In April 2020, Ruixing revealed that the false transaction fell to the bottom from the star company with the fastest IPO, which triggered a series of chain reactions: sharp decline in share price, delisting, class action, punishment by regulatory authorities
But it took two years for Ruixing to realize the overall reversal of the situation.
According to the third quarter financial report released by Ruixing in December 2021, the total net income of Ruixing coffee in the third quarter of 2021 was 2.352 billion yuan, a year-on-year increase of 105.6%; The net loss was 23.5 million yuan, a year-on-year decrease of 98.6%; The average monthly trading customers were 14.7 million, a year-on-year increase of 79.2%; Store operating profit margin increased to more than 25%.
During the Beijing Winter Olympics, valley ailing, a “bet”, also made Ruixing hot again, and young consumers continue to regard it as the first choice of cost-effective coffee. Ruixing seems to have stepped out of the impact of the storm of “financial fraud”, and its reputation has gradually changed from cheap to cost-effective. Behind this, the management led by Dazheng capital and pleasure capital has played a great role in promoting.
During this period, after a long-term game among Ruixing coffee’s internal management, shareholders and investors, Ruixing coffee finally took a series of self-help measures, including adjusting the board of directors and senior management, solving litigation problems, closing stores with serious losses, etc.
On January 27, 2022, Dazheng capital announced that the buyer group led by Dazheng capital has completed the acquisition of some shareholders’ equity of Ruixing coffee, and other members of the buyer group include IDG capital and Ares SSG capital management After the completion of the transaction, Ruixing will hold more than 30% of the equity and more than 50% of the voting rights and become the controlling shareholder.
With the change of management, the entry of Dazheng capital and the exit of Lu Zhengyao’s forces, Ruixing, who advocates fine operation, management and precision marketing, is stepping out of the negative impact of the storm of “financial fraud”.
But the industry is also predicting the fate of Ruixing in 2022: can it return to NASDAQ?
management seizes power and changes blood, Lu Zhengyao forces are out
After Ruixing’s financial fraud, the management began to shuffle. Guo Jinyi replaced Lu Zhengyao as the chairman and CEO of Ruixing. In January 2021, unwilling Lu Zhengyao led seven vice presidents, five directors and 34 regional managers of Ruixing to jointly write a letter of removal, asking for the removal of Guo Jinyi.
Guo Jinyi then fought back, saying that the joint letter was a former executive organization such as Lu Zhengyao and Qian Zhiya. Some of the employees involved did not know the truth and were coerced to sign. The management dispute ended in the victory of Guo Jinyi with the support of the management.
Wang Chen, a former employee of Ruixing coffee, told reporters that after the battle, many middle and senior managers left. This exchange of blood basically completed Guo Jin’s control of the core team.
At that time, the media said that Ruixing coffee technology team was poached by Lu Zhengyao on a large scale. Even Guo Jinyi mentioned “malicious poaching” in his letter. According to media reports, in December 2020, more than 300 employees of Ruixing coffee’s Xiamen headquarters received a notice that they needed to “change their visas” to transfer their labor relations to Lu Zhengyao’s new company.
At the beginning of 2022, the management storm fell behind. Dazheng capital strongly announced that the buyer group led by Dazheng capital had completed the purchase of 383425748 class a ordinary shares of Ruixing coffee. After the transaction is completed, it will hold more than 30% equity and more than 50% voting rights of Ruixing coffee and become the controlling shareholder. This also means that Dazheng capital entered Ruixing and Lu Zhengyao was completely out of debt liquidation.
“Everyone in the company knows that Guo Jinyi is a boss representing the management, which also brings about the relative stability of the management. After the last incident, many colleagues doubt Ruixing’s management ability, but now, Ruixing is a normal company.” Shen Tao, an employee of Ruixing, told reporters that the year-end bonus will be paid normally this year. Excluding the optimized employees, it is basically about 1-4 months.
after the change of management: from money burning subsidy to refined store operation
The reporter found that although Guo Jinyi was once an assistant to Lu Zhengyao, his management style is very different from the latter.
During the period when Lu Zhengyao’s senior executives were in charge of Ruixing, Ruixing’s strategy was to sign stores at a high price in order to expand rapidly, but most of the leases were about three years. Compared with Starbucks and other coffee shops in the industry, the lease is about 10 years.
