Baiguoyuan's Halved Gross Margin Reflects Dilemmas in the Fruit Retail Industry

Based on relevant information and market data found, the halving of Baiguoyuan’s gross margin indeed reflects the deep-seated dilemmas faced by the fruit retail industry.

Chart data obtained from searches shows that Baiguoyuan’s gross margin and net margin showed an obvious downward trend from 2020 to the first half of 2024. The company has issued a performance warning, explicitly mentioning the problem of declining gross margin [1].

• Rising procurement costs
  : Fluctuations in fruit origin prices, reduced production due to natural disasters, exchange rate fluctuations for imported fruits, and other factors have pushed up procurement costs
• Increased operating costs
  : Store rent, labor costs, and logistics distribution costs continue to rise
• High loss costs
  : The perishable nature of fruits leads to high storage and transportation loss rates, generally ranging from 5% to 10%

• Intensified peer competition
  : Chain brands such as Xianfeng Fruit and Hongji Fruit are expanding rapidly
• Impact of fresh e-commerce
  : New retail formats such as Missfresh, Dingdong Maicai, and Hema have diverted customers
• Rise of community group buying
  : Platforms like Meituan Youxuan and Duoduo Maicai seize the market with low-price strategies

• Consumption downgrade trend
  : Uncertainty in the economic environment has led consumers to reduce spending on non-essential items
• Increased price sensitivity
  : Consumers are more sensitive to fruit prices, leading to frequent price wars
• Diversified consumption scenarios
  : New consumption scenarios such as takeout and pre-made dishes have diverted fruit consumption demand

• Low standardization level
  : The non-standard nature of fruits makes quality control difficult
• Low supply chain efficiency
  : Cold chain logistics infrastructure is not perfect, with many links and high losses
• Weak brand premium capability
  : Consumers have low awareness of fruit brands, with price competition being the main focus

• Obvious gross margin ceiling
  : The average gross margin of the fruit retail industry is about 20% to 30%, with limited room for improvement
• Rigid expense ratio
  : Fixed costs such as rent and labor are difficult to reduce
• Unobvious scale effect
  : Marginal benefits from store expansion are diminishing

Facing these dilemmas, fruit retail enterprises are exploring:

• Strengthen supply chain integration and extend to upstream planting
• Develop own-brand products to enhance differentiated competitiveness
• Expand online channels and promote omni-channel operations
• Optimize store structure and improve operational efficiency

Overall, the halving of Baiguoyuan’s gross margin reflects that the fruit retail industry is in a period of deep adjustment. Enterprises need to continue to focus on cost control, differentiated operation, digital transformation, and other aspects to break through in the fierce market competition.

[1] Sina Finance - Baiguoyuan’s gross margin and net margin charts and related information on performance warnings (https://n.sinaimg.cn/finance/)