Cheung Kong Graduate School of Business2024-01-30
One end is connected to the field, and the other end is directly to the consumer's table, and the prefabricated food, which spans and integrates the track of primary, secondary and tertiary industries, has continuously obtained favorable policies in recent years, and a trillion-level "blue ocean" is being born.
Under the policy dividend, more and more enterprises are vying to enter the game. In the constantly reshaping industrial chain, resource-based players seek to turn around agilely, catering players look for marketing scenarios, and channel-based players explore the balance between supply and demand. Behind the seemingly simple food of pre-made dishes, there is a complex production process and business strategy.
Professor Shi Weilei and Teng Binsheng of Cheung Kong Graduate School of Business, and researcher Cao Xinbei deeply dismantled the prefabricated food industry in their latest article, revealing the traps and ceilings of the industry, and also put forward three suggestions on how enterprises can become prefabricated food unicorns. For every entrepreneur who lays out the prefabricated food industry, today's article is worth reading.
Author |Shi Weilei, Teng Binsheng, Cao Xinbei.
* |The Economic Observer.
In 2023, the "Opinions of the Communist Party of China on Comprehensively Promoting the Key Work of Rural Revitalization in 2023" was released, and the first document proposed "cultivating and developing the prefabricated vegetable industry", which was the first time that prefabricated dishes were written into the first document. As an inevitable product of urbanization and food industrialization, prefabricated dishes cater to the fast-paced production mode of contemporary people, and have become an important development direction for simplifying kitchen processes and upgrading efficiency.
Standing outside the besieged city and looking at the prefabricated dishes, the limelight is in full swing. But under the siege, the players in the game know that they have their own opportunities and challenges.
Pre-made dishes are in the ascendant.
Prefabricated dishes are usually made of agricultural, livestock, poultry and aquatic products as raw materials, with various auxiliary materials, through multiple pre-processing procedures (screening, washing and cutting, pickling, stirring, tumbling, seasoning, molding), and through the preservation of rapid freezing technology and cold chain transportation to ensure the freshness of the product to the greatest extent.
According to the depth of processing of raw materials and the convenience of eating, the current market is usually divided into four categories of prefabricated dishes: ready-to-eat food (RTE, ready to eat, such as eight-treasure porridge, pickled pepper and phoenix feet, hamburger, etc.), RTH, ready to heat (such as frozen dishes, canned soups, instant noodles, etc.), ready-to-cook food (RTC, ready to cook, such as refrigerated steak, Kung Pao chicken and other conditioning packages), ready-to-serve food (prefabricated clean vegetables, RTP, ready to prepare）。
Compared with other countries, China's pre-made food emerged relatively late. In the early 90s of last century, McDonald's, KFC and other international catering giants poured in, and China only entered the early embryonic period of prefabricated dishes. After 2010, with the acceleration of the restaurant chain process and the explosive growth of takeaway, the development of prefabricated dishes began to accelerate.
Although since 2020, the lazy economy has made prefabricated dishes more widely concerned on the C-side (user-oriented); But until now, the main consumption of prefabricated dishes is actually still on the B-end (for enterprises).
According to the "2023 China Prefabricated Food Digital Consumption Report" released by the Ele.me New Service Research Center, the B-end market of prefabricated dishes accounts for 80%, mainly including restaurant chain stores (700 billion yuan), takeaway (1 trillion yuan), group meals involving tourism catering and canteens of various institutions (15 trillion yuan), as well as village kitchens involving rural red and white ceremonies.
At present, China's prefabricated food is in a period of rapid development.
The reason why prefabricated dishes rise on the B-end is more due to the cost of reversal. The core appeal of the use of prefabricated dishes in B-end catering is to reduce the kitchen area and labor costs as much as possible, reduce costs and increase efficiency, especially at the moment when the restaurant chain rate, takeaway penetration rate, rent and labor costs continue to increase, the introduction of prefabricated dishes has become one of the important measures to improve the resilience of B-end catering.
In terms of kitchen area, every F&B outlet is faced with the problem of waste of space from "pre-processing" (washing, cutting and pickling). In particular, washing and cutting vegetables does not have any technical content, but it is a necessary start-up step for every dish. With the continuous increase in site rent, the ping effect is becoming more and more important. If a hotel is located in a core area, instead of using the limited space for washing and cutting vegetables, the operator can save the pre-processing process by introducing "ready-to-match" pre-made dishes, and change the original space used for the kitchen to place the table, so as to accommodate more customers.
