Baiguoyuan, how can you lose 700 million by selling just one fruit?

Not long ago, Pagoda became a hot topic because it “lost 700 million in two years.” However, everyone who has paid with tears and gritted teeth at Pagoda may not have much sympathy for it.

After all, Pagoda has long been famous as the “Fruit Assassin” and the “Hermès of Fruits”.

When ordinary people visit Baiguoyuan, they must read the price clearly before buying. Otherwise, after the clerk neatly packs the bags and weighs them and quotes the price, you will have to bite the bullet and buy a 120 yuan Thai red pomelo, a 100 yuan box of cherry plums, and a 30 yuan rock sugar pear. I wanted to buy some fruit to reward myself as a wage earner after work, but after I paid the bill, I discovered that my wallet had been hacked and today’s work was in vain.

After experiencing such a painful consumption experience, everyone inevitably feels that even if Pagoda does not make a lot of money, it should at least break even.

But the fact is that Pagoda suffered a loss of approximately 386 million yuan in 2024, and another loss of approximately 317 million yuan in 2025. The total loss in the two years exceeded 700 million yuan [1].

Why is Pagoda, which sells fruits as luxury goods, still losing money?

01

Why do you need to be educated when you buy a fruit?

Fruits from Baiguoyuan are really not cheap. Prunes cost 34.9 yuan per catty, plums cost 41.9 yuan per catty, and grapes sold for 69.9 yuan per catty [21]. Just pick a few items and the total price can be over a hundred yuan.

With such a price, everyone will inevitably have questions: Why are the fruits from Baiguoyuan sold so expensive?

Pagoda’s explanation of the price once put itself on another hot search list.

In August 2025, a video of Baiguoyuan Chairman Yu Huiyong talking about fruit prices was widely circulated on the Internet. Yu Huiyong divides business into two types: one is “taking advantage of consumers’ ignorance” and the other is “educating consumers to be mature”. Pagoda falls into the second category. He also said that Pagoda will not pursue cheap prices in order to cater to consumers. He hopes to let consumers understand the quality of fruits and then make their own choices[2].

As soon as the remarks came out, controversy arose. No customer is willing to listen to an educational lesson from the boss after spending a high price.

Putting aside these high-profile words, What Yu Huiyong calls “educating” consumers actually refers to Pagoda’s attempt to use its own grading and service system to define high-end fruits.

When buying fruits at ordinary fruit stalls, you mainly rely on personal selection experience. To buy watermelons, you have to be good at photographing them, and to pick out apples, you have to be good at reading them. It’s hard to say whether the fruit you buy home will be sweet or not, it all depends on luck.

What Pagoda wants to do is reduce customers’ uncertainty when buying fruits.

It divides fruits into different grades such as signature fruits, A-grade fruits, and B-grade fruits, and evaluates them based on sugar acidity, freshness, crispness, tenderness, aroma, and safety. Pagoda attempts to use fruit grading labels to allow customers to directly judge the quality differences of fruits and then make choices based on their own tastes and budgets [3].

▲Paiguoyuan’s fruit standard system / Picture source: [3] Baiguoyuan. (n.d.). Fruit labeling system.

In order to make the fruit quality more stable, Pagoda also extends its management scope to planting, picking and transportation.

On the planting side, Baiguoyuan has introduced BLOF ecological planting technology, which means to improve the growing conditions of crops as much as possible through precise soil analysis and scientific fertilization design, so that fruits can perform better in terms of quality, yield and nutrition [4]. After the fruits are picked, Baiguoyuan cooperates with AgroFresh, a fruit and vegetable post-harvest technology company, to minimize the loss of fruits during the picking and sales process [5].

In addition to the fruit itself, Pagoda also provides after-sales protection. After customers purchase eligible products, they can apply for a refund within 7 days of receiving the goods. Generally, there is no need to provide a receipt or return the physical product[6].

Just listening to Baiguoyuan’s business strategy, everyone can understand why it sells fruits so expensively.

However, what is unsatisfactory is that Pagoda’s quality promises are often not fulfilled. In 2022, two Pagoda stores in Chengdu and Wuhan were exposed for problems such as using spoiled fruits to make fruit cuts and selling small pineapples as large pineapples [7].

In 2024, another Pagoda store in Wuhan was photographed cutting partially rotten apples into pieces and using 2J cherries to distribute to customers who ordered 4J cherries [8]. On social platforms, you can often see consumers complaining about the quality of Pagoda fruit. I paid a higher price than elsewhere, but the fruits I bought were not fresh enough.

Why does Pagoda’s carefully crafted high-end positioning fail to work in actual operations?

02

Fruits are expensive to sell, but you can’t make money

In fact, Pagoda’s fruit business did make money in the past. In 2022, Pagoda will earn approximately 323 million yuan, and in 2023, it will earn approximately 362 million yuan[1].

