Main business turning profit, new business models breaking the mold, supply chain opening up: Baiguoyuan (02411) embarks on a new cycle with "three growth curves."

In 2026, community retail is entering a new round of transformation, moving towards "high quality-price ratio community consumption." On one hand, fresh snacks are on the rise, with short shelf life and freshly made products hitting the young consumers' demand for "healthy indulgence"; on the other hand, bulk snack brands are evolving towards comprehensive hard discount offerings. However, in the retail sector, achieving freshness, good prices, and profit is not easy. Freshness means waste, good prices compress gross margin, and maintaining profit levels requires high operational efficiency. As retail brands transition towards healthy fresh food, Baiguoyuan, leveraging over twenty years of accumulated loss control, cold chain, and supply chain efficiency, is entering a strategic opportunity period. On August 28, Baiguoyuan (02411) released its interim performance announcement. In the first half of the year, revenue reached approximately RMB 5.01 billion, a year-on-year increase of about 14.5%; the net profit attributable to shareholders was approximately RMB 30 million, reversing from a loss of RMB 342 million during the same period in 2025; the total number of stores increased by 53% year-on-year to 6,709, marking a return to sustainable expansion. Revenue, profit, and store openings are all trending upward, establishing a turning point in performance. Notably, this performance report is a "low-profile submission" to the capital market. Prior performance guidance indicated a revenue growth rate of no less than 7% and a net profit attributable to shareholders of no less than RMB 20 million, while the actual revenue and profit for the group significantly exceeded expectations. "Turning a profit" is a reflection of Baiguoyuan's recovery after two years of active strategic adjustments. But what drives this turnaround? Previously, founder Yu Huiyong laid out three progressive strategic positions: a globally leading ecological technology company in the fruit industry, a leading global platform for incubating fruit and vegetable processing brands, and a globally integrated service platform for the entire fruit supply chain. In this financial report, Baiguoyuan is answering the question of what kind of enterprise it aims to become in the future through changes in its business. With the arrival of turning points, "information + agriculture" tech empowers the foundation of fresh fruit. Fruits are perishable; every minute they are in a competition with life. Any issues with picking time, storage temperature, transportation losses, or shelf life can turn good fruit into bad business. For over twenty years, Baiguoyuan has delved deep into every link in the chain, from variety selection and post-harvest preservation to smart ordering and store diagnostics. In the first half of 2026, the capability accumulated across the industry chain is releasing more value. The simultaneous upward trends in revenue, profit, and store openings indicate a reversal in the core business. Whats remarkable is that Baiguoyuan's growth occurred after "purifying" business quality rather than pursuing scale expansion. In recent years, Baiguoyuan has undergone a proactive clearing of inefficient stores, and the restructuring is now complete. Thus, understanding this reversal cannot focus solely on operational recovery. A deep industrial chain accumulation constitutes a more solid competitive barrier than a pure store network. On this basis, Baiguoyuan has set its strategic goal of being a "globally leading ecological technology company in the fruit industry." In fact, the full-chain technology system supports the main business in having a solid foundation during this new round of retail transformation. Store operational quality continues to improve. By the end of the second quarter, the membership scale exceeded 97.7 million, and online orders accounted for 27.8%, with the single-store model and member repurchase rate continuously deepening. Looking deeper, Baiguoyuan is evolving from a traditional fruit chain retailer into a platform enterprise with industrial infrastructure capabilities. This evolution is built upon the deep accumulation and visibility of four core capabilities: First, the deep application of digitalization and AI technology, with smart ordering and store diagnostics covering all stores, while R&D expenses decreased by approximately 17% year-on-year; Second, hard capabilities in supply chain and cold chain fulfillment, with over 20 years of global fruit supply chain experience, 29 national cold chain warehouses, and 56 branded fruit product categories; Third, franchise chain operational management capabilities, with a standardized operational system for over 4,000 fruit retail stores continuously iterating; Fourth, fresh fruit inventory control and loss control capabilities, managing every aspect from picking timing and storage temperature to shelf life management. It