In terms of labor costs, F&B outlets face two challenges:
First, after undertaking group meals, it will lead to a temporary increase in demand for meals. If you recruit people on a temporary basis every time, the business will be full of uncertainty; The long-term reserve of a large kitchen team will encounter the problem of redundant personnel.
Another challenge is that F&B outlets have to pay the high wage costs of some special occupations. In an interview with the interviewee about pre-made dishes, he said, "In 2002, the annual income of the head chef of a restaurant with a monthly turnover of 1 million yuan reached 1 million yuan, which even exceeded the level of many (enterprise) executives at that time." "Excellent chefs are very scarce, and a chef who can support a monthly income of 1 million must not only cook well, but also continue to innovate in combination with customer needs.
In addition, it is difficult to manage the group of chefs, and it is easy to be poached, or go out to work alone or even run away after a while. More importantly, for chain restaurants, what is needed is not a few good chefs, but each with good chefs, so as to ensure the stability of the taste of chain restaurants.
In addition to excellent chefs, there is also a special position in the catering industry - the person in charge of soaking the bird's nest and abalone wings. Some practitioners liken these positions to "scientists in the restaurant industry" because they specialize in how to use water and additives to make dried goods such as abalone bigger, better looking and rounder. The whole process is comparable to a "black box", outsiders do not know the doorway, and extremely high technical barriers create the scarcity of talents, which also leads to high labor costs.
Therefore, for restaurants, over-reliance on labor not only leads to high labor costs, but also still cannot resist the risk of job hopping, which is far less stable and cost-effective than industrialization, and can effectively improve the food delivery rate and turnover rate, and improve the cost structure of restaurants.
The Anxin** report also shows: "Although the use of prefabricated dishes will increase the proportion of food cost from 33% to 38%, the greatly reduced labor cost and rent cost are enough to cover the cost of ingredients**, and the profit margin of takeaway stores will increase from 4."5% to 65%。”
Due to the pain points of labor and site development, China's B-end prefabricated dishes show the characteristics of extending from "both ends to the middle".
There are two types of merchants who used prefabricated dishes in China at the earliest, one is high-end merchants, mainly buying products such as bird's nest, abalone, shark fin, Buddha jumping over the wall, etc., and merchants reduce high labor costs and instability factors by introducing prefabricated dishes processed by industrial soaking. The other type is fast food chain merchants, Yonghe Dawang and Zhen Kung Fu are the early merchants who used pre-made dishes. On the premise of reducing costs and increasing efficiency, merchants can ensure that consumers can taste the same taste and stable quality products when they step into any store.
Therefore, according to this logic, medium and large chain restaurants and occasions that need to solve the problem of large quantities, such as the hotel's wedding banquet and the hotel's buffet breakfast, will be highly adapted to the scene of prefabricated dishes.
However, for non-chain restaurants, no matter how high or low the positioning is, the development stage determines that it is more about the pursuit of uniqueness and innovation. Smaller restaurants will find pre-made dishes too expensive. A practitioner said in the survey that they had promoted braised eggs to different B-ends, and the ** of prefabricated braised eggs was 1 yuan, with stable quality and deliciousness, and large chain stores were very welcome. But in small restaurants can not be promoted at all, the latter thinks that 1 yuan is too expensive, it is better to use their own rice cooker, the cost is only 0$5.
Players and the status quo of pre-made dishes.
From the perspective of industry ecology, the players of prefabricated dishes are mainly divided into three categories: resource-based, catering-based, and channel-based.
1. Resource-based: Let the elephants dance.
Participants in the resource-based prefabricated vegetable industry are in the upstream of the industrial chain, and most of them are first-class suppliers of raw materials such as chickens, cattle, sheep, pigs, and meat, and typical representatives include Wen's, Sunner, Zhengda, Guolian Aquatic Products, Zhangzidao and other enterprises. Resource-based enterprises have a cost advantage that is difficult to replicate - they can obtain high-quality prefabricated raw materials at a very low price.
