Setting 4 or 5 alarms every morning to grab groceries across various fresh food apps has been the reality for Shanghai residents over the past month. This spring, recurring outbreaks have put many regions on alert. Locked down at home, people have lost the chance to dine out, making fresh food e-commerce platforms the "protagonists" of home life, gaining significant presence during the pandemic.

This is not the first time fresh food e-commerce has been in the spotlight this year. Not long ago, platforms like Dingdong Maicai and Miss Fresh frequently made headlines for negative news—layoffs, debts, and regulatory talks. While becoming essential during the pandemic, they also face harsh realities.

Looking back at 2020, the global pandemic brought a "wild growth" opportunity for the fresh food industry. Some leading platforms saw substantial business growth, with JD Daojia, Miss Fresh, and Dingdong Maicai successfully going public. They became the "top players" that grew against the trend.

Until 2021, with the rise of community group buying, problems such as difficulty in food storage and high supply chain and logistics costs emerged. The competitive landscape intensified, many new fresh food e-commerce startups faced closure, and the industry turned from hot to cold.

In spring 2022, the struggling fresh food e-commerce seems to have grabbed a "lifeline" again. How will they seek survival in this pandemic-induced battle?

New Opportunities in 2022: "Epidemic Prevention Meal Packages" Launched

"In the past few days, I've added a bunch of fresh food apps to my phone. Each platform has different times for grabbing groceries, so I have to take turns waiting," Xiaolan, whose community is under lockdown, told CBNData. Her situation mirrors that of most quarantined residents. According to Chanmaster, on iOS, downloads of fresh food e-commerce apps hit a new peak since mid-March.

Take Miss Fresh, which had been at a download low, as an example. Its first step to attract attention was launching "anti-epidemic meal packages."

Since early March, Miss Fresh took the lead in delivering anti-epidemic meal packages to designated areas in Songjiang, Shanghai. The packages were uniformly priced at 100 yuan, containing 13 varieties of vegetables, meat, eggs, and fruits. Later, Dingdong Maicai and Meituan Maicai also joined the supply guarantee teams in designated areas of Shanghai, offering similar packages.

The trend of vegetable-and-meat packages flourished across major fresh food e-commerce platforms. According to CBNData statistics, many platforms and supermarkets have listed various fresh food packages online to attract consumers. Most packages are priced at different levels based on contents, with average prices not differing much.

Among platform-based fresh food e-commerce, JD Daojia's G package had the highest total price, containing nearly 4 kilograms of food including shrimp and meat, priced at about 110 yuan. Supermarket-type platforms mostly accept orders via WeChat mini-programs, with the highest unit price being iBailian's 100-yuan package.

Additionally, e-commerce companies from other sectors have also joined the fresh food package bandwagon. Oriental Shopping, which started with TV shopping, partnered with Dongtan Lvgang Agricultural Park during the pandemic to offer fresh vegetable combos on its app and mini-program. Users can order online or by phone, though delivery is less timely compared to fresh food e-commerce.

Image source: Oriental Shopping app

As early as the initial outbreak in 2020, the concept of combo packages had already taken shape among fresh food e-commerce. This form became popular after a collaboration between Wumart Supermarket and retail service provider Dmall. On February 4, 2020, Wumart launched a "vegetable and meat package" online, containing 7 kinds of vegetables, 1 kilogram of meat, and 5 imported KF94 masks, priced at 199 yuan. It sold out immediately upon launch.

Later, due to user complaints about high pricing, Wumart adjusted the package price multiple times, eventually promoting a 110-yuan "vegetable and meat combo." This year, CBNData observed Wumart's online channels but did not see such packages for sale. Compared to the temporary popularity in 2020, in 2022, major fresh food e-commerce platforms have become more standardized and affordable in selling packages.

Combo packages are widely available on fresh food e-commerce platforms, but due to limited daily stock, "not being able to grab groceries" has become a common user experience. "I don't count on those fruit and vegetable packages. For someone like me who isn't good at cooking, I mainly choose semi-finished and instant foods," Xiaolan said.

As Xiaolan mentioned, beyond the popular fresh food packages, pre-made dishes, mainly semi-finished products, have become a priority for people and a quick way for fresh food e-commerce to differentiate during the pandemic.

Fresh Food E-commerce Actively Seeking Survival: Pre-made Dishes Become Popular

Opening the homepage of fresh food apps, some platforms have already promoted "pre-made dishes" as a separate section. Under prolonged pandemic life, consumers' demand for "convenient dining" has risen, and fresh food e-commerce platforms are seizing this opportunity to enter the market.

Image source: Left: Dingdong Maicai; Right: Meituan Maicai

Recently, Yonghui Superstores released data showing that from March 1 to 20, 2022, vegetable sales increased nearly 20% year-on-year, while sales of its own pre-made dish brand "Hui Ma Dao Jia" grew over 60% month-on-month.

Yonghui's growth in pre-made dishes is not an isolated case. During the 2022 Spring Festival, Hema's pre-made New Year dishes sales in Shenzhen increased 345% compared to the 2021 Spring Festival, and Dingdong Maicai's pre-made dish category sales rose 300% year-on-year.

"Pre-made dishes have always been a hot trend in the catering industry," Mr. Liu, who has worked in food R&D for ten years, told CBNData. "For companies, pre-made dishes can reduce costs and improve standardization; for consumers, they are more standardized and safer than takeout."

According to iiMedia Research data, the market size of pre-made dishes in China is estimated at 345.9 billion yuan in 2021, growing at an annual rate of 20%, reaching about 516.5 billion yuan in 2023, potentially becoming the next trillion-yuan catering market.

