Who has abandoned Pagoda, which has shut down more than 1,600 stores in two years?
The fruit business has an inherent natural challenge: when you stand in front of the shelf, it is very hard to judge whether a peach is sweet or a box of blueberries is sour. Buying fruit is just like opening a blind box. Any party that can turn this blind box into a predictable choice can earn a premium.
1,625 stores were shut down within two years, averaging more than two closures per day. The revenue dropped from 11.391 billion yuan to 8.174 billion yuan, with consecutive losses for two years. In 2025, the membership fee revenue also plunged by 53% year on year. The "peace of mind fee" that Pagoda used to collect from consumers and franchisees can no longer be charged smoothly now.
One of the most powerful moves Pagoda made in its early stage was the "no-questions-asked return for unpalatable products" policy: no refund will be rejected even if the fruit is not sweet, has been cut and tasted, or there is no specific return reason.
This policy successfully turned fruit from an "experience good" into a "credence good".
The extra money consumers paid was for a sense of security.
In the era when high-quality fruits were not common, this sense of security was extremely scarce.
Pagoda opened stores in residential communities, made the "return for unpalatable products" its iconic feature, and consumers were naturally willing to pay a little more for it.
Franchisees were also willing to follow the headquarters, because this iconic brand could reduce customers' hesitation and bring stable passenger flow.
The Pagoda headquarters earned the price difference by supplying goods to franchisees, forming a cycle of "the brand gains trust, franchisees gain customer flow, and the headquarters gains revenue from goods supply".
The problem is that the trust fee has a prerequisite: the existence of information asymmetry is a must.
In the past, the quality of individual fruit stores varied unevenly: the same kind of fruit was sweet in one store and sour in another, and consumers could only consider themselves unlucky when they bought bad fruits. Now consumers have far more channels to get access to product quality information.
Sam's Club sells fruits by the case, Freshippo provides instant delivery, community group-buying groups deliver goods directly to the community gate, and the proprietress of individual stores decides the discount time on her own with flexible low prices. Consumers no longer need to pay such a high premium for "the certainty of buying good fruits".
Taking Hangzhou as an example, a juicy peach in Pagoda's store costs 12.8 yuan, and a box of blueberries costs more than 24 yuan. In an individual fruit store 150 meters away, 5 oranges only cost 3 yuan. How will consumers choose? The answer is quite obvious.
More importantly, Pagoda's quality signal is also weakening.
During the "3·15" period in 2024, its Wuhan stores were exposed to using rotten apples to make high-priced cut fruits, and selling overnight fruits as fresh products. The accumulated number of complaints on the Black Cat complaint platform reached as high as 2,278.
When the "high quality" promise is slapped in the face by reality, the high price will turn from a "quality premium" into a "fruit price gouger".
In August 2025, when Yu Huiyong, the founder, responded to the complaint of "too expensive fruits", he said: "We will not cater to consumers, we are educating consumers to be more mature." This is the producer sovereignty thinking, which is a serious communication mistake in the real retail industry.
The standard for consumers to be mature is that they will compare products by price, quality and convenience. Community group-buying and Sam's Club have already placed the comparison samples in front of them.
Pagoda wants to educate consumers, but consumers are educating Pagoda instead.
So Pagoda started to cut prices for promotion.
In 2025, the company held 22 "Good Fruit Gratitude" campaigns, launched cost-effective products such as citrus and litchi, with a total order volume of 25 million, sales revenue exceeding 500 million yuan, and attracting more than 29 million in-store customers.
The effect is positive, but the cost is also huge.
In 2025, Pagoda's gross profit was 597 million yuan, a sharp drop of 21.9% year on year, and the gross profit margin was only 7.3%.
For every 10 yuan of sales, the gross profit is only more than 70 cents, not counting rent, labor and loss. The more promotions are carried out, the thinner the profit margin will be.
Pagoda's "peace of mind fee" has not disappeared, but it has been re-priced by the market. If the price is set too high, consumers will not pay for it; if the price is set too low, the company cannot make profits. This contradiction is directly passed on to the franchisees' books.
Store closures first appear on franchisees' accounts, and the headquarters' financial statements only reflect the situation later
Pagoda's revenue is highly dependent on franchised stores. In 2025, the product sales revenue of franchised stores reached 5.912 billion yuan, accounting for 72.3% of the total. But this core engine is losing speed.
As of December 31, 2025, the total number of Pagoda's offline stores was 4,468, a net decrease of 659 stores compared with 5,127 stores at the end of 2024. Compared with 6,093 stores at the end of 2023, 1,625 stores were closed within two years.
