Summary of Key Points
The parent company of Zhengxin Chicken Sandwiches, Zhengxin Food, has recently announced plans to list in Hong Kong, aiming to raise approximately $300 million. As a benchmark for affordable dining, the company once grew to over 25,000 stores with its popular 10-yuan chicken sandwich and franchise model. However, in recent years, the number of stores has decreased to just over 10,000, leading to concerns that it may be "abandoned by younger consumers." Compared to peers like Mixue Ice City and Luckin Coffee, Zhengxin's capitalization process has lagged behind. This listing could be an opportunity to break through growth bottlenecks and upgrade its supply chain and brand, but there are still challenges in addressing issues such as outdated products and intensified competition.
Why the Urgent Need for a Listing?
Zhengxin Food didn't suddenly decide to go public; it was forced into this move due to several factors:
- Peers Moving Ahead: Competitors like Mixue Ice City, Luckin Coffee, and Juewei have already listed and used the funds to expand rapidly (for example, Mixue has nearly 60,000 stores). If Zhengxin doesn't go public now, it will fall behind.
- Pressure from Declining Store Numbers: The company once had 25,000 stores at its peak in 2021, but now there are only over 10,000. Younger consumers are less likely to shop there, so funds are needed for new products, marketing, and supply chain improvements.
- The Need for Growth: The founder once set the goal of reaching 100,000 stores with a revenue of 100 billion yuan, and going public is the fastest way to achieve this.
How Did Zhengxin Become a "Dominant Player in the Chicken Sandwich Industry?"
Zhengxin's success over the past 30 years can be attributed to its straightforward approach:
- Focusing on the Main Product: Initially, it offered a variety of snacks (including meat skewers and milk tea), but it later narrowed its focus to chicken sandwiches. The stable supply of chicken and the affordable price point (10 yuan per order) made it attractive to customers, while the low franchise cost (just tens of thousands of yuan) facilitated expansion.
- Following Mixue's Footsteps: Zhengxin targeted areas with high foot traffic, such as county towns and small cities, which were also favored by Mixue. This strategy saved on location costs.
- Strong Supply Chain: The company has established more than 10 production bases, ensuring that the taste of chicken sandwiches is consistent across all stores. Franchisees don't need to worry about sourcing ingredients.
Why Is Zhengxin "Being Abandoned by Younger Consumers"?
The decline in store numbers is not accidental; several issues have been underlying this trend:
- Outdated Products: The company's main product, the fried chicken sandwich, is now seen as outdated by younger consumers who are more concerned about health and avoiding fried foods.
- Lost Cost-Effectiveness: The 10-yuan chicken sandwich used to come with a free drink, but now prices have increased and gifts have been removed. This makes Zhengxin less competitive compared to offerings like KFC's 9.9-yuan fried chicken sets.
- Intense Competition: Competitors such as Wallace and McDonald's offer low-priced fried chicken, and even Luckin Coffee is entering the market with its own chicken products, diluting Zhengxin's advantages.
How Does Zhengxin Compare to Mixue and Luckin Coffee?
The differences between Zhengxin and its peers are evident:
- Lagging Listing: Zhengxin is several years behind its competitors. Mixue went public in 2023, and Luckin did so in 2019, leaving Zhengxin behind in terms of expansion opportunities.
- Slow Product Innovation: While Mixue continuously launches new products (such as 2-yuan ice cream and 4-yuan lemon water), Zhengxin has had limited success with new offerings beyond chicken sandwiches.
- Brand Development: Mixue's "Snow King" character has become a well-known internet celebrity, while Zhengxin's attempts to create a similar brand image (with the "Chicken King") have not been as effective.
Can a Listing Solve These Problems?
A listing may provide an opportunity for Zhengxin to overcome its challenges:
- Opportunities: The raised funds could be used to develop healthier products (such as non-fried chicken sandwiches), improve the supply chain, and invest in marketing, potentially attracting younger consumers again.
- Challenges: If Zhengxin continues to rely on its traditional products and methods, a listing may not be enough to retain customers. It also needs to address food safety issues associated with its franchise model (for example, past reports of poor hygiene in some stores), which could affect the stock price.
In summary, Zhengxin's listing is a critical move that determines whether it can continue to expand or risk being completely abandoned by younger consumers.