is precisely these "foundation capabilities" that enable Baiguoyuan to stabilize its fresh fruit base while fully evolving into multi-format retail, B2B platform business, and empowering both large and small B clients. From the financial report, the reversal of the core business is the first step. Opening up the space for imagination represents the second and third steps. The growth engine transitions from quality growth to ecological expansion. In the past, many commercial theories envisioned corporate development. For instance, a senior McKinsey consultant proposed in "The Growth Alchemy - Secrets to Sustained Growth" that all large companies experiencing continuous growth maintain a balanced development across three levels: the first level is to guard and expand the core business, the second level is to establish emerging businesses, and the third level is to create viable candidate businesses. The three levels of business function like a pipeline, with the old business providing cash flow and the new business picking up the growth baton. This aligns with Baiguoyuan founder Yu Huiyong's judgment: fruit stores are just the starting point and front-end verification stage. As the core fruit business grows steadily, Baiguoyuan is expanding outward from its fresh fruit capabilities. The second step is to develop a second growth curve of community fresh retail/community hard discount supermarkets beyond fruit stores. In the past two years, bulk snacks quickly expanded through low prices and scale, but as the hard discount snack sector stabilizes, consumer demands, especially from younger demographics, have shifted from "low-priced indulgence" to "health, freshness, and experience." This is where the fresh snack sector has exploded. According to Zheshang's research report, the market size for fresh snacks in China will grow from less than RMB 5 billion in 2020 to RMB 18 billion by 2025, with an average annual compound growth rate exceeding 40%, and it is expected to increase significantly to RMB 40 billion to RMB 50 billion in 2026. However, behind fresh snacks lie high waste, difficult operations, and high turnover requirements, areas where traditional snack players are less competent. Baiguoyuan, however, is taking a low-difficulty approach. Fresh fruit is one of the most difficult categories to manage within perishables. Baiguoyuan has been deeply engaged in this area for over twenty years, forming four core advantages: over 20 years of global fruit supply chain experience, extensive fresh control experience from thousands of stores, 29 national cold chain warehouses, and seven regional local brands. Now, Baiguoyuan is systematically expanding into new business formats. On one hand, category expansion is taking place from fruit product brands to fruit and vegetable product brands and then to fruit, vegetable, and derivative processing product brands, systematically exporting long-accumulated capabilities in planting, quality control, preservation, channels, and capital to each single-category brand. On the other hand, channel expansion occurs without altering existing stores, with both new and old business formats sharing a set of capabilities. This achieves a balance between standardization and localization. As a result, Baiguoyuan is evolving toward its second strategic goal: "a global leading platform for fruit and vegetable processing brand incubation." According to company announcements, in the first half of 2026, Baiguoyuan has partnered with seven local brands to explore new business formats and new store types, including "fruit + snacks" and community fresh retail stores. In July, the first innovative comprehensive store opened in Shenzhen, with its positioning extending from "buying fruit" to "one-stop healthy living solutions," aiming to increase the non-fresh fruit sales ratio to about 40%. Ready-to-eat fruit cuts, short shelf-life foods, dried fruit, juice, and even baking ingredientsthese derivative products will open up a longer lifespan for category brands. While accelerating deployment on the multi-format retail end, Baiguoyuan's B2B platform business and supply chain empowerment are also expanding simultaneously. The B2B platform, Bangguo, achieved a GMV of RMB 1.401 billion in the first half of the year, a year-on-year increase of approximately 22%; in terms of fully opening supply chain 2B business, the company provides a three-layer empowerment system covering differentiated product development, low-cost fulfillment, and full-process operations guidance for snack shops, convenience stores, restaurants, tea drinks, and welfare procurement, among others. Whether large B clients or small B clients, any business needing fruit supply chain capabilities is becoming an "external client" of Baiguoyuan. This means that Baiguoyuan's supply chain capabilities are no longer just for its own stores but are beginning to open up to the entire industry, transitioning from a "self-operated closed loop" to "platform output." By centering on fresh fruit capabilities and allowing good categories to