At this stage, the fastest way to reduce costs in the prefabricated food industry is to work hard from raw materials. This has even led to the phenomenon of "bad money driving out good money", such as continuously reducing the proportion of "solid matter" in prefabricated dishes, or adding "black technology and hard work" to achieve the purpose of controlling costs and seizing the market with lower **.
However, the resource endowment enterprises are different. When participating in the prepared food business, they only need to allocate a small percentage of raw material resources to enter the game. Resource endowment enterprises need to consider agile transformation. Due to long-term contact with B-end customers, such companies often have a better understanding of the needs of B-end restaurants, but they are relatively vague about the way to meet the tastes of the C-end market.
What such companies need to be strategic agile to enter the prefabricated food market is to promote it to the market after conducting internal taste tests; Instead, it is necessary to consider the diversified needs of the market, continuously iterate and adjust on the basis of combining its own categories, and prepare different derivative flavors.
In addition, large enterprises may also have the problem of "not looking down on small orders". Some C-end test small orders need to spend a lot of effort to adjust, but they can only contribute a relatively small amount of revenue, which often lacks motivation for large enterprises that already have stable revenue and profits to promote and implement. Once a resource-based company can achieve the ultimate in the resources it has, find suitable products for every chicken, every cow, and every fish for every meat, and open up the whole industrial chain from raw meat to prefabricated dishes, the dancing elephant will become an insurmountable mountain in the prefabricated food industry.
2. Food and beverage type: look for marketing scenarios.
In the prepared food industry, the second type of players belong to the catering type, with a customer base accumulated over many years of operation, a high level of understanding of market tastes, they are familiar with the process of turning fresh food into mature food, and they can also test new products in stores on the fly. Such players include Quanjude, Tongqinglou, Guangzhou Restaurant, etc.
Affected by the epidemic, many catering companies have supplemented their revenue and alleviated business pressure by selling pre-made dishes to consumers. Many consumers also developed the habit of buying pre-made dishes from restaurants during that period, and achieved a certain degree of market education. However, it is worth noting that the private domain of the catering brand is not the same as the private domain of the prefabricated dishes of the catering brand.
But according to one interviewee, private domain is sometimes a false proposition, and although people sign up for membership in many places, it does not mean that everyone is a loyal fan. When people dine in a restaurant, they not only consider the food, but also factors such as the environment, location, and even the waiting time in line. And these factors do not apply to prefabricated dishes, which means that merchants should choose the appropriate positioning and marketing strategy when promoting prefabricated dishes.
Another characteristic of F&B businesses is that in-store consumption is the closest moment to customers, but it is not the right time to promote pre-made dishes. Consumers' feelings about the use of pre-made dishes in restaurants are mixed.
A micro-survey released by the Jiangsu Provincial Consumer Protection Commission showed: 628% of consumers have encountered the use of pre-made dishes in restaurants and restaurants in the process of dining out;53.2% of consumers oppose the use of pre-made dishes in hotels and restaurants, saying that they want to eat fresh dishes when they go to restaurants. 65.6% of consumers believe that hotels and restaurants should inform in advance about the use of pre-made dishes. 78.1% of consumers reported that offline hotels and restaurants did not inform in advance about the use of pre-made dishes.
For catering businesses, compared with customers who convert to offline stores, the target customers of pre-made dishes should be aimed at a wider range, including customers who are geographically restricted and inconvenient to go to the store at any time, but have a certain degree of recognition of the brand.
For offline stores, due to its irreplaceable advantages online, it helps restaurants to create characteristics and establish brand recognition, so hotel catering participants can consider introducing prefabricated dishes on side dishes, but they should retain their core competitiveness and create chef specialties that can only be eaten in the next store, so as to achieve online and offline go hand in hand.
3. Channel type and others: find the balance point of supply and demand.
The third category of participants, including Dingdong, Hema and Sam, is already a mature channelOther professional participants, such as Weizhixiang, Xian Meilai, Xincong Kitchen and other participants who have been deeply involved in prefabricated dishes for many years; and new entrants who are trying to establish their own brands in the prepared food industry.
The commonality of these participants is that, compared with the first two, when entering the prefabricated food industry, they do not have too many initial advantages, and they all need to connect industry resources, achieve business synergy, build their own prefabricated food brands, and become channel platforms. Compared with players starting from scratch, mature channels such as Dingdong, Hema and Sam have a comparative advantage and already have a large number of users and data.
