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HaidilaoIt wants to increase the turnover rate by providing good services, but the service costs cannot be increased; it wants to increase the turnover rate by lowering prices, but it cannot compete with the affordable hotpot restaurants.

Author | Fu Rao

Editor | Wilderness

WeChat public account: Lueda Reference (ID: hyzibenlun)

The table turnover rate is a barometer of Haidilao’s stock price.

In 2018, Haidilao's overall turnover rate reached its peak, stabilizing at 5.0 times per day. The capital market applauded and the stock price rose by about 83% throughout the year. It was a high-spirited year. Two years later, when the turnover rate fell to 5.0 times per day, Haidilao's annual loss exceeded 4.161 billion yuan, and the stock price fell by more than 70%.

Therefore, at the end of 2021, Haidilao set itself the passing line of "overall table turnover rate 4.0 times/day" and stated: It will not expand on a large scale unless it reaches the passing line.

For consumer brands, successful expansion means acquiring new consumer groups and increasing both revenue and profits. But at present, Haidilao, which is stuck below the passing line, can only "twist the towel" from the existing market and strive to increase the turnover rate by reducing prices and providing alternative services.

After several efforts, Haidilao raised the overall turnover rate to 3.8 times/day in 2023 - still not passing.

It seems that the table turnover rate is becoming a shackle that is trapping Haidilao.

01 Price cuts bring good results, but fail to solve anxiety

According to "LatePost", a securities firm minutes showed that in the first half of 2024, Haidilao's average customer spending fell below 100 yuan - returning to the level of 2017.

In 2017, Haidilao was a star player in the hotpot market: it topped the hotpot rankings for four consecutive years, with annual revenue exceeding 10 billion yuan, becoming the first catering brand in China to do so. At that time, its biggest worry was how to raise prices, and it raised the average customer price of 97.7 yuan to prepare for its IPO the following year.

The wish came true in 2018: Haidilao achieved a per-customer price of over 100 yuan and was successfully listed in Hong Kong. By 2020, Haidilao's per-customer price had soared to a peak of 110 yuan, while the mainstream consumption price of the entire hot pot industry was only 50-60 yuan, only half of Haidilao's.

Figure: Data comes from financial reports, slightly larger for reference

But in hindsight, this was the apex of a parabola. Haidilao, which reached its peak, entered a period of sustained decline. Since 2020, Haidilao's profit growth has slowed down for two consecutive years. The financial pressure brought by blind expansion has caused Haidilao to lose 4.161 billion yuan in 2021, with an average daily loss of 11.4 million yuan.

Back then, Haidilao was hyped up as much as it fell.

Of course, the pain is not only felt by Haidilao.Xiabu XiabuCEO He Guangqi announced the closure of 200 stores to survive, bringing the average customer spending from 62.3 yuan back to within 60 yuan.

Faced with market changes and the downturn in the entire industry, Haidilao can only lower the prices that had been raised that year. By increasing meal packages, launching low-priced series products, and offering 31% discounts to college students, Haidilao will reduce the average customer price from 110.1 yuan in 2020 to 99.7 yuan in 2023.

In the past two years, price cuts are not unique to Haidilao, but rather a unified move by hotpot brands. According to data from Jiuqian’s middle office, the average customer spending of Shu Da Xia and Tan Ya Xue has dropped back to 100 yuan, and the average customer spending of Tai Er Pickled Fish has dropped from more than 80 yuan to more than 70 yuan, falling back to 2017. Even the average customer spending of Coucou, which focuses on mid- to high-end dishes, has dropped by 11 yuan, the price of Xiabu Xiabu’s set meals has dropped by more than 10%, and the high-end Shuang Hotpot has dropped from 150 yuan in the same period last year to 109 yuan.

Under the trend of price involution, Haidilao can only continue to dive downward. Not only did it launch the more affordable HiLao hotpot last year, but it alsoMeituanLocal life e-commerce platforms such as TikTok have launched low-priced packages and vouchers, and the cost of a hotpot meal is much lower than the per capita consumption at Haidilao.

