Author | Zheng Qiao

Editor | Zhou Zhiyu

A retailer selling household goods looked at traditional supermarket chains, and Mingchuang Premium had fun crossing borders again.

On the evening of September 23, Mingchuang Premium announced on the Hong Kong Stock Exchange that it plans to acquire 29.4% of Yonghui Supermarket's shares for 6.27 billion yuan, including 21.1% of Yonghui Supermarket's shares held by Milk Company, the original shareholder of Yonghui Supermarket, and 8.3% of shares held by JD.

If the deal is successfully completed, Mingchuang Premium will become Yonghui Supermarket's largest shareholder. The management of Mingchuang Premium also hopes to use this to create a “Chinese version of Sam's Club”.

The reaction of the capital market to this acquisition was polarized. On the one hand, Yonghui supermarket's stock price quickly rose and stopped after opening. On the other hand, Mingchuang Premium dropped sharply by 19.5% when the US stock market opened. At one point, the total market value evaporated about 0.85 billion US dollars (about 6 billion yuan), and investors just couldn't understand it.

“It's right that no one can read it; if everyone can understand it, I don't have a chance.” Ye Guofu, founder of Mingchuang Premium, said in his circle of friends.

Ye Guofu sees that Yonghui supermarket is already showing signs.

He has visited the Yonghui store renovated by Fat Donglai many times. At the end of July '24, Ye Guofu went to Zhengzhou, Henan to visit the first Yonghui supermarket store that Fat Donglai helped adjust. Even on Thursday afternoons, when there is usually less traffic, the inside of the store is still full of people, which makes Ye Guofu very excited. Then, in August, he visited Henan again.

Earlier, Yonghui Supermarket made a high-profile introduction of Fat Donglai to carry out store reforms. On August 31, Yonghui Supermarket, the first store in the country that imitated the “Fat Donglai Store” to adjust itself — Yonghui Supermarket, located in China Trade Plaza in Xi'an, Shaanxi, officially reopened after closing and adjusting. According to the data, before the adjustment, the average daily sales volume of the store was about 0.2 million yuan, and the average daily customer traffic was about 3,000; after the adjustment, the store's customer traffic surged to more than 0.014 million people, and the first-day sales reached 1.5143 million yuan.

According to Ye Guofu, China's offline supermarkets are facing a structural opportunity once every 20 years, and believes, “The Fat Donglai model is the only way out for Chinese supermarkets.”

According to Mingchuang Premium, the Fat Donglai model has set off major changes in the supermarket industry in China, and Yonghui Supermarket achieved breakthroughs in various dimensions such as sales and customer flow after being restructured by Fat Donglai. As a Chinese retail brand with rapid global development, Mingchuang Premium and Yonghui Supermarket are expected to join forces to create a “Chinese version of Sam's Club”.

Yonghui was once known as the “King of Chinese Supermarkets”. At its peak, the number of stores reached 1,440. However, Yonghui's current business situation is not optimistic. According to the semi-annual report disclosed by Yonghui Supermarket on August 23, the company achieved operating income of 37.779 billion yuan in the first half of 2024, a year-on-year decrease of 10.11%; net profit was 0.275 billion yuan, a year-on-year decrease of 26.34%.

In the first 8 months of 2024, Yonghui closed 136 stores, of which 63 were closed in the first half of the year, which means Yonghui closed 73 stores in the two months of July and August alone.

In contrast, the performance of Mingchuang Premium in 2024 was particularly remarkable. In March, Mingchuang Premium's products in collaboration with Chiikawa were launched domestically and quickly became a sensation on social networks. In order to buy products, young people did not hesitate to line up all night with small benches. The 3-day reservation was sold out within 2 minutes.

According to financial reports, Mingchuang Premium's revenue for the first half of 2024 was 7.759 billion yuan (1.068 billion US dollars), an increase of 25% over the same period last year; operating profit for the first half of the year was 1.495 billion yuan (about 0.206 billion US dollars), an increase of 18.1% over the previous year.

Adequate cash flow encouraged Mingchuang Premium. Zhang Jingjing stressed that with the 6.27 billion yuan required for the transaction, Mingchuang Premium has sufficient resources to pay the consideration.

Ye Guofu also showed great confidence in the future of China's retail industry. In an investor conference call on September 23, he pointed out that Yonghui is an investment undervalued by the market and is expected to drive the profit growth of Mingchuang Premium. He also stressed that the acquisition will not change the strategic direction of Mingchuang Premium in the next five years. The company will continue to focus on product innovation, IP strategy, cost performance and globalization. The goal is to increase annual revenue by more than 20%, and that the increase in earnings per share exceeds revenue growth.

“Among the top 1000 shopping malls in the country, our effective coverage rate is not high enough. Yonghui supermarket occupies many good positions in the country. With Yonghui's successful restructuring, it will become the main brand for commercial real estate to attract traffic. MINISO (Mingchuang Premium) can use Yonghui's advantage to upgrade our channels, acquire stores with Yonghui, and obtain the best position in the same business format in more commercial real estate, helping the MINISO (Mingchuang Premium) brand to continue to succeed.”

Mingchuang Premium also said that after entering Yonghui, it can help Yonghui supermarket optimize its current governance structure, give full play to the integrated advantages of both parties in channels and supply chains, and create greater value for consumers.

Some industry insiders believe that Yonghui Supermarket should have been planning to sell shares for some time. Previously, it cooperated with Fat Donglai to adjust the store, on the one hand, hoping to improve the store's operating efficiency, and on the other hand, it is likely to use this to enhance its own commercial value, which will benefit Yonghui Supermarket's capital operation.

Although the market is cautious about this acquisition, Ye Guofu is confident about the future of the Chinese retail industry and seems to have made plans for Mingchuang Premium to expand. However, whether the goal of the “Chinese version of Sam's Club” can actually be achieved is yet to be tested by the market and time.