However, it should be noted that sometimes too much understanding of the C-end will also become a fetters, which will lead to too much catering to consumers, and a lot of energy will be put on short-term products in order to convey fresh ideas to consumers. According to the length of the shelf life, pre-made dishes can be divided into two categories: short-term and long-term. At present, there are different standards for the classification of short-term and long-term warranties in the market, and the common classification criteria include the short-term warranty products with a shelf life of less than 7 days (there are also those with a shelf life of less than 45 days as short-term warranty products and more than 45 days as long-term warranty products).
The biggest problem faced by short-term products is that they face the "countdown of the shelf life" from the completion of production, and once they cannot meet the deadline, it means high losses. As a result, there is a cap on the daily output of short-term products, which leads to a cap on overall revenue. For enterprises, short-term insurance products can help enterprises complete the start from 0 to 1, but if enterprises want to achieve growth from 1 to 100, they cannot do without long-term insurance products that can increase the volume.
What's more, as a prefabricated dish that "connects one end to the field and the other end to the public table", it itself has the effect of regulating the fluctuation of agricultural raw materials and avoiding waste. Market volatility is one of the important risks of agricultural product operation. The particularity of agricultural products lies in the fact that the market price can only affect the supply of agricultural products in the next harvest cycle, but regardless of the market price, the current agricultural products must be harvested when they are mature. The short-term prefabricated dishes not only reproduce the shortcomings of the "countdown" of agricultural products, but also make it difficult to enjoy the low prices of agricultural products in the upstream of the industrial chain.
A prefabricated food company said that they had tried to make fresh walnuts into prefabricated dishes, which are more nutritious than common dried walnuts on the market, and can also be sold as fruits, but because fresh walnuts can only be stored for a week, they can only rot in the warehouse in the end, and the product loss rate is as high as 50%.
An industry insider said: "Short-term insurance products are not suitable for cross-provincial and cross-regional sales, and the transportation cost is too high. Many short-term products are set up in the suburbs of big cities or surrounding cities, and they are simply pieced together, and sometimes even re-branded. The processing plant is more like a 'warehousing + packaging factory', with no substantial deep processing. Can fresh ideas really go far? Even if they are desperately trying to cater to the demand for freshness, consumers still know that they are buying pre-made dishes and will not find it fresher than buying two dishes directly on the shelf. ”
For prefabricated food merchants, it is necessary to find a balance between supply and demand, and at the same time not give up their own characteristics, open up the link from the place of origin to the table, continue to develop long-term products, and break the ceiling of revenue scale.
How to become a pre-made unicorn.
Pre-made food is an industry with a very low tolerance for error. In addition to talking about cooperation, many prefabricated food manufacturers will now ask if there is a channel? Can you help digest (pre-made food inventory)? From the remaining 3 months of shelf life, pre-made dishes will be heavily discounted, 3 discounts for 3 months, 2 discounts for 2 months, and 1 discount for 1 month. A practitioner revealed.
From the perspective of industry characteristics, prefabricated dishes, like the clothing industry, do not have absolute aesthetics and no unified standards for weights and measures. Just as there is no universally recognized perfect outfit, there is no such thing as the best dish. For enterprises, this means that on the road to the unicorn of the prefabricated food track, the following points need to be noted:
1. It is difficult for enterprises to simply take taste as a moat, but to integrate the industrial chain as a moat.
It is precisely because there is no absolute standard of "the best in the world" that simply spelling "the most delicious" is obviously not the way. To a certain extent, prefabricated dishes belong to the resource-based industry. When a popular product appears on the market, it will inevitably attract followers; The taste of thousands of people and thousands of faces, so that enterprises do not need to be 100% reproduced. In the end, the enterprise still fights for resources, industrial chains, and sales channels. If it does not belong to a resource-based enterprise, it is necessary to pay attention to the integration of the industrial chain, maintain the end-game thinking on the basis of opening up the whole industrial chain, and constantly iterate to the flexible industrial chain to generate more personalized products as much as possible.
Just like Industry 4Garment enterprises in the 0 era have abandoned the traditional "market demand, stock up in advance" heavy capital and high inventory model, and turned to the flexible ** chain of "small batch, multiple varieties, and fast response", compressing production and procurement, shortening the production cycle, and even launching personalized ready-to-wear, which will undoubtedly be the development trend of prefabricated dishes.