Why was it possible to make money before but not now? This starts with its business model.

Pagoda was able to expand rapidly in the past largely relying on the franchise model. That is to say, franchisees pay to open stores, and Pagoda headquarters earns income by supplying goods to franchise stores and collecting franchise fees. In 2023, the number of Pagoda stores nationwide will reach 6,093, of which 6,081 are franchise stores [9].

There are indeed consumers willing to pay for the high-end fruits in these stores. The signature fruits and A-grade fruits in Baiguoyuan belong to higher grades. In 2022, these two types of fruits together contributed about 70% of the retail sales of Pagoda stores [10]; in 2023, this proportion was 66.5% [9], and in 2024 it dropped to 62.8% [11]. High-end fruits have always been the main sales force of Pagoda.

However, there is still a difference between how much money a store sells and how much money the headquarters ultimately earns.

Pagoda once gave an example in its prospectus: Suppose a customer spends 200 yuan to buy fruits at a franchise store, of which 140 yuan is the payment to the headquarters, 10 yuan is the royalties, and the remaining 50 yuan is settled to the franchise store [12].

The 50 yuan received by the franchise store must be used to pay for rent, employee wages, water and electricity, as well as fruit loss and other expenses. The headquarters also did not make money as expected. Although it has received payment, procurement, transportation, and warehousing all cost money, and the real profit it can retain is very limited.

Moreover, selling fruit is a business that races against time. The longer the fruit is stored, the less fresh it becomes. If it sells slowly, it has to be discounted to sell it before it spoils.

Once the fruit becomes unsalable, there is no way to return it to the headquarters. According to the arrangements disclosed in Baiguoyuan’s prospectus, goods sold to franchisees generally cannot be returned except for confirmed defective goods, delivery errors, etc.[12]

For franchisees, when business is good, the money earned from selling fruits every day may be enough to cover rent, labor, losses and other expenses. But once there are fewer customers, you may not be able to make much money in the end after a busy day.

Pagoda’s operating data gradually reflects this pressure. As early as 2023, although the number of Pagoda stores was still increasing, the headquarters’ revenue from selling fruits and other food to franchise stores had dropped from approximately 8.851 billion yuan in 2022 to approximately 8.5 billion yuan.[9]。

In the next two years, Pagoda began to adjust its stores on a large scale. At the end of 2023, Pagoda still had 6,093 stores[9], which would be reduced to 4,468 stores by the end of 2025[1]. In just two years, the number of stores decreased by 1,625.

At the same time, the sales scale of Pagoda’s entire retail network is also shrinking. In 2024, the total retail sales of Pagoda’s offline stores and online channels will be approximately 12.703 billion yuan; by 2025, there will only be approximately 10.342 billion yuan left, a decrease of approximately 18.6% in one year [13].

If franchise stores do not do well, the headquarters will naturally be affected. In 2023, Pagoda’s revenue from selling fruits and other food to franchise stores will still be approximately 8.5 billion yuan, which will drop to approximately 7.396 billion yuan in 2024 [11], and further drop to approximately 5.912 billion yuan in 2025 [1].

In order to regain customers, Pagoda tried to sell fruits cheaper. Starting from 2024, it has added some fruits with thinner margins and more attractive prices[11].

But there are also difficulties in lowering prices. In 2023, Pagoda’s operating income will still be 11.391 billion yuan, which will drop to 10.273 billion yuan in 2024. Gross profit dropped directly from 1.315 billion yuan to 764 million yuan, a decrease of about 550 million yuan in one year.[1]。

In order to attract more consumers, Pagoda renovated stores, carried out marketing activities, hired “good life ambassadors”, etc. Its sales expenses in 2024 will reach approximately 605 million yuan, which is approximately 123 million yuan more than the previous year [11].

Pagoda, which originally hoped to sell its products at a good price based on high quality, is finding it increasingly difficult to find a balance between quality, price and cost.

03

Baiguoyuan, where is the way out?

Wait, Pagoda Garden’s business is declining, is it because everyone doesn’t like to eat fruits anymore?

No, judging from national consumption data, the situation is exactly the opposite. In 2022, the per capita consumption of fresh melons and fruits nationwide will be approximately 54.7 kilograms, which will increase to 60.8 kilograms in 2023 and 61.6 kilograms in 2024 [14].

Everyone still loves to eat fruits, but those expensive fruits in the past are no longer so rare.

The so-called high-end fruits usually refer to fruits that are expensive and in short supply and are often used as holiday gifts. For example, cherries, durians, sunshine rose grapes, etc. were once considered high-end fruits in everyone’s eyes.

However, as the scale of cultivation expands and imports increase, many fruits that were rare in the past are now common in ordinary supermarkets and fruit stands. Taking cherries as an example, China will import about 584,900 tons of fresh cherries in 2025, an increase of about 29.7% over the previous year. During the same period, the average import unit price calculated by import value and weight fell by approximately 28.8%[15].

