Yonghui sells stake in Lianhua to Yiguo

Date : 05 January 2017

Chinese retailer Yonghui Superstores has announced that it has agreed to transfer all its shares in Shanghai-based Lianhua Supermarket to a fresh produce ecommerce operator Yiguo, in transactions worth HKD950m (US$122.4m).

Disposing of unprofitable overlapping business

Since becoming the second-largest shareholder of Lianhua in April 2015 with 21% of its shares, Yonghui has been involved in improving Lianhua’s branch-level retail management. However, Lianhua has been facing challenges since 2015 with declining sales and profits. In the first nine months of 2016, it lost RMB188m (US$27.1m).

Yonghui said in a filing on the Shanghai Stock Exchange that it made the decision because of an overlap in businesses, and that while the two parties would no longer have equity connections, there would still be potential for cooperation over store operations and purchasing.

Ecommerce operator scaling up

The sale is also an indication that Yiguo, the well-known Chinese fresh produce ecommerce leader, is mapping out its offline business strategies. Yiguo has engaged in a partnership with Suning Supermarket’s online “Su Xian Sheng” section by providing the supermarket with a variety of fresh produce products (4000 SKU in total). Meanwhile, Yiguo is also the supplier for Suning’s O2O community shops to enhance consumers’ offline shopping experience.

Last month, Yiguo celebrated its eleventh anniversary by announcing its updated business strategy and its success in C+ round financing. The total financing of Yiguo in 2016 reached US$500m.