Recently, a hyperbaric oxygen equipment in a pet hospital in Guangzhou was suspected of exploding. The door of the instrument ejected and hit a customer's face, causing his skull to fracture. When he was sent to the hospital, he was initially diagnosed with a high probability of brain death. After more than 20 days of treatment, the treatment was ineffective. In the end, it was regrettable. passed away.

While mourning the tragic experience of the deceased and their families, the hospital involved in the accident was exposed to the public.

Currently, the Jiangnanxi branch of the hospital where the incident occurred, Ainobest Animal Hospital, has been sealed. The operating entity, Ainobest, has suspended the use of multi-functional oxygen therapy systems from all manufacturers and is conducting a dragnet on all branches. Safety inspection and rectification. The specific cause of the accident is still under investigation.

It is understood that the hospital is affiliated to China The largest pet care platform - Xinruipeng Pet Medical Group (referred to as: Xinruipeng).

Xin Ruipeng, founded in 2013, has successively received investment from many star capitals such as Dachen Capital, Hillhouse Capital, CICC, Tencent Investment, and Nestlé. With the protection of capital, Xin Ruipeng has developed greater ambitions and continues to expand rapidly through investment and mergers and acquisitions.

From 2019 to 2022, Xinruipeng acquired a total of 1,290 pet hospitals. As of the end of 2022, it has a total of 23 pet hospital brands and 1,891 pet hospitals, covering 31 provinces and 113 cities.

However, this pet empire, which was ripened by capital, has not played a leading role in the industry, and scandals have continued.

In January 2023, Xinruipeng submitted application documents to the U.S. Securities and Exchange Commission and planned to list on Nasdaq. However, during this period, the pet hospital owned by Xinruipeng was exposed to the incident of "doctors abusing cats", and eventually its listing process came to nothing.

Nowadays, looking through major social media platforms, there are countless "complaint posts" about Xinruipeng's pet hospitals.

01

A super giant ripened by capital

Looking back at the development history of Xin Ruipeng, it can be traced back to 1998, when Ruipeng was established in Luohu, Shenzhen. Peng Pet Hospital.

In fact, in its initial stage, Ruipeng Pet Hospital developed relatively slowly. It was not until 2014 that it expanded out of Guangdong and entered the Hunan market. In September of the same year, Ruipeng completed its first round of angel round financing. In 2015, Ruipeng continued to move north and settled in Shanghai. In December of the same year, it received Series A investment from Dachen Venture Capital.

In 2016, Ruipeng Pet Hospital acquired the pet care brand Meilian Zhonghe, conquering the North China market, and successfully listed on the New OTC Market in the same year, becoming the largest pet hospital chain in China at that time. Although it has a history of more than ten years, the total number of Ruipeng's hospitals at that time was less than 70, which was not comparable to the nearly 2,000 hospitals later.

The gears of fate changed at this time. Hillhouse Capital has entered the pet industry as a dark horse, and has specially set up an investment platform focusing on the pet industry, Hillhouse Group.

Backed by abundant capital, Lingyu Group launched a horse-racing model to lay out the pet industry ecological chain, quickly catching up with latecomers. It was also at this time that Hillhouse extended an olive branch to Ruipeng. In March 2018, Hillhouse Zhang Lei proposed a merger invitation to Ruipeng founder Peng Yonghe.

At this time, Peng Yonghe seemed to realize that if he wanted to leverage the overall change of a traditional industry, an unprecedented behemoth was needed.

After the conversation, Ruipeng decisively delisted from the New Third Board, reached strategic cooperation with Hillhouse, and integrated and reorganized more than 700 pet hospitals invested by Hillhouse. At this point, New Ruipeng, a super giant composed of China's two major pet medical giants, was born.

New Ruipeng, which was on the fast track, has since received multiple rounds of financing.

Among them, in September 2020, Xinruipeng completed hundreds of millions of dollars in financing led by Tencent and followed by Country Garden Venture Capital, Snow Lake Capital and other institutions. At that time, Xinruipeng’s valuation may have already reached reaching nearly 30 billion yuan.

