Original link: https://www.latepost.com/news/dj_detail?id=1153
In 1986 a special interview took place in Hunan. The interviewer was Professor Peterson, an agricultural expert from the Federal Republic of Germany (then West Germany), and the interviewer was a university graduate who signed up for the European Community (predecessor of the EU) “Development of Hunan Fruit and Vegetable Processing Experiment and Demonstration” assistance project.
Among the many interviewers, Shan Yang, a 23-year-old university graduate from Youxian County, Hunan Province, passed the assessment and was selected to study at the Institute of Agricultural Chemistry and Food Technology of the Spanish National Research Council. The knowledge about food technology is vast. Among them, Shan Yang captures a small thing that is very closely related to his hometown of Hunan: Spain is also rich in citrus like his hometown, but the local citrus processing and production chain is extremely professional and standardized, making Spain the largest in the world. of citrus exporters.
With the relatively abundant simplicity and enthusiasm of that era, Shan Yang chose a direction for his scientific research life: research on citrus processing.
From the beginning of 7 people, to the follow-up research with a local citrus processing enterprise in Hunan. In 2021, Shan Yang, who has been selected as an academician of the Chinese Academy of Engineering, has been researching in this field for 36 years. China’s citrus industrial production has already embarked on an economical, efficient and highly standardized road in the past 36 years. By 2019, citrus surpassed apples as China’s most exported fruit.
Citrus is no longer just a fresh fruit that must be sold within 3 months, otherwise it will be a backlog of rotten fruit, but an industry that includes a variety of products such as squeezing orange juice, making cans, extracting essential oils, and extracting pectin.
Resource recycling, raw material storage (frozen) storage technology, and access to global certification standards are the basic requirements for standardized and industrialized citrus production.
The 59-year-old Academician Shan Yang found another stage goal outside of citrus, and applied the standardization of fresh food processing to places closer to the stomach of Chinese consumers. He chose Luwei and also cooperated with a local company in Hunan.
On May 19, Juewei Foods held its annual general meeting of shareholders in Changsha, and Shan Yang sat at the scene. Dai Wenjun, Chairman of Juewei, announced the official opening of the Shan Yang Academician Workstation. The academician of the Academy of Engineering is an authority in the field of applied research, and each academician can only choose one enterprise to settle in the academician workstation.
Standardization is the only way for food companies to pursue scale competition.
The best food companies in the world are all companies that take standardization to the extreme. From McDonald’s to Coca-Cola, standardization allows these companies to provide food anywhere in the world with the slightest deviation in taste, and it brings scale and expansion through strong production efficiency, and a unified taste represents an infinite market space.
But standardization has always been the most troublesome problem for Chinese food: the cooking process is complicated, and the preservation and storage are not easy. Compared with the Internet platform business monopolizing the industry through capital and technology, the replication growth of catering relies more on the traditional store model.
In the entire catering market, the taste of casual lo-mei food is fixed, and it may also be the easiest area for Chinese food to start standardization.
And better standardization is also a necessary condition for Juewei Group to realize its expansion ambitions.
After the outbreak of the epidemic, many large catering companies expanded against the trend, such as Haidilao, which opened more than 500 new stores, but today, two years later, there are many fewer companies that continue to expand.
At the annual shareholders meeting, Juewei Chairman Dai Wenjun announced that under the premise of financial stability and system stability, the company will continue to promote the company’s store opening strategy, maintain the original plan to open 1,000 to 1,500 stores this year, and “will increase the pace of store expansion in due course. “. If it is successfully opened, the number of Juewei stores will be close to 15,000 this year.
This will be an overall transformation, and it will be more difficult to optimize a series of links from upstream raw materials to taste, processing, refrigeration, transportation, preservation, and store sales. Juewei Group’s challenge is not small. Whether it is successful or not, it will become an important experiment in the standardization and scale of Chinese food.
Every link needs to improve efficiency
Start with buying duck necks
Zhou Hei Ya and Jue Wei, a lo-mei company with duck by-products as the core, spend more than 80% of the cost in purchasing raw materials for fresh products such as duck neck, duck feet, duck collarbone, duck intestines, and duck wings.
Last year, Juewei sold 142,000 tons of braised products. If each pound of raw materials was cheaper by an average of 1 yuan, it would save 280 million yuan and increase profits by nearly 30%.