2. Pursue the ultimate cost performance, rather than brand premium.
If there is no such thing as "the world's best chili stir-fried pork", it will be difficult for "secret chili stir-fried meat, which only sells 100 servings a month", to sell consistently**. In addition, the prefabricated dishes themselves have a certain sensitivity to the first, and between ordering takeaway and prefabricated dishes in big-name restaurants, when consumers choose the latter, cost performance is an important consideration. Therefore, prefabricated food companies should be aware that it is difficult to achieve brand premium in this track. An industry insider said: "If the raw materials of fried chicken are all white feather chicken, and the price of one brand is 50% higher than that of another, consumers will quickly switch." Even if the one is more brittle, it will be difficult for consumers to pay a 50% premium for it. ”
B-end merchants will also consider cost performance. Under the premise of product safety and stable quality, no matter how much the unit price is, the restaurant will compare the purchase price. Therefore, the pursuit of the ultimate cost performance is a more feasible path, "burning money war" is not a wise approach, in the premise that it is difficult to rely on product taste differentiation out of the circle, enterprises need to break through with "the best cost performance".
But this does not mean that enterprises will fall into the trap of the first war, but in the case of ensuring quality, compete for the first chain. In the short term, enterprises can minimize SKUs (minimum stock keeping units), take phenomenal explosive products as a breakthrough, and try to make each selection as fine as possible. In the long run, enterprises need to eliminate intermediate links as much as possible through the integrated construction of the first chain, and promote the continuous deepening of the flexible first chain operation model, so as to adapt to differentiated needs and respond quickly to the market.
3. Based on the product standard, realize the extension of brand value.
Due to the variety of tastes, the research and development of prefabricated dishes is more "product-oriented" rather than "customer-oriented". To a certain extent, pre-made food manufacturers need to "define" the product. For example, tell the market: this is the common acidity and spiciness of sauerkraut fish, and on this basis, what flavor adjustments can the product support; Rather than trying to balance everyone's preferences during research and development, and over-delve into taste.
In terms of R&D, companies need to pay special attention not to pay too much attention to the R&D of the taste side, so as to ignore the R&D of the factory side. Some of the new entrants to the pre-made food track adopt a strategy of finding a well-known chef to make a specialty dish, and then developing how to replicate the taste and turn it into a pre-made dish, but ignoring the importance of the factory side.
One practitioner said: "The design and layout of the circulation line of the factory is very complex. There are a large number of new factories in the industry, but the circulation design cannot meet the demand. A really good prefabricated food factory should be an unmanned factory. A good prefabricated vegetable factory is not able to do anything, today's assembly line makes sauerkraut fish, tomorrow it will become spicy chicken, but a highly specialized non-** water line. ”
Food engineering is a discipline based on mechanics, kinetics, thermodynamics, heat transfer and mass transfer, and is a new field developed on the basis of chemical engineering, aiming to solve the interrelationship between each processing unit in the processing process of food raw materials, such as mass balance relationship, energy balance relationship, interrelationship and other factors.
Since each dish faces different humidity, temperature, environment and handling steps during the preparation process, this places extremely high demands on the design of food plants. For enterprises, this means that in the process of integrating the industrial chain, industrialization must be achieved to the extreme, and professional talents must be found to design and lay out production lines according to the steps required in the specific processing of different ingredients, so as to reduce costs and increase efficiency from the factory side.
After opening up the industrial chain and building an ecosystem with the goal of flexible ** chain, enterprises can lay out a product matrix from low to high and establish value extension.
The top products with the highest customer unit value are used to lead audience awareness, enhance brand reputation, and map brand positioning. However, just as the total market volume of bird's nest is difficult to match the total market volume of marinated eggs, it is difficult to blindly focus on high-end products to achieve a leap from 1 to 100 in the volume of enterprises. It is not enough to make delicious fried chicken thighs, but it is not enough to make the best use of every part of a chicken and make a product "combination punch" to establish a competitive advantage for the enterprise. In addition, enterprises also need to always allocate part of their energy, maintain the development of new products, and prepare for the next explosive product in small steps, trial and error iteration.