grow from the entire industry chain, Baiguoyuan's vision is opening up in retail innovation. Creating the future, three-layer progressive growth redefines value. Baiguoyuan's strategic vision extends to a longer-term dimension. Every retail format explosion occurs at the turning point of the economic cycle. For instance, post-World War II Germany's economic reconstruction gave rise to the pioneer of hard discounts, Aldi. Low gross margins, streamlined SKUs, and extreme supply chain efficiency conquered the European market. Today, in the context of structural changes in the global economy, consumption is becoming the core engine of domestic demand in China, empowering the "14th Five-Year Plan" start. A new round of retail innovation is gearing up, and notably, the logic of hard discounting is about to rewrite Chinese retail. According to a report from Guotai Junan Securities, the penetration rate of the general hard discount model in food and grocery retail in China is only 8%, which is far lower than Germany's 42% and Japan's 31%, with a projected compound annual growth rate of 23% in the next three years. The combination of low penetration and high growth means this is an extremely certain track. Aldi China is accelerating expansion, Walmart is engaging its private-brand strategy, and Hema is launching its Superbox model. However, a gap still exists. How can the "last mile" closest to the community achieve economies of scale in fresh food within small stores that are highly reliant on foot traffic? Traditional hard discount models excel at categories like snacks, beverages, and daily chemicals, whereas fresh produce and short-shelf-life foods remain unproven in broad applications. Baiguoyuan can fill this gap in community scenes, expanding from fruit specialty stores to fruit + all-category hard discounts. This suggests that the second growth curve will benefit from a surge in community consumption. On this basis, Baiguoyuan has not confined its capabilities. Founder Yu Huiyong has set a third strategic goal: "a globally integrated service platform for the entire fruit supply chain." Baiguoyuan is promoting the platformization of the supply chain, fully opening its standards, products, fulfillment, training, and operational capabilities to all business formats requiring fruit supply chain capabilities. Specifically, this empowerment system is divided into three layers: In terms of product empowerment, it utilizes differentiated product development capabilities to offer high-margin items, and maintains ongoing influence with its 56 branded fruit categories. For supply chain fulfillment empowerment, it provides low-cost delivery through a nationwide fresh distribution and preservation system. Furthermore, in training and operational empowerment, it offers full-process guidance from product selection to promotion. Thus, it can be seen that the three growth curves of "present profits, medium-term growth, and long-term space" are forming, making Baiguoyuan an "ideal type" in McKinsey's three-level theory. The first curve is the core fruit business, leveraging brand density, service standards, and fulfillment capabilities to turn losses into profits. The second curve encompasses ecological technology and category brand incubation in the fruit industry, incorporating agricultural technology, information technology, and industrial incubation into a longer-term value framework. The third curve involves exporting supply chain capabilities to the entire industry, with snack shops, convenience stores, restaurants, tea drinks, welfare procurementall requiring fruit become potential clients. Currently, Baiguoyuan is still recognized under the valuation perception of "traditional retailers," showing a clear divergence between its undervalued state and the fundamental reversal in performance. However, this exceeded performance realization is a key step in gradually establishing trust in the capital market: no storytelling, just presenting results; not pursuing noise, but proving the effectiveness of strategy with verifiable data. As AI efficiencies continue to net profit margin improvements and new formats and B2B businesses contribute incremental revenues, the market is expected to shift from a pure retail valuation to a diversified one encompassing "retail + technology + supply chain services." Galaxy Securities has raised the company's rating to "recommended" based on improvements in the core business and explorations of new formats. Looking ahead, Baiguoyuan has seized the opportunity of a new round of retail innovation emerging, entering a new growth cycle. With the support of a three-layer growth logic, Baiguoyuan is evolving into an industrial mega-platform of "fruit industry ecological technology + fruit and vegetable brand incubation + supply chain services." As consumption from 1.4 billion people becomes the main engine of China's domestic demand, the era of dividends has just arrived. This article has been reproduced from the "Hong Kong Stock Research Society" public account, GMTEight editor: Jiang Yuanhua.