Like soybeans and pork, the prices of these raw materials will fluctuate due to various factors, which will directly affect the profit margins of downstream enterprises and promote changes in the industry structure.
In 2018, the second year of Juewei’s listing, the net profit attributable to its parent increased by nearly 30% to 640 million yuan, surpassing Zhou Heiya for the first time and becoming the most profitable company in the lo-mei industry.
Zhou Hei Ya said in its annual report that rising raw material costs dragged down profits. Sun Hongliu, chairman of Jiangsu Wuxiangju Foods, said in an interview with the media that from the second half of 2017 to the end of 2018, the prices of raw materials such as duck necks rose by 30% to 40%.
Juewei foods with more stores and larger purchases have more bargaining power. In 2018, both Zhou Hei Ya and Juewei Foods purchased raw materials such as duck necks from Yike Foods. Jue Wei purchased 31,000 tons at 13.92 yuan per kilogram, which was 1 yuan cheaper than Zhou Hei Ya, which purchased 16,000 tons.
Juewei mainly relies on centralized procurement to negotiate prices with upstream suppliers. In 2020, Juewei purchased a total of 113,000 tons of duck by-products, about half of which were duck necks, and over 95% were purchased in a unified manner.
In addition, Juewei has also invested in meat duck companies to reduce supply chain risks, such as Inner Mongolia Saifeiya Agricultural Technology Development Company, which specializes in meat duck breeding, breeding and processing.
In the food processing industry, raw materials also affect profit margins in another way: the taste and flavor of the finished product. In order to ensure the taste of the finished French fries, McDonald’s will screen the raw materials according to the length and starch content of the potatoes.
In the lo-mei industry, raw materials have a greater impact on costs, not only the quality of raw materials, but also storage and transportation. The farms that supply raw materials on a large scale are concentrated in a certain area, while the processing plants of lo-mei are close to the consumer market in order to quickly distribute the finished products.
Frozen storage and cold chain transportation of raw materials are the only methods, but they will inevitably affect the quality of meat. How to improve the quality of raw materials in the current industry situation is one of the research priorities of Juewei’s newly established academician workstation.
Use more than 10 spices
It’s hard to standardize on taste
Large-scale food companies will require uniform taste, so that consumers can form fixed taste expectations and induce repeated consumption. Especially when it comes to addictive foods.
Coca-Cola uniformly produces Coke puree in the United States, and then transports it to concentrate plants around the world to make concentrates, and finally to bottling plants to add water, sugar, gas and canned production. Except for different water quality in different regions, different sugar standards, and different local health supervision requirements, the taste of Coca-Cola is uniform. McDonald’s and KFC, not only the recipe of French fries is fixed, but the frying time is the same every time.
In the lo-mei industry, the “original pulp” that determines the flavor is marinade, but it is difficult to standardize like Coca-Cola: According to Juewei’s prospectus, at least 10 kinds of spices are used for braised duck neck, which are usually packaged together according to the recipe.
Although the proportion of raw materials in the marinating process can be strictly controlled, it is difficult for them to precisely control the taste – spices from different batches and origins will have different tastes. Like most of the upper reaches of the food chain in China, spices are not unified.
Over the past few years, Juewei has been trying to standardize, setting the origin and sunshine time requirements of spices, such as 1,500 meters above sea level and 2,600 hours of sunshine per year, etc., but there are still differences when it comes to marinating.
In addition, the determination of the taste of marinade mainly depends on experienced chefs, and the optimal flavor time points of different spices are different, so it is difficult to find a standardized marinade recipe. There have been companies in the marinade industry that have tried to make powdered marinades with spices, but the results have not been satisfactory. At present, Juewei is exploring plant extraction technology to extract flavor from spices and quantitatively use it in lo-mei.
This is a technology that is very common in the coffee field. The soluble compounds in coffee include fruit acids, caffeine, lipids, melanoids, carbohydrates and plant fibers, etc. Different extraction times can extract different flavor substances from coffee beans. Although the final taste of coffee is ever-changing according to the producing area, roasting, and production, a chain coffee company with tens of thousands of stores like Starbucks can basically achieve the same taste.
Still in the stage of mechanized production
60% of employees are on the production line
In 2010, Dai Wenjun, founder of Juewei Duck Neck, and others applied for a patent for “a complete set of equipment for the mechanized production of braised food”, describing a complete set of mechanized production equipment, including a cleaning tank that uses the waste heat of a steam boiler to melt ice, and conveying ingredients to be braised. belt conveyors, steam-heated sandwich pots, machines for screening and drying braised food, etc.
