In the past month, Michelle Ice City has been constantly sending out heavy news, first in early October, a number of media reported that Michelle Ice City intends to list in A-shares and is receiving guidance on the listing of GF Securities; then a few days ago, according to the Economic Observer, as of October 1, 2021, The Mixher Ice City stores exceeded 20,000.
It can be seen that Mi Xue Ice City is "running wild" on the road of embracing capital.
3 yuan ice cream, 4 yuan lemon tea, plus a brainwashing divine song, is indeed enough for consumers to remember this "grounded" tea brand. But is the soon-to-be-listed Michelle Ice City really as sweet as its theme song?
Perhaps by interpreting the logic of making money in Mi xue ice city, it is not difficult to find the other side of the "heavy" behind it.
Infographic According to IC photo
(i)
The logic of making money in Michelle Ice City
(1) Development path
In 1997, Zhang Hongchao, the founder of Mixue Ice City, took 3,000 yuan and rented a storefront of two or three square meters in Zhengzhou and began to do shaved ice business. When SARS struck in 2003, Michelle Ice City was forced to be converted into a restaurant.
In 2006, Zhang Hongchao found that an ice cream with a price of 20 yuan appeared in Zhengzhou, which was sought after by many consumers. After buying raw materials and making it himself, he found that the taste was comparable to the ice cream in the mall, so he sold the ice cream and priced it at 2 yuan.
In 2007, Michelle Ice City Fresh Ice Cream officially joined the outside world, and 36 franchise stores were developed at the end of the year. In this way, Michelle Ice City gradually developed and grew by selling affordable ice cream, and in 2008, it joined more than 180 stores.
Source: Honey Snow Ice City official website
It is worth mentioning that at that time, the founder Zhang Hongchao did not think of taking the high-end route and making more profits by increasing the unit price of customers.
In 2009, Zhang Hongchao opened a high-end version of the store in Zhengzhou, using Kangpak milk pulp and launching "high-end ice cream", but this high-end store was only short-lived, and it "closed its doors" after two years of operation.
The first attempt at high-end stores failed miserably, which may also strengthen the product positioning of Michelle Ice City in the years after - parity, stable small profits and high sales strategies.
Therefore, around the small-town youth and college students in the third-tier cities and below, Michelle Ice City began to accelerate its own pace of expansion.
At the end of 2018, the number of Michelle Ice City stores reached 5,000; at the end of 2019, the number of Honey Snow Ice City stores exceeded 7,000. In January 2020, Michelle Ice City completed the first round of financing of 2 billion yuan, with a valuation of about 20 billion yuan after the completion of the financing; at the end of the same year, the number of Michelle Ice City stores has exceeded 13,000.
(2) Open source: Crazy store expansion
The expansion speed of Michelle Ice City is so fast, thanks to the franchise model of Michelle Ice City.
Different from the general tea beverage franchise model, Michelle Ice City does not participate in the franchisee's profit sharing, and its income mainly comes from collecting franchise fees, management fees and other store operating fees from franchisees, as well as the later increase in the price of supply chain products.
That is to say, as long as enough franchisees join, Michelle Ice City can get more store operating fees and raw material markup income from franchisees.
According to the data of the official website of Mi xue ice city, the franchisee of mi xue ice city invested about 350,000-400,000 yuan in a single store in the early stage. Among them, the franchise fee is 21,000 to 33,000 yuan (the franchise fee for provincial capitals, prefecture-level cities and county-level cities is 11,000 yuan, 0.9 million yuan, and 0.7 million yuan / year, respectively, a one-time payment of three years), a performance bond of 10,000 yuan (if the contract is not renewed after the expiration of the three-year contract and no breach of contract will be refunded), the daily management and operation and consulting service fees total 0.68 million yuan / year, the equipment cost is about 80,000 yuan, the operating raw material cost is 60,000 yuan, the store decoration cost is 80,000 yuan, and the rent and other expenses are 100,000 yuan.
It is worth mentioning that in order to rapidly expand the number of stores, in the early stage of development, Michelle Ice City also adopted the new model of "free loan" to expand the number of franchisees, and took out tens of millions of yuan of funds every year to lend interest-free loans to franchisees to solve the financial problems encountered by partners when opening new stores.