In addition, one month before its IPO in the United States, Xinruipeng received strategic investment from the Nestlé Group and stated that Nestlé Purina would carry out strategic cooperation with Xinruipeng to jointly explore the Chinese pet market.

As of the last version of the prospectus, Hillhouse Capital is the largest shareholder of Xinruipeng, with a shareholding ratio of 35.8%, and Xinruipeng Chairman Peng Yonghe holds 31.8%.

It can be seen that whether it is the rising valuation or the successful listing in the United States in the future, Hillhouse may become the ultimate winner.

02

The radical expansion of heavy assets has laid hidden dangers

After injecting capital blood, New Ruipeng accelerated the expansion model of investment and mergers and acquisitions. The prospectus shows that since 2019, Xinruipeng has acquired a total of 1,290 pet hospitals in three years. As of the end of 2022, Xinruipeng has a total of 1,891 pet hospitals.

During this process, Xinruipeng’s business structure has also changed, extending from medical care and beauty to the entire pet industry chain ecosystem.

Currently, Xinruipeng takes pet care services (including medical treatment, nursing and beauty care), supply chain services and local services as its three main business pillars. In addition, it has also expanded into third-party diagnosis, veterinary retraining, and marketing. services and marketing-as-a-service.

The New Ruipeng Empire continues to grow. From 2020 to 2022, Xinruipeng's operating income increased from 3.008 billion yuan to 5.740 billion yuan, with a compound annual growth rate of 38.14%. Among them, pet care service revenue accounts for more than 50% and is the main source of revenue.

According to Frost & Sullivan, Xinruipeng is the largest pet care platform in China and the second largest in the world in terms of number of hospitals and pet care service revenue in 2021 and 2022 Pet care platform.

The asset-heavy model of conquering cities and land has indeed made Xinruipeng become a "behemoth" in the industry in a short period of time, but it has also gradually fallen into the "scale trap".

According to common sense, Xinruipeng has nearly 2,000 pet hospitals, which is easier to achieve scale effects than the dozens of hospitals in the early days. However, it is calculated that from 2020 to 2022, Xinruipeng's single store revenue continued to decline, reaching 1.678 million yuan, 1.576 million yuan, and 1.5685 million yuan respectively.

In addition to the decline in revenue of a single store, high costs are also a major problem, of which manpower and rent have become the main components.

From 2020 to 2022, the labor costs of veterinarians, medical assistants and beauticians are 1.039 billion yuan, 1.552 billion yuan, and 1.583 billion yuan respectively, and the rental expenses related to hospital operations are 309 million yuan and 463 million yuan. yuan, 539 million yuan, accounting for 68.46%, 70.14%, and 72.18% of the total cost of pet care business.

This has also caused the gross profit margin of Xinruipeng’s pet care business to continue to decline, from 4.13% in 2020 to 0.88% in 2022. Based on past data, Xinruipeng's gross profit margin could be maintained at around 30% before the delisting of the New OTC Market, but by 2022 its gross profit margin has dropped to 5.55%.

From 2020 to 2022, Xinruipeng’s gross profits were only approximately 142 million yuan, 223 million yuan, and 319 million yuan respectively. During the same period, the net losses increased year by year, to 1.000 billion yuan, and 1.311 billion yuan respectively. , 1.417 billion yuan, with a cumulative loss of 3.728 billion yuan in three years.

Not only that, frequent mergers and acquisitions have also burdened Xinruipeng with a heavy burden of goodwill.

Based on the financial report data of the New Third Board period, at the end of 2017, Xin Ruipeng’s goodwill was only 2.1717 million yuan, but as of the end of 2022, Xin Ruipeng’s goodwill had reached 3.991 billion yuan, accounting for 10% of the total assets at that time. 39.6%, accounting for 55.97% of non-current assets.

