Financial Services Association, January 30 (Reporters Liu Ke and Chen Kang) Yiming Foods (605179.SH), which went on sale in 2020, was ready to make a big splash, but it was stuck in a situation where the consumer scene was damaged, and its performance lost for a while during the pandemic. In the words of Zhu Like, chairman of Yiming Foods, in fact, the factory and production capacity are all in place, so just wait for the offline store to open. Today, Yiming Foods has climbed the slope past Cantuo's new market.

“Yiming Fresh Milk Bar”, which appeared in the streets and alleys, contributed most of Yiming Food's performance. Sales revenue from direct-run stores and franchise stores accounted for more than 65% of total revenue. In an exclusive interview with a reporter from the Financial Federation recently, Zhu Like said that his current focus of work is on “opening stores.” He stressed that the company's goal of opening 6,600 stores in 2026 has not changed.

“Excluding holidays, we hope to maintain the rate of opening 4 stores a day in 2024, which is a net increase of 800 stores a year.” Zhu Like said that the key markets to be developed this year include northern Jiangsu, Anhui, Jiangxi and other regions, while hoping to make a breakthrough in central China.

“With the current production capacity in the supply chain, we can support 6,600 companies.” Zhu Like said. This means that Yiming will triple the number of existing stores within three years, and the company's revenue is expected to exceed 10 billion dollars at that time.

“6600 Plan” as usual

Yiming is a food brand that emerged from Wenzhou, Zhejiang. With a “dairy+baking” chain management model, Yiming has now opened more than 2,100 “Yiming Real Fresh Milk Bars” in East China. It has two own ranches, Taishun Yunlan and Changzhou, and has built 3 processing bases in Pingyang, Pinghu, and Changzhou.

The Changzhou processing base is Yiming's first base outside Zhejiang Province. It has a production capacity of 94,900 tons of dairy drinks and vegetable protein drinks and 241,000 tons of baked goods a year.

With a production base within a radius of 600 km, apart from Jiangsu, Zhejiang and Shanghai, Yiming's products can reach Shandong, Anhui, and Hebei. Zhu Like mentioned that the company plans to cooperate with logistics companies to establish a cloud warehouse in Langfang, Hebei to cover the North China region. This is an effective way to expand the national market, and it will also consider acquiring or cooperating with high-quality local factories in the future. “We hope to become a national brand. Of the 6,600 stores, at least 1,000 stores will be outside of East China.”

East China is Yiming's current base. Zhejiang accounts for 80%, but according to Zhu Like, the Zhejiang market is far from being saturated. For example, Wenzhou and Hangzhou have room for growth. He revealed that in terms of site selection, apart from previous communities, schools, hospitals, business districts, and transportation hubs (within subways, airports, bus stations, and high-speed railways), Yiming will enter a commercial complex this year, adopting a light catering model, and consider entering a highway service area next year.

During the interview, Zhu Like answered a phone call about matters relating to the store's entry into Shanghai Airport. “Choosing the location of these critical and brand-representative offline stores is really important, so I will participate in the decision.”

“To enter a city, you must first open a direct-run store, build brand awareness, and optimize the store structure,” Zhu Like said. Direct stores assume the functions of personnel reserves, training, and model store building. Company development is mainly based on franchising, supplemented by direct management. Currently, the region takes the lead in direct management, and after the model matures, the expansion of franchisees is the main focus. In 2023, the number of Yiming franchise stores grew rapidly, breaking through recent high values.

Among existing stores, the ratio of franchised to direct-run stores is 7:3. In order to guarantee product quality, Yiming's franchise model has never opened up regional agents. It uses single store franchises and unified headquarters control. Judging from channel profit margins, franchise stores are higher than direct management.

Improving the quality and efficiency of own milk sources

Currently, Yiming Foods has established a supply chain system from ranch farming, factory production, cold chain distribution, and chain store sales.

The establishment of our own ranch not only provides Yiming with a high-quality milk source, but also lays an important foundation for in-depth cooperation between the company and external suppliers. Compared to other dairy companies, Yiming seems to have a shortcoming: upstream milk sources mainly rely on outsourcing (accounting for 80%), have few own milk sources, and are easily affected by factors such as price fluctuations, tight milk sources, and interrupted cooperation.

According to Zhu Like, accounting for 20% of our own milk sources is enough. “The establishment of our own ranch allows the company to grasp the development trends of the entire industry. External suppliers are very stable. We have a long-term accumulated and mutually supportive relationship with our cooperating farmers. We have not thrown away a drop of milk from dairy farmers during the pandemic. Our focus is on consumer research and market development.” Zhu Like said.

Currently, Taishun Ranch and Changzhou Ranch have 1,800 and 3,000 cows respectively. In addition to dozens of core ranches cooperating with farmers, Yiming owns around 46,000 cows. According to Zhu Like's plan, Yiming will start producing an additional 6,500 cows by 2025. Within the next three years, the number of dairy cows cooperating with farmers will increase to 70,000.

Compared to the increase in quantity, Zhu Like places more importance on improving quality and efficiency. Zhejiang is speeding up the pace of cultivating good breeds of dairy cows, and Yiming is no exception. Together with his university's alma mater, Zhejiang University, he established the Zhejiang Provincial Key Laboratory for Dairy Cow Genetic Improvement and Milk Quality Research to improve breeding efficiency and produce more high-quality cows with high yield potential through embryo transfer technology. “Now our goal is 5 fetters and 12 tons: the yield of dairy cows has increased from 11 tons to 12 tons; the average number of cows has increased from 3 to 5, which is the leading level in the country.”

Here are some transcripts of the interview:

Financial Services Association: How has the company's online business developed in recent years?

Zhu Like: Before 2021, Yiming only focused on offline; online was basically zero. After store performance was disrupted by the epidemic, the company began to launch e-commerce. The overall base was small, and the pace of development was rapid. Every month, sales increased exponentially. The products appeared on leading live broadcasts such as Oriental Selection, opening up a wider range of e-commerce channels. We hope to reach 1 billion in sales in three years. According to financial reports, from 2021 to the first three quarters of 2023, the share of online revenue increased from less than 1% to 3%. In the first three quarters of 2023, online revenue increased 150% year-on-year, and gross margin increased by 0.29 percentage points.

Financial Federation: In response to the development of milk bar stores, Yiming also proposed the “one thousand stores and one thousand faces” strategy. How exactly was it implemented?

Zhu Like: “A Thousand Stores, One Thousand Faces” is mainly divided into four categories: standard stores, experience stores, stall stores, and factory stores. Various modules such as store layout, product regional distribution, and product development are modified according to different locations and consumer groups.

Financial News Agency: Who are Yiming's competitors in the market?

Zhu Like: Yiming's unique service scenario and product portfolio. There are no exact competitors in the market, but in fact, competitors are everywhere. Dairy, bakery, and chain companies are all our competitors, so we need to continuously innovate categories and improve quality, and everything starts with the consumer.

I often mention two companies, Starbucks and Nestle. We need to learn from their product innovation model and strategic management model, and we also need to learn about Lucky's digital operations.

Financial News Agency: Can you talk about the company's future strategic plans?

Zhu Like: Yiming now has three divisions, which correspond to the company's three development curves: milk bar division, e-commerce division, and major customer division. We believe that milk bars are the cornerstone of performance and will maintain more than 60% of revenue in the future; e-commerce and major customers should also accelerate expansion, continuously diversify product channels and scenarios, and strive for a high growth rate over the next three years.