Grocery Delivery Service Missfresh Thrives, Unstirred by Regulatory Crackdowns

China's grocery delivery sector wasn't hurt in the recent crackdowns; rather, post-Covid-19 consumer habits fueled the thriving market.
Oct. 09, 2021 18:12
Grocery Delivery Service Missfresh Thrives, Unstirred by Regulatory Crackdowns

(CapitalWatch, Oct. 9, New York) Grocery delivery company Missfresh (Nasdaq: MF) brings high-quality goods to its customers while also helping traditional retailers and rural farmers benefit from their services. 

The company, backed by Tencent (OTC: TCEHY; HKEX: 0700), offers fresh produce, beverages, meat and dairy products, as well as frozen and packaged foods, and delivers orders to customers in 37 minutes on average.

The grocery delivery industry in China has seen significant and continuing growth recently. The popularity of online delivery especially surged after the outbreak of Covid-19. 

According to a recent report from the professional market research and consulting company iResearch, the fresh grocery delivery market could grow from 5 trillion yuan in 2020 to 8.6 trillion in 2025. And Missfresh's offerings and business model have made the company one of the top players in this market.

Recent regulatory crackdowns in certain sectors of the Chinese market including education and gaming have caused uncertainty in their profitability, but the grocery delivery sector hasn't suffered from the tightened rules. 

Missfresh also doesn't own any data that could pose a threat to national security, so the company doesn't have to worry about the recent cybersecurity crackdown. For the data it uses, Missfresh is compliant with all the government regulations that do apply to the company.

Not only is Missfresh compliant with government regulations, the company is supported by the government for its efforts to provide small- and medium-sized grocery markets with digital services and create more jobs for rural farmers. 

The company's business model focuses on providing its services while having a positive impact on local communities instead of dominating the market alone. Missfresh works to bring more customers and profit to fresh markets by introducing e-commerce to the businesses. The company uses its digital resources and business insight to help small businesses operate both offline and online efficiently. With the company's help, fresh markets are able to modernize parts of their business instead of being left behind as e-commerce continues to grow in popularity.

Missfresh also coordinates extensively with upstream suppliers including agricultural producers to make plans that best suit the customers' shopping preferences. It also develops programs to promote local brands in villages which lines up with the government's strategy for rural revitalization. The company especially helped small businesses that were hit badly by the pandemic.

The Shanghai Municipal Commission of Commerce issued a formal letter of gratitude to Missfresh for its help in distributing over 40 of Kashgar's local specialties across China in both remote areas and big cities. The company was also recognized by the Chinese Academy of Information and Communications in a report on mobile internet data security for being an excellent case of "mobile internet enterprise practice."

Missfresh doesn't just stand out because of its commitment to helping communities or the bright pink you can see on its uniforms, locations, and delivery vehicles. The company also sets itself apart by bringing a wide selection of high-quality goods to its customers in under an hour. Missfresh can get its goods to customers so quickly in part because it pioneered the use of the distributed mini-warehouse model in China. 

In this model, the company sources its products directly from their origin and transports them from the large quality check centers to smaller warehouses with chilled and frozen storage. The mini-warehouses are usually located in neighborhoods, which cuts down delivery time and makes providing fresh foods easier. 

Missfresh's millions of users are usually those who lead a busy lifestyle and are used to online shopping. 

The company also said many customers are mothers to young children who might find it hard to leave the house to go to the store. The service also offers several ways to order online including a mini-program in WeChat. 

The company went public this summer, selling 21 million American depositary shares in its $273 million initial public offering. The company reported $293.4 million in revenue in the second quarter of 2021, a year-over-year increase of slightly over 40%. It also reported that it fulfilled 23.8 million orders in the second quarter, priced at just under $15 on average.

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