MINISO's 29.4% stake in Yonghui Superstores: A risky bet amidst struggles?

by LU Yibei

MINISO announced on Monday that it will acquire a 29.4% stake in Chinese supermarket chain Yonghui Superstores for 6.3 billion yuan ($893.05 million), positioning itself as the largest single shareholder of the struggling company. An hour after the announcement, MINISO’s stock price fell by around 18% when the U.S. market opened.

“If no one understands it, that’s good. If everyone did, I wouldn’t have the opportunity,” MINISO founder, Chairman, and CEO Ye Guofu posted on social media on the evening of September 23.

MINISO's CFO Zhang Jingjing clarified that the company won't control Yonghui Supermarket's board or act as its controlling shareholder. The transaction is expected to be completed in the first half of 2025.

MINISO anticipates that the partnership will enhance Yonghui’s private label offerings, reduce costs, and leverage its store network for scale. It will also help MINISO diversify its daily goods investments and mitigate business risks.

Founded in 2001, Yonghui Supermarket was once a standout in the industry. Revenue soared from 12.318 billion yuan at its IPO in 2010 to 93.199 billion yuan by 2020, before the pandemic.

Today, however, Yonghui is facing significant challenges, reporting a 12.71% decline in operating income to 78.642 billion yuan for 2023 and a net loss of 1.329 billion yuan, with cumulative losses exceeding 8 billion yuan over the past three years. In response, the company closed 136 stores in the first eight months of 2024.

Ye Guofu sees this as an opportunity to "buy at the bottom."

Acquiring a 29.4% stake in Yonghui Supermarket, previously valued at over 100 billion yuan, for 6.3 billion yuan appears to be a lucrative opportunity. However, the key question remains whether Yonghui has truly reached the turning point that Ye Guofu envisions.

In recent years, Yonghui Supermarket has focused on reforms inspired by PangDongLai, the newest poster child for successful supermarkets. Beginning in June, Yonghui implemented these changes in two stores in Zhengzhou, eliminating 70% of existing products and reorganizing the lineup to include PangDongLai items. Additionally, Yonghui improved compensation for front-line employees.

The second restructured store opened on August 7. By August 22, it recorded average daily sales of 1.08 million yuan, an increase of 8.2 times compared to its pre-restructure performance, with customer traffic nearly 10 times higher.

It is this "PangDongLai version of Yonghui" that truly impressed Ye Guofu.

He believes that China’s offline supermarkets are facing a rare structural opportunity and views the PangDongLai model as the most suitable retail format for China, even better than Costco, Sam's Club, or Trader Joe's. Ye Guofu remarked, "Why did I not start in the past but now? Because I see a new future, a new model, and a new prospect."

The success of the PangDongLai model has sparked positive changes in China's supermarket industry. However, whether this will genuinely revive Yonghui Supermarket remains uncertain, despite Ye Guofu's decisive investment.