline distribution channels, prices, investment promotion policies, channel management, manufacturer support, etc., may still be relatively lacking. If there is no strong promotion capability, distributors should carefully consider. Then there is the franchise model promoted by Lu Zhengyao's Shejian Technology. It is reported that Shejian Technology has signed 3,000 franchisees nationwide. Starting from March, these signed stores will be launched one after another. But this is not a precedent. Taking the data disclosed by Weizhixiang, which went public last year, as an example, as of December 31, 2020, Weizhixiang had 1,117 franchise stores, with sales of 320 million yuan. Its single-store annual output was 286,000 yuan, with an average monthly output of 23,900 yuan per store, equivalent to an average daily output of 796 yuan. Calculated at 40% gross profit, it is about 300 yuan per day. Calculated at 10,000 yuan gross profit per month, after deducting rent and labor, Weizhixiang's store operations are barely maintained. From the disclosed data, Weizhixiang's franchise store sales accounted for 52.06%, meaning half of the revenue comes from large customers. There is still a long way to go for prepared dishes to face the C-end. References: Lingshou: Out-of-control prepared dishes, author: Qingshan; Spoon Classroom: Prepared dishes, on the eve of the outbreak, author: Song Xuan; Catering Boss Internal Reference: Weizhixiang, is the first fragrance of prepared dishes fragrant, author: Sun Yu; Lieyun.com: New Year's Eve dinner, the new battlefield of prepared dishes, author: Lin Jing; Industrial Securities: Prepared dishes with continued prosperity; Guosen Securities: In-depth report on the prepared dishes industry: The prepared dishes tuyere is coming, and heroes are competing. -END-