They claimed in the patent that this invention can change the halogen production from manual operation to mechanization, improve production efficiency, from the original 2 workers to operate 1 brine pot to operate 3.5 pots, the efficiency is increased by 3.5 times.
Although the efficiency has improved, the halogen products industry is still in a relatively primary stage of mechanized production, and the processing process is still driven by humans.
As of the end of 2021, Juewei has a total of 4,853 employees, nearly 60% of which are more than 100 in each of its 19 production sites.
In contrast, many food production factories, such as some steamed dumpling production lines of the Chia Tai Group, are completely unmanned, and everything from dough mixing to filling to packaging is fully automated.
People on the production line are not only the cost that is difficult to reduce during expansion, but also the factors that are difficult to standardize and the risks that are difficult to control in the production of lo-mei. Promoting the lo-mei industry from mechanization to automated production and forming a replicable factory template is one of the research topics of the Juewei Academician Workstation.
It is understood that Juewei also intends to establish a clean production workshop. In the beverage industry, there are clear requirements for the cleanliness of the filling area, while the halogen products industry has no unified requirements.
Over 95% sold in bulk
Distributed production bases and cold chain
How to deliver fresh lo-mei from the production base to the store and sell it to consumers is the core competitiveness of the lo-mei industry. It is not a problem when the lo mei is still in the form of a roadside stall.
The stores are all located in residential areas or around restaurants where consumers live. The amount of lo-mei produced each time is not large, and it is not a problem to sell it in a fresh state. But if you want to scale, you have trouble.
Opening one store to sell lo mei and opening 100, 1,000 or 10,000 stores to sell lo mei are completely different business logics. The old master can be a store with a good reputation, but if you want people with less experience to open a store, so that production is efficient and the cost is lower, you must concentrate on mass production, and how to deliver the lo mei fresh to the store, it will be a competitive breakthrough.
Under normal circumstances, the shelf life of lo-mei food is 5 days at the longest at 0℃-4℃, and the shelf life will be shortened by half if the temperature is doubled. To extend the shelf life of lo-mei, there are currently two common packaging methods. One is vacuum packaging, in which the food is placed in an airtight packaging container and the air is removed, which can keep it fresh for 90-180 days, but the level of residual oxygen in the packaging is difficult to control, and some packaging needs to be sterilized at high temperature for an instant, resulting in food Flavor drops.
The other is modified atmosphere packaging, which fills the packaging with inert gas, and fills a certain proportion of nitrogen and carbon dioxide gas into the packaging to block the infiltration of oxygen, thereby slowing down the reproduction rate of microorganisms and extending the shelf life to 5~7 days. And less flavor loss, the problem is high cost.
Zhou Hei Ya, which has a higher price, mainly adopts modified atmosphere packaging, accounting for nearly 90% of its sales. Juewei, which is more cost-effective and has a unit price that is more than 30% cheaper than Zhou Hei Ya, although it applied for a modified atmosphere packaging patent in 2013, it is still mainly sold in bulk. More than 95% of the products sold last year were in bulk.
The way to keep Juewei fresh is to compress the delivery time from the base to the store. The most direct way is to build the production base near the consumer market to physically reduce the delivery distance. At present, Juewei has 19 production bases in normal operation across the country, and two are under construction, with a distribution radius of 300-500 kilometers, supplying 13,000 stores.
At the same time, Juewei also controls the order volume and transportation process, and requires stores to reduce stockpiling and improve the efficiency of goods turnover according to the world’s orders. In 2008, Juewei began to build its own cold chain distribution system, aggregated third-party cold chain resources, digitalized management, ensured stable daily delivery, and quickly delivered braised products to various stores, with the goal of selling within 24 hours after production.
Cold chain transportation also has its limits. If the store is far away from the production base and the delivery time is long, Juewei Foods can only stop the pace of opening a store and consider whether to invest money to set up a new production base, or make efforts in preservation to prolong the preservation of freshness. Time to buy time for long-distance delivery.
13,000 stores
How to standardize management
In the snack food industry, people consume a limited number of times within a fixed period of time, and the core growth comes from covering more people.
Juewei said in the prospectus that the company is targeting “impulse buying”, that is, young users who see a store on the way to the mall or on their way home may stop to buy some. The store is not only a consumption channel, but also a consumption scene. core.
