Good News on Listing | Frost & Sullivan Assists Shenzhen Baiguoyuan Industrial (Group) Co., Ltd. to Successfully List on the Hong Kong Stock Exchange (2411.HK)

Shenzhen Baihuogarden Industrial (Group) Co., Ltd. (hereinafter referred to as 'Baihuogarden') successfully went public on January 16, 2023. The company issued approximately 78.9475 million shares globally at an issue price of HK$5.6 per share, raising a net amount of about HK$36.6 million.

During the process of listing in Hong Kong this time, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support and highlight the issuer's competitive advantages, assisting the issuer, investment banks and other intermediaries in completing the writing of relevant parts of the prospectus (such as overview, competitive advantages and strategy, industry overview, business and other important chapters), helping the issuer complete communication with the Hong Kong Stock Exchange and investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and assisting the issuer in completing feedback on various industry-related issues from the Hong Kong Stock Exchange, etc.

The company is a leading fruit retail enterprise;

The company owns multiple well-known fruit category brands and channel brands in China;

The company owns the largest fruit specialty retail network in China, integrating offline and online services with community proximity;

The company has achieved industry-leading high turnover and low losses by implementing specialized, standardized quality management across the entire industrial chain;

The company has a visionary and experienced management team as well as a strong corporate culture.

According to the Frost & Sullivan report, in terms of fruit retail sales in 2021, the company:

Ranked first among Chinese fruit retail enterprises;

Possesses China's largest offline retail network;

The retail sales of stores (i.e., the sales amount after discounts) achieved a compound average annual growth rate of 7.1% from 2019 to 2021, which is higher than the 1.2% growth rate of retail sales in China's fruit retail industry during the same period.

With the improvement and widespread coverage of cold chain logistics infrastructure, the diversification of distribution methods, and the impact of the COVID-19 pandemic on consumption habits since 2020, China's online penetration rate for fresh produce has rapidly increased, leading to a rapid growth in market scale. In the future, as more consumers gradually develop the habit of shopping online for fresh produce and the fresh retail market places increasing emphasis on online channels, the online penetration rate for fresh produce will continue to rise. It is estimated that by 2026, the online penetration rate for fresh retail will reach 22.4%, with online retail sales of fresh food reaching RMB1,896.8 billion, a compound annual growth rate of 21.1%.

With the increase in per capita consumption expenditure and the upgrading of dietary consumption, consumers' demand for high-quality fruits is growing day by day. The enhancement of health awareness has also made people pay more attention to food safety and origin, willing to pay a high premium for delicious and high-quality fruits. At the same time, thanks to the development of the supply chain and the upgrade of cold-chain warehousing logistics technology, distribution timeliness has improved, fruit loss rates have decreased, and consumers can enjoy fresh and high-quality fruits in a timely manner. In addition, with the rapid development of the Internet and e-commerce, the fruit retail business model is becoming more diversified, providing consumers with a more convenient shopping experience and more choices.

According to the Frost & Sullivan report, in terms of retail sales, the market size of China's fruit retail market has increased from RMB 827.3 billion in 2016 to RMB 1,229 billion in 2021, with a compound annual growth rate of about 8.2%. Compared with other fresh foods, fruit sales offer relatively higher profits because they include multiple selling points and enable differentiated marketing. Therefore, the future fruit retail market is expected to witness more varieties of fruits and a better shopping experience, with further growth potential in China's fruit retail market. According to the Frost & Sullivan report, in terms of retail sales, the market size of China's fruit retail market is expected to further increase to RMB 1.7752 trillion by 2026, with an expected compound annual growth rate from 2021 to 2026 of 7.6%.

The fruit retail industry in China is highly fragmented, with fierce competition among existing market participants. According to a Frost & Sullivan report, in 2021, by fruit retail sales volume, the Bao Guoyuan Group was the largest company in the fruit retail industry, accounting for 1.0% of the market share, while the top five participants combined accounted for 3.6% of the market share.

The following table lists the top five retail enterprises in China by fruit retail sales volume for 2021, along with their market share and number of stores as of December 31, 2021.

The following table lists the top five fruit specialty stores in China by retail sales of fruits at stores as of December 31, 2021, along with their respective market share and number of stores as of that date.

• The upgrade in dietary consumption and consumers' heightened awareness of health have driven an increase in fruit consumption.

With the upgrading of dietary consumption and the acceleration of life pace, Chinese people are paying increasing attention to health. The enhanced awareness of consumers about health has driven the consumption of fruits. At the same time, with the growth of China's economy driving continuous increases in per capita disposable income, after meeting basic personal needs, consumers' focus has shifted from 'eating enough' to 'eating well' and 'eating healthily'. Consumers' attention to food safety and sources has increased, and they are willing to pay a premium for high-quality fruit products. In particular, with the deepening of urbanization, the consumption upgrading speed and purchasing power of residents in third-tier and lower-tier cities in China have entered a fast lane.

• Rapid development of the supply chain and improvement in cold-chain and constant-temperature warehousing logistics technology

With the continuous application of cutting-edge technologies such as the Internet of Things, blockchain, radio frequency identification (RFID), and intelligent temperature control in cold chain logistics, real-time monitoring methods such as cold chain traceability and full-process surveillance will gradually be implemented in the logistics sector, effectively ensuring fruit quality control and reducing losses. The development of the supply chain and the improvement of cold chain warehousing logistics technology will successfully achieve quality assurance of fresh products from farmland to dining tables, thereby driving the rapid development of the fresh food industry.

• Strong support from national policies for the fruit industry

In recent years, the state has introduced a series of policies to strongly support the development of the fruit industry, covering multiple aspects such as planting, logistics, and sales. These policies emphasize the importance of agricultural quality and safety to national life, encouraging the transformation and upgrading of agricultural products, standardization of logistics and warehousing, and new retail of agricultural products.

Frost & Sullivan has extensive research experience in the food industry, assisting well-known enterprises in successfully listing on capital markets. Recent successful listings include: Zhengwei (2147.HK), Weilong (9985.HK), Shuangcai Zhuang (2321.HK), Youran Muying (9858.HK), Jiulongwang (1927.HK), Yumart (9987.HK), Nongfu Spring (9633.HK), Fengxiang Food (9977.HK), Simore (6969.HK), China Feihe (6186.HK), China National Tobacco International (6055.HK), Youpin 360 (2360.HK), Wugu Mofang (1837.HK), Babys Tree (1761.HK), Haidilao (6862.HK), Perennial Agriculture (8609.HK), Longhui Holdings (1007.HK), Xinyong International (1587.HK), Yiyuan Liquor (8146.HK), Jierong International (2119.HK), Bingshi International (1705.HK), Sainsbury's Food (1475.HK), Asia Grocery (8413.HK), Chowking Duck (1458.HK), COFCO Meat (1610.HK), Yihai International (1579.HK), Zhongdi Dairy (1492.HK), Dali Foods (3799.HK), Manor Ranch (1533.HK), Vientiane International (0288.HK), etc.