Since 2021, many fresh food e-commerce platforms have already targeted the pre-made dish track. Generally, there are two ways for fresh food e-commerce to enter: one is brand cooperation, mainly by directly introducing pre-made dishes from major catering brands or co-branding with them. Frequent partners include braised snacks like Jiujiuya and Laojie Laowei, and frozen ready-to-heat foods like Zhenwei Xiaomeiyuan and Taotaoju.

The other is platform-owned brand self-operation. With the pre-made dish trend arriving, self-operated brands have become a popular choice for fresh food e-commerce. According to CBNData statistics, several leading fresh food e-commerce platforms currently have their own pre-made dish brands.

The industry generally divides pre-made dishes into four types: ready-to-eat, ready-to-heat, ready-to-cook, and ready-to-prepare. Costs vary based on ingredients and processes, leading to different pricing. The self-operated brands of Hema, Dingdong Maicai, and Meituan Maicai basically cover all types, from net dishes priced at single digits to Buddha Jumps Over the Wall priced over 100 yuan.

Among them, Hema Gongfang and Meituan Maicai cover all pre-made products under one brand, while Dingdong Maicai splits into nearly 10 sub-brands, each corresponding to different product types. For example, Cai Changqing focuses on home-style dishes, Dingdong Haoshiguang emphasizes salads and light meals, Liangxin Jiangren mainly does staples, and Dingdong Wangpaicai focuses on restaurant dishes and local specialties.

Besides platforms with all types of pre-made dishes, Miss Fresh and Yonghui Daojia focus more on single-category tracks, mainly ready-to-cook foods.

In late March, Miss Fresh just launched its pre-made dish brand "Ju Xia Fan," featuring Japanese-style and golden soup series, priced at 20-40 yuan, with portions and pricing suitable for one person per meal. As of press time, the platform showed all products from this self-operated brand sold out.

Image source: Miss Fresh

Compared to the time-sensitive "epidemic prevention meal packages" during the pandemic, pre-made dishes seem to offer more long-term benefits for fresh food e-commerce.

Although pre-made dishes have only become popular in the C-end market in the past two years, they have been accompanying catering enterprises for 10 years. According to Guosen Securities research, the B-end market currently accounts for 4 times the C-end in China's pre-made dish market. To achieve deeper development, some platforms have begun to venture into the B-end market.

On March 22, Dingdong Maicai announced the launch of its independent pre-made dish brand "Zhaoqi Xianshi," mainly targeting B-end channels such as distribution, agency, and terminal key accounts. This is Dingdong Maicai's first pre-made dish brand focused on B-end channels. Under the banner of an "independent brand," Dingdong Maicai's intention to "seek another way out" is increasingly clear.

Are pre-made dishes really the best destination? For fresh food e-commerce, the challenges may only increase. "For convenient storage, pre-made dishes undergo high-temperature sterilization during packaging, which compromises taste," Mr. Liu told CBNData.

Additionally, Dingdong Maicai's vice president Shen Qiang once said, "The supply chain and cold chain determine the freshness of pre-made foods, and in the sales chain, if too many follow the trend to mass-produce, it's easy to have oversupply and high losses."

Next Steps for Fresh Food E-commerce

For fresh food e-commerce today, it has reached a critical juncture of "life and death." According to data from the China E-Commerce Research Center, there are over 4,000 fresh food e-commerce companies in China, with only 4% breaking even, 88% suffering losses, 7% incurring huge losses, and only 1% ultimately profitable.

Miss Fresh accumulated losses of 9.9 billion yuan from 2018 to the first three quarters of 2021, while Dingdong Maicai's cumulative losses over four years have exceeded 10 billion yuan.

This spring's regional outbreak has seen fresh food e-commerce actively provide a large number of epidemic prevention packages and promote self-operated pre-made dishes. The emptied shelves have given them hope for "survival" again, but the pandemic cannot be their "lifeline." To survive the winter, fresh food e-commerce urgently needs to make more changes.

Dingdong Maicai and Miss Fresh, which have been using the front-warehouse model, aim to be closer to residential areas for "last mile" delivery. While optimizing high-frequency and efficient delivery, this model also leads to high fulfillment costs, which is the crux of their continuous "burning money."

Under such circumstances, Dingdong Maicai began reducing its front-warehouse model in the fourth quarter of last year, slowing expansion, and focusing on pre-made dishes and self-operated brands. Miss Fresh has also been cautious about the number of front warehouses, closing underperforming sites, and launching a new retail model of "smart wet market + retail cloud" to develop digital platforms.

Hema, which adopts a warehouse-store integrated model, has begun to focus more on offline development. Hema CEO Hou Yi previously announced Hema's strategy shift for 2022: no longer insisting on online-first and offline-supplement, but choosing to develop both online and offline, aiming to expand offline share from the current 30% to 50% within three years.

On one hand, reducing warehouses and focusing on B-end; on the other, expanding offline share. For fresh food e-commerce today, either approach requires time to test. Spring 2022 is about to pass; how much longer will the "spring" of fresh food e-commerce take?

Cover image source: CBNData

References: iiMedia Research "2021 China Pre-made Dish Industry Analysis Report"; Dongjian Bay Capital: "Pre-made Dishes Explode: Real Opportunity or Bubbles?"; Rong Finance: "Dingdong Maicai vs Miss Fresh: Same Losses, Different Fates"

Source: Hong Loudou (ID: hongloudou)

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