▲Chilean cherries used to be expensive, mainly because they were limited by the inefficiency of sea transportation at that time. Most of them needed to be imported through extremely costly air charter flights. At that time, production capacity was limited and the market was in short supply / Tu Chong Creative

The same goes for Sunshine Rose, once called the “Hermès of grapes.” In 2024, the transaction volume of sunshine roses in Jiaxing Fruit Market increased by 4.4% year-on-year, but the transaction volume dropped by 12.1%. The average wholesale price for the year was about 12 yuan per catty [16].

As high-end fruits become more and more popular, Pagoda’s past path is not so easy. What’s more, Baiguoyuan wants to do business, and other fruit sellers are also thinking about it.

Xianfeng Fruit, which is most similar to Baiguoyuan, also specializes in fruit franchises and has its own origin procurement and cold chain distribution system. It’s also a fruit specialty store. What reasons do customers have to buy from Pagoda?

There is also Hema, which focuses on quality and peace of mind. When customers purchase daily ingredients, they can buy fruits conveniently, saving time and effort. Some of Pagoda’s flagship high-quality fruit brands can also be purchased at Hema[17]. Hema is also building its own fruit supply chain. It will use store and online sales data to determine consumers’ shopping preferences, and cooperate with planting bases to arrange production and supply [18].

▲Hema’s fruit business is not only about fresh fruits, it also produces cut fruits, frozen fruits and juices, driving sales by diversifying product types / unsplash

Fat Donglai puts great effort into fruit quality control and after-sales service. If the durians purchased are not full enough or the fruit is not tasty, consumers can apply for a refund [19].

Online shopping gives everyone more choices. Fruits that used to be expensive in the past can now be ordered in the live broadcast room and farmers will ship them directly from the place of production.

For Pagoda, these competitions are difficult. Because the price of high-end fruits is not low, the number of customers who are willing to pay high prices for long-term purchases is relatively limited. Pagoda relies on the franchise model to open thousands of stores. Each store needs to have enough customer traffic to maintain daily operations. You may be willing to occasionally spend a high price to buy a box of high-quality fruits to treat yourself, but it is not that easy to spend dozens of yuan more every time you buy fruits.

Pagoda’s paid membership business can also reflect some changes. At the end of 2023, Pagoda had more than 1.17 million paid members[9]; by the end of 2024, it had dropped to about 850,000[11].

The flow of customers decreased, and Pagoda began to change its original business methods.

The first is to use online channels and community WeChat groups to sell fruits, allowing customers to buy affordable products more conveniently. In the first half of 2026, it launched the “Surprise Every Day” campaign, which launched a special fruit every day through the store’s WeChat group, trying to get customers to develop the habit of frequent purchases. In the first half of the year, the amount of goods sold through WeChat group Solitaire exceeded 87.6 million yuan[20].

If customers don’t want to come to the store to buy fruits, they can also sell the fruits to other stores. Pagoda cooperates with seven regional retail brands to try new businesses such as “fruit + snacks” and community discount supermarkets. It is Pagoda that uses these ready-made stores of local brands to use its purchasing, distribution and quality management capabilities in more places.

In the first half of this year, these cooperative stores brought about 720 million yuan in merchandise sales revenue to Pagoda [20].

The new business has brought in revenue, and Pagoda’s overall operating conditions have improved. In the first half of 2026, Pagoda finally turned a profit, with profits attributable to shareholders of the parent company of approximately 33.56 million yuan. Compared with the loss of approximately 342 million yuan in the same period in 2025, there has indeed been an improvement [20].

但是， Although Pagoda has found a new source of income, it still cannot solve its core dilemma: Why do customers come to Pagoda to buy fruits?

▲Customers have different preferences when choosing fruits. Some people focus on size and appearance, while others care more about sweetness, taste and freshness / Tu Chong Creative

In the first half of 2026, the total retail sales of Pagoda’s original fruit retail stores was approximately 5.169 billion yuan, a decrease of 9.5% compared with the same period last year. In other words, although Pagoda has increased its revenue through new businesses, its traditional fruit retail business still performs poorly [20].

Fruit quality is highly affected by weather, ripeness, transportation and storage conditions. It is difficult for Pagoda to sell high-end fruits with stable quality in thousands of franchise stores. The more expensive the fruit is, the higher the quality requirements of customers. Just one drop in quality may affect customers’ trust in the brand.

Pagoda’s problem is that it firmly believes that its prices are reasonable, but it cannot convince customers to pay the premium. Instead of asking consumers to become mature, Pagoda should lower its profile and use real quality and experience to prove to customers that the money spent is worth it.

Zhong Xuegao’s lesson is there. Brands that try to educate consumers may end up being educated by consumers.