The store network that used to spread all over the streets and alleys has shrunk by more than a quarter in two years.
The headquarters explained that the company encourages franchisees to move out of high-rent areas, or close poorly operated stores and stores with excessively high labor costs, aiming to optimize the store network and improve efficiency.
This statement is not very sincere. The real logic is that before the headquarters' revenue declines, the franchisees' balance sheets have already collapsed first.
The surface of the franchise model is "turn employees into franchisees and turn franchisees into employees", and its essence is that the headquarters externalizes the risks of rent, labor, loss and inventory to franchisees.
The headquarters earns the supply price difference, and the franchisees earn the terminal markup profit.
When the market is good, both parties share the profits; when the market is bad, the franchisees bear the losses first.
High rent, forced overstocking, distribution of unsalable products, plus low-price interception by community group-buying, finally make franchisees realize that they are not starting a business, but working for the brand, while also taking capital risks.
In 2025, the total sales revenue of franchised stores decreased by about 20% year on year, which is mainly attributed to the reduction in the number of franchised stores and the decline in the average revenue of single stores.
In the environment of weakening consumption willingness, the loss of franchisee confidence has become an unavoidable pain point for Pagoda.
If franchisees cannot make money, they will reduce orders, delay payments, and close stores. The revenue decline on the headquarters' financial statements only confirms the contraction that has already occurred in the channel side with a lag.
There are also Pagoda's capital moves. On October 9, 2025, the company completed the placement of 279.5 million new H shares, receiving net proceeds of about 325 million Hong Kong dollars, which will be used to pay trade payables in daily business, repay bank loans and supplement general working capital.
In the same period, employee welfare expenses (excluding layoff compensation) were 528 million yuan, down 20.3% year on year; R&D expenses dropped from 136 million yuan in 2024 to 105 million yuan, and the number of R&D personnel was reduced from 336 to 262.
Isn't this a typical response to "balance sheet recession"? No expansion, repay debts first; no investment in the future, ensure cash flow first.
The fruit retail business itself is a tough business. According to Frost & Sullivan, the loss rate in the fruit retail industry is generally between 35% and 45%. Even Dole, the global leading fruit distributor, has a gross profit margin of less than 10%. This means that franchisees are extremely sensitive to costs.
If the rent is a little higher, the loss is a little larger, and the overstocking is a little more, the profit will be completely eaten up.
In the past, Pagoda pursued high store density, believing that scale can bring efficiency. However, excessively high density will cause internal customer diversion, and high-rent low-efficiency stores will drag down franchisees, while forced overstocking and distribution of unsalable products will worsen the channel relationship.
Pagoda later reflected internally that "scale ≠ efficiency ≠ health", which is actually the root of the problem.
In the first half of 2026, Pagoda continued to optimize the single-store investment model, lower the franchise threshold and promote the reform of existing stores. The fruit retail store network increased by 372 to 4,758 compared with the same period of last year, and the store network returned to the growth track.
However, the total retail sales of traditional directly-operated and franchised stores was only 5.169 billion yuan, down 9.5% year on year.
The product sales revenue of franchised stores was 3.081 billion yuan, accounting for 61.5% of the group's total revenue, while the proportion was 70.3% in the same period of 2025.
Traditional franchised stores are still the largest source of revenue, but the revenue scale has increased slightly, which is difficult to drive the overall revenue to grow rapidly. The performance of the terminal market shows that franchisees can earn less money, and simply increasing the number of traditional franchised stores can hardly bring simultaneous growth of revenue and profit.
The essence of the store closure wave is the contraction of channel credit. The headquarters says it is "optimizing the network", but what really needs to be repaired is the franchisee's profit model.
Only when franchisees can make ends meet, can the headquarters' financial statements be stable.
Otherwise, the rebound in the number of stores is just a numbers game.
It is difficult to give a unified answer when you want to be both high-end and low-cost
In its latest financial report, Pagoda positioned itself as "the expert and leader of high-quality and cost-effective fruits" as its core strategy.
From my point of view, this is actually contradictory.
The core of brand positioning is to occupy a clear anchor point. High-end means high price, while cost-effective means low price. If you emphasize both at the same time, consumers will not think you are "all-round", but will think you are "split". People who buy high-end fruits will think you are not high-end enough, and people who pursue low prices will think you are still too expensive. When the brand tries to obtain both high-end profits and low-price traffic, the result is often unsatisfactory on both sides.
Pagoda used to position itself as a mid-to-high-end boutique fruit brand, with its pricing generally 20% to 50% higher than other channels. The meme "people with a monthly salary of 20,000 yuan can't afford Pagoda" has long become a popular online joke.