All the chain brands above 10,000 stores in China are franchisees, and Juewei is no exception. How to open more stores and manage them well is the last step of the business model.
The franchise model can find more conscientious store managers – it is difficult for employees hired by large companies to be as conscientious and dedicated as their own-funded store owners to solve business problems. But shopkeepers sometimes violate the brand’s norms in order to make more money now, which will damage consumer trust in the brand as a whole. The food safety problem is particularly serious. When franchise stores use fake products or sell expired food, it will cause irreversible effects.
To this end, some chain brands have studied a lot of methods. For example, MINISO, franchisees are only responsible for the operating costs of renting and hiring people, and MINISO is responsible for management and supply, so as to reduce the uncertainty of franchisees as much as possible.
Zhou Hei Ya, who has long insisted on self-operated stores, also opened franchises in the early days of his business. According to Zhou Fuyu, the founder of Zhou Hei Ya, he opened 11 stores in one go, and quickly earned more than 200,000 yuan. Control”, until 2019, it was not allowed to join again, but the products sold were mainly packaging.
Juewei attaches great importance to selling in bulk, which can attract price-sensitive consumers and give franchisees operational space. In Juewei’s franchise model, Juewei is responsible for producing the lo-mei and delivering it to the store, and the franchisee sells the goods by themselves and is responsible for their own profits and losses. Then Juewei relies on a series of standardized measures and supervision measures to reduce the risk of joining.
A fundamental principle is that when the brand’s own factory maximizes quality and price, small shop owners will not look for cheaper products. When the food is generally sold within the shelf life, the store owner will not sell expired food.
Greater risks come from the industry as a whole. Big brands can control the risk of franchisees as much as possible, but it is difficult to control the risk of other players in the industry. For example, this year’s CCTV 3.15 party revealed that some companies were unsanitary in the production of sauerkraut, which had a huge impact on the entire sauerkraut processing industry and downstream instant noodle companies, and Master Kong’s share price fell by more than 10%. And once there is negative news about Luwei, Juewei, as the largest company, will also suffer.
When Juewei was launched in 2017, the food safety of smaller-scale braised product workshops was listed as an important risk factor. In order to better expand and reduce uncertain risks, Juewei intends to take the lead in establishing the standard for Lo-mei bulk food through the establishment of the Academician Workstation.
larger scale
Need for more extreme standardization
Lo-mei food is a rare large-scale category in Chinese food. Since the 1990s, many companies with more than 1,000 stores have been born. Of course, there are personal factors of the founder, but more importantly, it is driven by the times.
From 2000 to 2021, the per capita disposable income of Chinese urban residents has increased by nearly seven times, and the consumption of optional food such as lo-mei has become popular, and the market space has become larger.
In addition to the perfect construction of China’s cold chain logistics system, from 2011 to 2019, the number of road cold chain transport vehicles in China increased nearly 6 times to 215,000.
The market space is larger and the infrastructure is constantly improving. Juewei Duck Neck, Zhou Hei Duck, Ziyan Baiwei Chicken, etc. have become larger, and the lo-mei has changed from manual production to mechanized mass production. In a less standardized industry, thousands of Ten thousand stores have turned small workshops into listed companies with billions of dollars in revenue.
The degree of concentration of the whole lo-mei industry is not high. According to Frost & Sullivan’s survey data, the share of the top three in the industry last year added up to 17%, and the largest, Juewei, accounted for 9%. More are individual stores. Juewei believes that there is still room for growth. Coupled with the impact of the epidemic, the accelerated integration of catering companies and the price reduction of commercial real estate are opportunities for expansion.
After the expansion, consumers are shown new stores one by one, but after each store, there are changes in the entire system from raw materials to production to preservation and transportation. According to Juewei’s shareholders meeting, the production capacity utilization rate of Juewei’s production bases exceeded 90%, and even reached 100% in some time periods.
A previous research report by Tianfeng Securities estimated that Juewei could open up to 38,000 stores in China based on the market space in China—another 25,000 stores. At present, there is only one single brand with more than 38,000 stores in the world, McDonald’s. If Juewei is to open up to this number and operate effectively, it will depend on whether the standardization of lo-mei can really go further.
This article is reprinted from: https://www.latepost.com/news/dj_detail?id=1153
This site is for inclusion only, and the copyright belongs to the original author.