Yummy77.com Going Under, Who Will be the Next Casualty in Fresh Produce E-commerce?

In the afternoon of April 6, stories about serious problems happening at Yummy77.com started to surface. It was said that the company failed to meet its payment obligations in March, including employees’ salaries and social insurance as well as other debts, and was laying off all workers while the company would file for bankruptcy. Further reports said that Yummy77’s CEO， Mi Ping, has confirmed that the company ceased operation due to liquidity problems caused by disputes among the investors.

Yummy77 was established in 2013. It was originally part of TRUE, a subsidiary of the CP (Charoen Pokphand) Group, and operated as a B2C e-commerce company specializing in produce such as fresh fruits, eggs and poultry, seafood etc. It covered Jiangsu and Zhejiang provinces and claimed to be the leading fresh produce e-commerce player in the areas surrounding Shanghai. Produce Report published an article earlier （http://guojiguoshu.com/article/211）about Yummy77 receiving US$20 million investment from Amazon.com in 2015 and became one of the five partners of Amazon’s then newly launched fresh produce site.

However, Yummy77’s cooperation with the e-commerce giant failed to make any significant headway. Mi Ping once claimed to be using Amazon’s money to expand its markets to become national and yet Yummy77’s geographic coverage remained to be Shanghai, Jiangsu and Zhejiang. A major advertising campaign ran in Shanghai at the end of last year also showed little impact on the market.

Fresh produce e-commerce has been particularly buoyant in the last couple of years and seen as the Blue Ocean in e-commerce. Fresh produce e-commerce was a RMB54.2 billion (approx. US$8.4 billion) market in 2015, a 87% growth over the previous year. Because of this, huge investments were time and again poured into this industry. Produce Report has also reported previously that Yiguo.com had received its Series C round of financing in the amount of US$200 million from the Alibaba Group （http://guojiguoshu.com/article/2115）. Last month, it was said that Fruitday.com has achieved its Series D round of financing worth US$100 million. While this has not been verified, Fruitday’s US$70 million Series C round financing led by JD.com, and participated by the venture capital firms of SIG Susquehana and ClearVue Partners, was quite spectacular.

Despite news of investments aplenty, there are few profitable fresh produce e-commerce players. It takes very long for fresh produce e-commerce companies to break-even. Many are in the stage of “burning cash” and hence need financing from investors with deep pockets. In the case of Amazon.com, its interest in fresh produce may not compare with cross-border e-commerce. Should subsequent rounds of financing backing cannot be found, fresh produce companies cannot be sustained on their own.

Capital game naturally becomes fresh produce e-commerce players’ major competitive tool. Using price to compete for customers is one way but retaining loyal customers depends on product quality, supply chain, cold chain, and value added services etc. These also require big financial investments. For those without access to capital, it will be difficult to compete in the market.

Fresh produce e-commerce is forecast to soar to RMB 90 billion (US$13.9 billion) in 2016. While seemingly a very good industry, it has gone through rounds of re-structuring. The integrated capabilities of the players will be put through tougher tests in future.

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