US-listed fresh grocery e-commerce brand Dingdong Maicai revealed that it will cooperate with other brands to develop pre-cooked dishes for individual consumers, Cailian Press reported on September 22.
Ou Houxi, the employee in charge of Dingdong Maicai’s pre-cooked dishes, said that sales of pre-cooked dishes in Q4 last year accounted for 14.9% of the firm’s whole gross merchandise volume (GMV), and that the number is expected to increase in the future.
Dingdong Maicai achieved profitability in the second quarter, but firm founder and CEO Liang Changlin admitted that losses will emerge again in Q3, and that the company will strive for profits at the end of this year. The pre-cooked dishes business is also regarded as an important link to achieve this target.
Dingdong Maicai established a pre-cooked food division in February of this year, as a first-level department in the company. At present, it has nearly 30 R&D personnel and more than 40 factories, including four self-operated factories.
But compared with traditional pre-cooked dishes enterprises, Dingdong Maicai has no advantage in reducing costs. The quality control, logistics and warehousing of retail enterprises have high cost pressure. Moreover, the stock keeping unit (SKU) advantage of Dingdong Maicai is not obvious due to its limited storage capacity. Ou said that there are about 1,000 SKUs in the new business arena in the whole country, and about 400-500 SKUs in Shanghai alone.
In the first half of 2022, retail consumption remained weak, with sales of pre-cooked rice, noodles and meat maintaining growth, according to research by Central China Securities. Emerging categories, such as pre-cooked dishes and seafood, are doubling in growth.
Individual customer demand for pre-cooked dishes mainly lies in taste and convenience. However, controversies over the nutrition and quality of pre-cooked dishes are also affecting their consumption desire.
Ou revealed that the main consumer groups for pre-cooked dishes are office workers aged 35 to 45. The challenge of reaching more consumers remains huge.
Xu Zhijian admitted that this situation may have a certain impact on the market in the short term, but that the key factors are still taste and quality. “The penetration rate of Dingdong Maicai’s pre-cooked dishes in first-tier cities has exceeded 40%, and it may reach 50% to 60% during holidays. Second- and third-tier cities have lower penetration rates – 35% in Hangzhou and 30% in Chengdu.”
At present, there are many retail platforms entering the pre-cooked dishes industry. In addition to Meituan, Freshippo, and Yonghui Supermarket, there are a number of players who are new to the field but are not performing well, such as Qudian and Shejian Yingxiong. After a bumpy attempt at livestreaming on Douyin, Qudian decided to shrink its pre-cooked dishes business by laying off staff, clearing inventory and terminating cooperation with suppliers.
Shejian Yingxiong was established by Charles Lu, the founder and former chairman of Luckin Coffee. Targeting individual consumers, it adopts Luckin Coffee’s strategy of “heavy marketing + subsidy + promotion + fast expansion.” But its first store in Beijing, which opened in January, closed just seven months later. Its mini-program on WeChat shows that many stores in Beijing, Zhengzhou, Guangzhou and other cities are not in normal business operations.