In fact, to the surprise of the outside world, Ruixing did not have a large-scale shutdown after the “counterfeiting incident”. Many of these stores are automatically closed due to the expiration of the lease.
At the same time, Ruixing suspended the business layout related to unmanned retail and began to significantly increase the number of franchise stores in order to reduce costs. It is reported that Ruixing does not charge franchise fees from franchise stores, but takes the way of revenue pumping. That is, the monthly turnover of more than 20000 yuan is drawn in steps, with the proportion ranging from 10% to 40%. If the turnover of the franchise store exceeds 80000 yuan, it needs to pay the “management fee” of the current month.
Based on the financial data released by Ruixing, the scale of its direct stores has been maintained within 4500 for a long time, and its expansion at this stage mainly depends on franchise stores.
According to the third quarterly report of Ruixing in 2021, by the end of the third quarter, Ruixing had 5671 stores nationwide, including 4206 self operated stores and 1465 franchise stores, with a year-on-year increase of 6.4% and 66.7% respectively.
Not long ago, Guo Jin, chairman and CEO of Ruixing coffee, issued an internal letter to 20000 employees of Ruixing. According to the internal letter, in January this year, Ruixing opened about 360 new stores, setting a new record for Ruixing’s total number of stores in a single month. The turnover of stores during the Spring Festival Golden Week was three times that of the same period last year.
According to the new consumption daily, although it is still expanding at this stage, Ruixing’s management is also cautious about the expansion of franchise stores.
According to the owner of Ruixing franchise store, Ruixing franchise has been suspended in many cities, and the consulting staff said that the quota in the current city is full. But in fact, Ruixing is deliberately controlling the number of franchise stores and only gives them to the joint venture partners in the system.
“When Ruixing is only one step away from profitability, it starts to tighten its franchise, or hopes not to lose the control ability of stores and affect its return to the main board in the future.” Shen Tao told reporters that we noticed that on the social platform, some consumers showed that the coffee production and even capacity of some alliance stores were inconsistent with the regulations, which was not conducive to the development of Ruixing brand.
When the reporter visited several stores in Beijing, Ruixing staff revealed that the stores in first tier cities are directly operated and are not allowed to join.
It is also the current situation of Ruixing’s joining that has derived the middle gray area. After the reporter consulted Ruixing’s joining information as the owner, many people claiming to be intermediaries said that they can handle Ruixing’s joining for the reporter to ensure success, but they should charge a certain handling fee.
Ruixing customer service said that the above behavior was not compliant, but did not answer whether these intermediaries were related to Ruixing.
To improve the price of coffee
According to the financial report, Ruixing’s marketing expenses accounted for 20.1% in 2019 and decreased to 13.2% by 2020. In the first semi annual report of 2021, the marketing expenses further decreased to 12.8%.
However, the adjustment of marketing expenses does not mean that Ruixing gives up marketing and subsidies, but is more accurate.
At the Beijing Winter Olympic Games, Ruixing coffee bet on Gu ailing with its own traffic in advance. After winning the gold medal of Freestyle Ski platform in the Beijing Winter Olympic Games, Ruixing coffee added the word “win” to the “Gu ailing recommendation” menu in the applet for the first time, and launched a 4.8% discount special coupon, which attracted a wave of attention.
At noon on February 8, Gu ailing won the first battle. Ruixing’s backstage immediately poured in a large number of orders. In two hours, the “Gu ailing recommendation” menu in many stores around the country was swept away.
According to Ruixing, in order to do a good job in this round of marketing, the company has prepared two sets of materials in advance to complete the material switching within one hour after winning the championship. After Gu ailing won the championship, Ruixing team quickly spread the stored materials and materials in their own flow pool.
Gu Ailing’s endorsement fee also changed after the game. Before 2021, Gu Ailing’s endorsement fee was about US $1 million; After the game, the cost of a new endorsement of Gu Ailing was about $2.5 million after tax, about 15 million yuan.
According to the clerk of Ruixing’s Beijing store, the ordering heat brought by Gu ailing lasted about 5 days, and a number of customized products of Gu ailing were sold out. “After the launch of phenomenal products such as raw coconut latte, Ruixing’s innovative strategies emerge one after another, especially to attract young consumers.”
Zhou Weiming, senior vice president of Ruixing coffee, mentioned in the dialogue with Dazheng capital that Ruixing coffee promotes hundreds of new categories every year. “Ruixing will plan new products 6-8 months in advance to allow time for supply chain procurement, product optimization and other departments.”