According to public data, the revenue of Michelle Ice City in 2020 will reach 6.5 billion yuan, and the net profit will be about 800 million yuan.
In 2020, the number of new stores opened in Michelle Ice City is about 5,000, according to the sum of the three fees paid by each merchant (franchise fee, management fee and consulting fee) is 15,000 yuan, and the income of the enterprise from the franchised store will not exceed 100 million yuan, and it is clear that the company's money is mainly from raw material markups.
(3) Throttling: cost control
Perhaps you will be curious, Michelle Ice City is notoriously cheap, the per capita customer unit price is only 8 yuan standard, how do companies make so much money on raw materials?
The answer lies in "provinces".
First of all, Michelle Ice City has built a relatively complete set of supply chain closed loops, including the "research and development - procurement - production - warehousing and logistics - operation management" of raw materials. This is also the core advantage of Michelle Ice City in cost control.
In 2012, Michelle Ice City established an exclusive R&D center and established Henan Dajia Food Co., Ltd., which currently has 5 automated production workshops with a total area of more than 50,000 m², realizing the self-production of core raw materials.
In terms of self-built warehousing and logistics, at present, the general warehouse of Michelle Ice City is set up in Henan, and four major sub-warehouses are set up in the southeast, southwest and northwest regions, forming a "1+4" warehousing network that radiates the whole country, providing free daily delivery for franchise stores, and effectively controlling the transportation timeliness and costs.
Secondly, in addition to the efficient operation of the supply chain system, in the choice of raw materials, Michelle Ice City is also able to save the province. Honey Snow Ice City mainly hit ice cream, milk tea (powder blending), its raw material cost is relatively low, in the fruit tea to choose lemon and other long shelf life, low price of fresh fruits, at the same time through large-scale raw material procurement, improve the company's raw material bargaining power.
In addition, from the number of SKUs (product types) in the Meixue Bingcheng store, there are only 30 to 40, which is lower than high-end tea brands such as Heytea and Naixue's tea. In terms of the speed of new product launch, Michelle Ice City only has 1-2 new products per quarter, mainly lemon tea in summer and milk tea in winter, which improves the level of product standardization by reducing the difficulty of production and improving the level of product standardization, thereby improving the cup yield.
It can be said that the money earned by Mi Xue Ice City is "provincial", through the layer control of raw materials, with the increase of the number of stores, Mi Xue Ice City gradually forms a scale effect, and ultimately maximizes benefits.
(ii)
The heaviness behind the sweetness
The success of Michelle Ice City can be summarized as accurate product positioning, reasonable profit distribution with franchisees, grounded marketing promotion and the construction of a supply chain moat.
The "success" of The Ice City sinks, but gradually, the company is also trapped in the sinking.
(1) The ceiling of the low-end market is about to be touched
At present, the number of Michelle Ice City stores has exceeded the 20,000 mark, and the speed of store expansion in the past two years has been extremely rapid.
Source: Public data collation
However, opening a new store is not an easy task, you need to consider the location of the store, you must choose the location of the large flow of people, but also need to consider whether there is competition with the brand store, store rent and other factors.
According to the data of narrow door restaurants, the current stores of Michelle Bingcheng have covered 31 provincial-level administrative regions and 349 cities across the country, basically covering most of China; nearly 60% of them are opened in third-tier cities and below.
Source: Narrow Door Dining Eye
At present, the number of stores in Michelle Ice City has exceeded 20,000, if it continues to expand, it will lead to intensified competition between stores, dilution of customer flow, aggravating the "inner volume" between stores, resulting in a decline in single store revenue.
In other words, the coverage rate of Michelle Ice City stores will soon become saturated, and there will be fewer and fewer places that meet the requirements for opening stores, and the scale of Honey Snow Ice City may touch the ceiling.
(2) The high-end market has been repeatedly frustrated
Keeping the sinking route, for Honey Snow Ice City, not only is it making "hard money", but it is also about to touch the ceiling.