From 2020 to 2022, the net cash used by Xinruipeng in operating activities continued to be negative, which were -476 million yuan, -1.167 billion yuan, and -577 million yuan respectively, which may indicate that it has The "hematopoietic capacity" to obtain cash flow is declining.

As of the end of 2022, the books include 567 million yuan in cash and cash equivalents and 1.165 billion yuan in restricted cash.

03

When will the industry chaos end?

Back to the Xinruipeng brand itself, as the largest pet medical institution in China, it includes 23 pet hospital brands, covering 31 provinces and 113 cities.

However, precisely because its brands are complex and span different regions, it is difficult for nearly 2,000 pet hospitals to achieve complete unified management and control. Even for similar brands, there will be problems with uneven diagnosis and treatment levels and service levels between different hospitals.

According to media reports, from 2019 to 2023, many related branches of Xinruipeng’s Meilian Zhonghe Animal Hospital and Barbietang Animal Hospital were involved in the use of human drugs on animals and the use of fake veterinary drugs. He received at least 17 administrative penalties for violations such as using radiation devices without a radiation safety license, engaging in animal foster care activities in animal clinics, and starting construction without submitting environmental impact reports for construction projects in accordance with the law. In addition, Xin Ruipeng also received a penalty decision for hiring staff who were not registered as veterinarians.

Working without a license is a major chaos in the pet market. Pet medical accidents occur frequently because of this. As the largest pet medical institution in China, Xinruipeng obviously does not play a leading role.

On the Black Cat Complaint Network, there are many complaints related to Xinruipeng’s hospital brands. It is no surprise that the fees are high. There are even packages that include hidden consumption, excessive medical treatment, minor illnesses and major treatments, and improper treatment leading to the death of pets. etc.

Source: Black Cat Complaints

In 2023, Xin Ruipeng, which is intensively preparing for the U.S. stock IPO process, was exposed to a video of doctors at its pet hospital beating cats, which shocked many pet owners. Resistance arises spontaneously. The recent "hyperbaric oxygen chamber murder case" has brought this resistance to its peak.

The case is still under investigation, but there is a high degree of discussion on the Internet. For example, does the pet hospital provide equipment standard operation instruction training? Does the equipment have regular maintenance and scientific management? Does the pet hospital provide customers with correct safety guidelines before pet treatment?

It is understood that relevant reminders are also seen in the operating precautions for the use of hyperbaric oxygen chambers: the cabin should be placed in a sparsely populated location as much as possible, and personnel should not be stationed beside the cabin for a long time during use. However, according to some pet owners, they usually stay with their pets during hyperbaric oxygen therapy and are not reminded to stay away from the equipment.

It can be seen that Xin Ruipeng, which strives to become a "behemoth" in the industry, does not have a perfect management system to match it, and the staff is mixed, which leads to the occurrence of tragedies again and again.

In fact, this is also what China’s pet medical industry needs to improve at present, that is, to build a standardized and standardized good ecosystem.

At present, China’s pet medical industry does not have special pricing standards, and the industry’s own guiding standards have not yet been released. There is no pet-related protection bill in China. Even if a pet dies mysteriously in the hospital, it is still a civil dispute. , it will not rise to the level of medical malpractice. At most, it will only be financial compensation without bearing corresponding responsibilities. This also makes many "black-hearted hospitals" emboldened.

Secondly, pets cannot self-report their condition and require professional pet medical staff to make judgments based on experience. However, there is currently a shortage of pet medical talents in China. According to official statistics, as of 2022, China will have 136,000 official veterinarians, 165,000 practicing veterinarians, and 177,000 rural veterinarians. According to the demand ratio for veterinary services per 1,000 people in developed countries, the shortage of practicing veterinarians in China is 300,000.

It can be seen that there is still a long way to go to realize the standardization, standardization and scientific development of the pet medical industry.

Peng Yonghe once said: "The industry facing life needs more warmth and must be as gentle as poetry."

However, as radical capital enters the living industry, "hairy children" have become commodities with a price tag. Xin Ruipeng should also look back and see whether he has lived up to his original intention.