According to Ruixing’s open letter, Ruixing launched a total of 113 new products in 2021. Among them, the raw coconut latte has set a record of more than 10 million cups sold in a single month, and another popular product, velvet latte, has also been online, with a sales volume of 2.7 million cups in just nine days.
Meanwhile, at the end of 2021, Ruixing began to adjust the price, and hundreds of stores increased the price by about 3 yuan on the basis of the original price. Ruixing customer service said that the reason for the increase was based on the comprehensive consideration of operating costs such as rent, manpower and raw materials.
Many consumers revealed that Ruixing’s price rise was not only reflected in the unit price, but also in the smaller strength of coupons, resulting in a much higher checkout price than before.
Tang Li, a marketing expert, told reporters that at present, Ruixing has completed the transformation of brand image, and the event of “financial fraud” has been infinitely weakened. Ruixing has gradually transformed into a medium and high-end coffee brand, and realized the price increase through innovation.
In the interview, Shen Tao revealed to the new consumption daily that the R & D department is the most stressed Department of Ruixing. When Starbucks is still a “strong enemy” and many boutique coffee brands are rising, Ruixing still needs more popular funds to make stable profits.
In fact, Ruixing has entered the boutique coffee market from the supply chain. It is reported that when Guo Jinyi previously visited Ethiopian ambassador to China Teshome toga, he disclosed that Ruixing coffee will purchase more than 6000 tons of raw beans in Egypt in 2022, and plans to participate in solving the problem of Huakui supply, which is expected to become the coffee brand with the largest purchase of Huakui plus raw beans in the world.
Obviously, in addition to being rational in store operation, Ruixing’s management is also constantly trying to get rid of the user cognition of “cheap coffee” and “foot washing water” in the past through precision marketing, price increase and supply chain layout.
will Ruixing return to NASDAQ after Dazheng capital takes over
In the view of the outside world, including the full ownership of Ruixing by Dazheng capital, all this is to prepare for the next step – returning to NASDAQ.
Dazheng capital is the earliest and largest investor of Ruixing. Before Ruixing exposed the financial fraud scandal, Dazheng capital sold its shares worth $232 million. However, he bought a large number of shares of Ruixing at low prices for many times until he became the controlling shareholder of Ruixing in January this year.
According to media reports, Li Hui, chairman and CEO of Dazheng capital, has been “cleaning up the portal and changing the team” for Ruixing, and arranged personnel to stay in Ruixing for several months to formulate a reconstruction strategy.
In response to Ruixing’s plan to return to NASDAQ and the stationing team of Dazheng capital in Ruixing, Dazheng capital has not responded to the science and Innovation Board daily as of press time.
One of Ruixing’s early investors, the pleasant capital invested with additional funds last year, also did not reply to the reporter’s interview on Ruixing’s related issues.
Chen Sijin, a senior Wall Street practitioner who once served as vice president of Bank of America Securities, told the science and Innovation Board daily that Ruixing withdrew from the NASDAQ to the pink list market because of financial fraud, becoming a junk stock and zombie stock with less trading volume. At present, Ruixing has completed the debt restructuring, the SEC’s ticket has been settled, and the two sides of the class action initiated by US stock investors have also reached a settlement. In other words, a series of consequences caused by Ruixing’s financial fraud have been basically solved. “Therefore, as long as it meets the conditions on Nasdaq, Ruixing can return to the NASDAQ main board.”
Xu Guangxun, a former familiar representative of NASDAQ Stock Exchange in China and managing director of Asia, previously said in a media interview that “from the information disclosed at present, Ruixing’s re listing is no problem.”
Chen Sijin said that although the CSRC has strict supervision on listed companies, the companies that have been punished are not unable to come back from the dead. “It’s like going to jail for breaking the law. After being released from prison, you can still be a new man.” He also said that in the US stock market, there are not a few stocks that are required to delist due to violation of relevant regulations and then return to the main board.
However, according to another person who has long observed Ruixing coffee, Ruixing is currently in a critical period of debt restructuring, and some core issues have not been solved. Due to the few cases of returning to the main board from the pink list and the previous fraud, Ruixing will face many legal risks if he wants to return to the main board. “Ruixing’s return to NASDAQ cannot be blindly optimistic at this stage.”