As a result, in recent years, companies have also tried again to take the high-end route and expand new user groups. However, like the high-end ice cream store in 2009, Michelle Ice City has been repeatedly frustrated on the high-end route, and it has been "unsatisfactory" time and time again.
In 2018, Michelle Ice City launched a high-end sub-brand "M+", but the market response was flat.
In the expansion into the coffee field, Michelle Ice City also seems to have encountered many obstacles.
The "Lucky Coffee" founded by Michelle Ice City in 2017 was also a high-end route in the early days, but in the following years, Lucky Coffee only achieved more than 20 stores, and its popularity has not been opened, all the way to the fold. It was not until 2019, when Lucky Coffee launched the brand upgrade and opened to join in April 2020, that the coffee brand gradually became known.
"Lucky Coffee" stores
In the "Open Letter to All Lucky Coffee Partners" released by "Lucky Coffee" in 2020, Zhang Hongfu, director and general manager of Michelle Ice City, said that it is necessary to make affordable coffee in the county town or even town, and copy a "Honey Snow Ice City" within 5 years.
However, at present, the number of lucky coffee stores is only 215, and most of the stores are concentrated in Henan Province, the base camp of Mi xue ice city, which is still far from the whole country.
Michelle Ice City has been going around in the high-end market, but it has never worked. For Michelle Ice City, through the price advantage, it can quickly attack the city in the sinking market, but take the high-end route and develop in the second-tier cities, the user brand awareness is stronger, and the operating cost of the enterprise is also higher.
(3) Food safety problems have become the biggest hidden danger
For enterprises that take the franchise route, the influx of franchisees will increase the uncertainty of enterprises, which mainly comes from uncertain quality control and service quality. Among them, because of food safety problems caused by quality control, the blow to enterprises is often the most fatal.
This year, Michelle Ice City has also attracted controversy over food safety issues.
In May this year, some of Michelle Ice City's stores were exposed to tampering with the date labels of unopened ingredients, arbitrarily changing or not recording the deadline for the preparation of the "validity tracking card" of ingredients, and illegally using overnight ice cream milk.
In August and September this year, Mi xue bingcheng was successively exposed by the Fuzhou Municipal Market Supervision and Administration Bureau and the Beijing Haidian District Market Supervision and Administration Bureau to the food safety problems in random sampling, including the existence of moldy lemons in the store, the preparation of syrup, and the food operating conditions did not meet the food safety requirements.
As of October 22, 2021, Michelle Ice City has complained about more than 1,500 related complaints on the black cat complaint platform, of which food safety related issues are high-frequency words that trigger user complaints.
Source: Black Cat Complaint
For the upcoming listing of Michelle Ice City, the frequent occurrence of food safety incidents will gradually lose consumer trust, or it may hit investor confidence. Food safety issues are obviously a big challenge for Michelle Ice City.
(iii)
What should the snow king do next?
How should Mi Xue Ice City enhance corporate value after listing?
In fact, this year, in order to meet the listing, The company has also been seeking "change".
At the end of July, Michelle Ice City established Dajia International Enterprise Management Co., Ltd. in Hainan, Chongqing Xuewang Agricultural Co., Ltd. at the end of August, and Xuewang Investment Co., Ltd. in September.
On the same day that Michelle Ice City announced its sprint IPO, the first "Snow King Castle Experience Store" appeared in Zhengzhou, which not only launched new drinks, but also included fried skewers, coconut milk braised noodles, DIY cakes, coffee, roasting and other new categories.
But at present, the future of Michelle Ice City may not be clear. The image of its own brand has been deeply rooted in the minds of users, and it is difficult to upgrade the brand level on the basis of the original; try to lay out the high-end market ranks with independent brands, but in the past it has repeatedly encountered a wall, and the road ahead is still bumpy; try to take the road of internationalization and continue to expand abroad, but the current foreign epidemic has not been effectively controlled, and it remains to be seen to go international.
For tea companies, due to the low industry threshold, fierce market competition, and new consumer groups are also happy to taste early, the market may not give Mi Xue Ice City too much time.
Red Star News reporter Yu Yao Liu Mi
Responsible editor Ren Zhijiang Editor Yu Dongmei
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