At the moment when consumption is becoming more and more rational, more than 70% of young people put cost performance first when shopping. Consumers are not unwilling to pay for high quality, but the premise is that the price matches the quality. When the price of Pagoda's fruits is very high, but the quality fails to meet consumers' expectations, doubts and dissatisfaction are inevitable.
In addition, the rise of community group-buying has made consumers find that they can also buy fresh fruits with good quality at relatively low prices. Sam's Club, Freshippo and roadside individual fruit stores are taking away Pagoda's customers.
I am one of the "runaway" customers: "Pagoda's store is right at the gate of our community, and I used to go there often. But now, there is a special group-buying group in our community, which is very affordable. The group-buyed fruits will be placed directly at the gate of our community, which is very convenient to pick up."
What does that mean? Obviously, consumers have not stopped buying fruits, they just left Pagoda.
In 2025, through 22 "Good Fruit Gratitude" campaigns, Pagoda achieved a total sales revenue of more than 500 million yuan, attracting more than 29 million in-store customers.
Community operation is also being strengthened. The total number of WeChat communities has reached 32,200, and the total number of members across all channels is 95.3 million.
But the membership fee revenue plummeted by 53% year on year.
The total number of members is growing, but the willingness to pay is declining.
This shows that consumers are willing to maintain the connection, but no longer willing to pay a premium for membership status.
Affected by the macro environment, customers have become more cautious in making decisions about paid membership, and the company has to shift its focus to deeply cultivating the existing member group.
Pagoda also invested in and took control of the hard discount supermarket "Wangpi Matou".
Wangpi Matou focuses on the hard discount model of snacks and general merchandise, which mainly solves the problem of overcapacity in the fruit supply chain. Pagoda's logic may be that the main brand is constrained by its high-end positioning, so it is difficult to reduce prices significantly; discount stores can use lower pricing to target price-sensitive consumer groups and cover markets that were previously unreachable.
However, discount stores only solve the channel problem, not the cognitive problem.
The real dilemma of Pagoda is that consumers no longer believe in its high price — the quality promise represented by the name "Pagoda" is no longer enough to support its above-market price.
Opening a discount store and selling cheap fruits under another brand does not repair the cognitive rift of the main brand.
A more reasonable approach is to implement multi-brand isolation.
Pagoda keeps its quality benchmark and gift scenarios, Banguo acts as the supply chain platform, Wangpi Matou focuses on hard discount, and Qixing Alliance focuses on light asset cooperation. Each brand only answers one question, instead of letting consumers do reading comprehension. Once the main brand carries both high-end positioning and cost-effective positioning at the same time, the public cognition will be confused. Consumers only need a simple reason: why do I enter this store? Is it to buy assured fruits, cheap fruits, or cut fruit drinks? The simpler the answer is, the higher the conversion rate will be.
In the first half of 2026, Pagoda achieved a revenue of 5.008 billion yuan, a year-on-year increase of 14.5%; the profit attributable to owners of the company was 33.564 million yuan, compared with a loss of 342 million yuan in the same period of last year; the gross profit was 609 million yuan, a year-on-year increase of 182.5%, and the gross profit margin rebounded to 12.2%.
From the data point of view, it seems that the turning point has really come.
However, the total retail sales of traditional directly-operated and franchised stores was 5.169 billion yuan, down 9.5% year on year, and the real increment came from new businesses.
The 1,951 cooperative stores under Qixing Alliance contributed 720 million yuan of consolidated revenue, with an additional gross profit of 55.6 million yuan; the B2B platform Shenzhen Banguo achieved a GMV of 1.401 billion yuan, a year-on-year increase of 21.9%, of which 701 million yuan of direct sales revenue was consolidated into the statements.
The total number of stores under full-caliber definition soared to 6,709, a year-on-year increase of 53%, which is mainly driven by the light-asset Qixing Alliance business.
This means that Pagoda is transforming from a heavy-asset franchised retailer to a light-asset supply chain platform, but the positioning rift has not been repaired. Consumers are less willing to visit Pagoda's stores, because they can't figure out what Pagoda on earth represents.
In the high-price era, it represents a sense of security; in the price reduction era, it represents promotion; when it shouts both high-end and cost-effective positioning, it represents contradiction.
Once the brand cognition becomes blurred, the passenger flow will flow to competitors with clear labels.
Pagoda's second growth curve is more likely to lie in the supply chain and B-end market
The fruit retail business is an inherently tough business, with low gross profit, high loss, non-standard products and fragmented channels, so it is very difficult to form a national chain monopoly.
The final pattern may be that instant retail takes over