Yonghui Finally Connects with Overseas... $413 Million Invested Overseas

Do you still remember the counterfeit Yonghui supermarket in the US? Recently, the news and photos of "Yonghui supermarket opening in the US" went viral online, but Yonghui supermarket denied it, stating that the store was not opened by them, and they have collected evidence for legal action to pursue infringement liability. They also said, "As a listed company, Yonghui supermarket must publicly announce any domestic store openings to be responsible to investors, let alone opening stores abroad."

The US counterfeit "Yonghui supermarket" looks like this ▼ Yonghui supermarket trademark ▼ Domestic genuine Yonghui supermarket ▼

So this time, how did the real Yonghui supermarket connect with an overseas company?

On the evening of January 17, Yonghui announced its intention to acquire equity in Daymon Worldwide Inc. (达曼国际公司). Yonghui supermarket stated that it plans to participate through its wholly-owned subsidiary Yonghui Holdings Limited in BC Eagle Holdings, L.P. (Bain Capital Eagle Holdings Limited Partnership) in the 100% equity acquisition of Daymon Worldwide Inc. Among them, the transaction consideration for Yonghui's 40% shareholding is approximately $165 million.

According to the announcement, Daymon Worldwide is the world's largest retail services enterprise, with professional capabilities and rich experience in private label development, global sourcing, and retail execution. Through its five subsidiaries: Brand Development, Galileo Consulting, SAS, Omni, and Interactions, Daymon Worldwide serves over 100 retail enterprises in 51 countries globally. Daymon's Brand Development division manages over 165,000 SKUs from 1,700 private labels, with more than 20,000 new SKUs developed annually; it has cooperative relationships with 8,000 suppliers worldwide, offering competitive pricing for private label products.

Nowadays, private labels are sought after by many retail enterprises. Walmart has developed 13 series of private labels in China, including well-known ones like Great Value and Mainstays.

If they lack the capability to develop their own private labels, most retailers choose to cooperate with companies like Daymon to develop private labels. Public reports show that Daymon has cooperated with Chinese retailers such as Bubugao, Womai.com, Beijing Hualian, Haojiaxiang, as well as foreign retailers with stores in China like Lotte Mart (China) and AEON (China).

Currently, private labels are still in the initial stage in China, with huge development potential. According to a survey report on the current status of private labels conducted by the China Chain Store & Franchise Association's Procurement Committee, among the 27 surveyed companies, the gross profit margin of private labels is generally above 25%, and nearly two-thirds of the companies saw private label sales growth of over 10% in the first half of 2016. However, overall, private labels are still in the early stages, with sales accounting for mostly below 6%, and there are issues such as low development capability of private label items, especially the low number of fresh food items.

Through this transaction, Yonghui hopes to gain more say in private labels through equity cooperation. In the aforementioned announcement, Yonghui expects to achieve sales of RMB 1.5 billion from private labels and imported goods in the food and daily necessities category in 2016.

Yonghui's equity acquisition will enable it to play a greater role in the private label field, making up for the shortcomings of domestic retail enterprises in private labels.

In addition, Yonghui supermarket also released its 2016 performance forecast. According to preliminary calculations by the finance department, it expects to achieve operating revenue of approximately RMB 49,221,988,100 in 2016, an increase of about 16.79% year-on-year; net profit attributable to shareholders of the listed company of RMB 1,242,332,600, an increase of about 105.23% year-on-year; and owners' equity attributable to shareholders of the listed company of RMB 1,919,880,240, an increase of about 57% year-on-year.

Regarding the reasons for the performance increase, Yonghui supermarket stated that the company optimized its management structure and strengthened expense control; and the transfer of equity in Lianhua Supermarket Holdings Co., Ltd. during the reporting period increased non-operating income.

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