On the 13th, Joyvio Group, an investment platform for agricultural produces under Legend Group Holdings, held a press conference in Beijing and announced its strategic investment in Nine Masters. After this announcement, Joyvio will hold 68% of Nine Masters’ shares.
At the same time, Wang Zongxiang, Investment Director of Joyvio, will serve as an executive director of Nine Masters to assist Nine Masters in its cross-regional expansion of M&As and integration of resources. According to Yao Weida, President of catering of Nine Masters, the company's main business covers group meals and fresh semi-processed products including the central kitchen. ‘Our sales revenue was RMB 5 billion last year.’
As constrained by NDA, Chen Shaopeng, Chairman of Joyvio, did not disclose any specific figure regarding the size of investment or Nine Masters’ profit. ‘What can be disclosed is that it is several hundred million yuan of investment, accounting for 68% of the shares. There doesn’t exist any gambling’ he said. "Legend's strategic investment is always based on a win-win model.’
Joyvio Group, which was established in 2012, has become an important part of Legend's two-wheel-drive strategy, serving as an investment platform for its modern agricultural and food business. After taking stake in Nine Masters, its business portfolio has formed a comprehensive food company that covers beverage, fruit, animal protein, packaged food, and integrated food supply chains.
Nine Masters was established in 2008 and has been engaged in the group meal business in East China. After becoming qualified for pre-packaged frozen foods in Shanghai last year, it started working on fresh semi-processed food. Just before Joyvio’s announced, Nine Masters increased its investment by more than RMB1.31 million in August this year, making its total capital to RMB34.82 million.
It is worth mentioning that the fresh semi-processed food industry that Joyvio Group chose to enter this time is recognized as the ‘next eye of storm’ in the F&B industry in recent years. However, from the current situation, most companies are still observing or investing, thus, a truly mature business model does not exist yet in China.
Financing + brand endorsement
For Nine Masters, the most important task at present is to expand the company's business scale in North China and South China and copy the mature business model and management framework accumulated in East China to the above two regions.
Li Ruijun, Vice President of Nine Masters, told the 21st Century Business Herald reporter that the company has carried out many activities in the fresh semi-processed food industry. It has accumulated market and channel resources in East China as well as management experience. This year, the time for expansion has come.
In recent years, the Government’s regulatory policies on food safety have become more stringent, and the new construction of the central kitchen requires more complicated processes and technological preparation. ‘Completing the construction and obtaining relevant qualifications may take two years. As a comparison, acquisitions is much faster.’ Yao Weida said.
Li Ruiji told the reporter that the company is currently negotiating to acquire a central kitchen in the Beijing. The investment scale may reach tens of millions of RMB and it is expected to enter the central kitchen industry in Beijing before next year. ‘It can be a fully-financed offer, or strategic cooperation, but no matter what, Nine Masters must get majority ownership,’ he said.
During the expansion phase, Nine Masters received several hundred million of investment from Joyvio. It not only got capital ‘ammo’ but also Legend’s brand endorsement. No matter what perspective it is from, this investment will definitely help the company to gain market opportunities better in the competition.
In addition, in recent years, Joyvio has adopted a vertical growth strategy and acquired a number of companies in the upstream and downstream. At the same time, it has also made arrangements in the overseas markets on high-quality protein food. By integrating domestic cooking and foreign resources, it can enable Nine Masters to widen the gap with competitors on products.
‘One of our hands is connected to users’ needs, which will be satisfied through the Internet and new retail; the other hand of ours is holding a full vertically-covered ingredient supply that Joyvio has deployed, which will be combined into an optimal solution for the user. This is an important opportunity for us to realize win-win.’ Yao Weida said.
Horizontal integration & acquisition
The strategic investment in Nine Masters is one of the few horizontal integrations of Joyvio. Chen Shaopeng said that in each segment, Joyvio has a flagship enterprise that conducts horizontal integration so as to consolidate into a leader in China.
Since its establishment, Joyvio has begun to capitalize on its advantages through M&As and integrations. It has acquired several companies in the field of animal protein, fruit, and F&B; and being backed Legend, it successfully acquired Wanfu Biotechnology last year (300,268.SZ) successfully entered China’s capital market.
In Chen Shaopeng’s view, continuous vertical acquisitions have accumulated many advantages for the company in the food supply chain. What the investment in Nine Masters brings to the company is a judgment for the future, understanding consumption trends, and customer profiling. These advantages are not something that one single food company (such as fruits and vegetables, seafood) can have.
It is noteworthy that in recent years in the financial report, agriculture has contributed more and more to Legend's revenue and net profit. Liu Chuanzhi also told the reporter that he hopes to nurture agriculture into one of the next pillar industries of Legend.
Driven by this vision, Chen Shaopeng admits that in recent years the company has carried out a lot of pioneering work overseas and communicated with European and American leading companies of different products including seafood, beef, and pork. However, because the target companies are too big and the time is not ripe, no final acquisition agreement is reached yet.
‘These European and American companies want to enter the Chinese market very much, too. They are eager to know consumers’ demand and the supply chain directly, for example. Nine Masters can provide this information and cooperate with these food companies.’ He said.
Industrial standard blank
For many enterprises that are determined to enter the fresh semi-processed food industry, the blank of industrial standards is a major issue as well as a great opportunity.
‘At present, China's catering industry is facing high rents, rising labor costs, and rising prices of food ingredients and energy. Chain restaurants need semi-processed products that are quantified, standardized, safe, nutritious and healthy to help them solve this problem.’ Yao Weida told the reporter.
In terms of the competition for standard-setting, not only Nine Masters but also many other companies are aiming at the central kitchen and fresh semi-processed food industry, hoping to formulate industry-wide standards the first. China has a vast area and complex cuisine systems. There are huge differences in terms of tastes and ingredients for consumers in different regions. The formulation of standards is not an easy task.
At the same time, although this industry is not a new type, different regions have different stages of development, which means that the Government's attitude and policy towards the industry will also be different. Taking the Shanghai area as an example. If you want to do fresh semi-processed food manufacturing business, you must have a ‘pre-packaged cold-food qualification.’ While in other areas, the requirements from local governments will be not be the same. Therefore, it is difficult for an enterprise to realize ‘one pass for the whole country.’
It is foreseeable that in the future, this industry will attract more attention and funds. How to get rid of the constraints such as lacking industrial standards and realize healthy business growth will be a challenge in front of all companies.