The resulting achievements are reflected in the financial report data: in 2023, Haidilao made a profit of 4.495 billion yuan, a year-on-year increase of 174.6%.

But this set of data may only look good. Much of the 4.495 billion yuan profit can be attributed to cost reduction. For Haidilao, the two most important data are: 10% profit margin and 3.8 turnovers per day. At its peak, these two figures were 18% and 5 per day, which shows that it has long since left its former glory.

02 Everything for table turnover rate

In 2017 and 2018, Haidilao reached its peak table turnover rate, maintaining the number steadily at 5.0 times per day.

How do you understand this number?CITIC SecuritiesIt was once said that the average turnover rate of the hot pot industry as a whole is about 2.5-3 times per day, and Haidilao is equivalent to twice the industry average. In addition, among the top ten hot pot brands of the year, Xiabu Xiabu, which ranked second after Haidilao, had a turnover rate of only 3.3 times per day and 2.8 times per day in 2017 and 2018 respectively, far behind Haidilao.

In terms of table turnover rate, Haidilao was once far superior to its peers, and it was even something Haidilao was proud of.

In the catering industry, table turnover rate is an important keyword, and it is a direct indicator of how prosperous the business is. As reflected in the financial report, fluctuations in table turnover rate are often accompanied by changes in revenue and profit at the same frequency.

Take Haidilao as an example.

Haidilao's revenue increased from 10.388 billion yuan in 2017 to 16.97 billion yuan in 2018, a revenue growth of 59.5%. Net profit increased from 1.194 billion yuan to 1.65 billion yuan, a year-on-year increase of 38.1%. The growth rate of net profit margin was significantly faster than in previous years.

However, nothing lasts forever, let alone in the catering market where consumption changes rapidly.

By 2021, Haidilao's number of stores in the mainland market has expanded to a historic 1,491, but the same-store turnover rate has fallen from 5.2 times/day before the epidemic to 3.4 times/day, the worst performance in history. The turnover rate data in first-tier cities with the highest store density is the worst, reaching only 3.0 times/day. This year, Haidilao suffered a net loss of 4.161 billion yuan, "achieving" the ugliest annual report in history.

“Saving” the table turnover rate is urgent.

In 2022, Haidilao launched the "Woodpecker Plan", led by Yang Lijuan, then executive director and deputy CEO. It included one item: if the average turnover rate of Haidilao stores is less than 4 times/day, "in principle, new Haidilao restaurants will not be opened on a large scale."

This can be understood as: the table turnover rate of 4.0 times/day has become the red line for Haidilao's speed limit, and it is also the passing line for it to test its performance and decision-making.

Yang Lijuan took over Zhang Yong's position as CEO in 2023, and the emphasis on turnover rate has continued to this day. In addition to price cuts, Haidilao has also launched many marketing actions to attract young people, such as "opening stores at the entrance of concerts, at campsites, in night markets, and subject three dances."

After superimposing the price reduction method, this method is indeed effective.

In 2023, Haidilao reduced the average customer spending to less than 100 yuan. In the same year, the table turnover rate began to rise, reaching 3.3 times/day in the first half of the year. By the end of the year, the average table turnover rate increased to 3.8 times/day, and some stores could even reach 4 times/day.

However, if we go by the table turnover rate red line set by the "Woodpecker Plan", Haidilao has obviously not passed.

Naturally, it did not expand on a large scale. In March 2024, CEO Yang Lijuan mentioned at an analyst meeting that Haidilao's new store number in the domestic market in 2024 would only grow at a double-digit rate, with 13 stores signed.

Until this year, the turnover rate is still the focus of Haidilao. In March this year, Haidilao launched an information management system called "System Prosecutor", which provides up to 350 data indicators for managers at all levels to "inspect stores" online at any time, including the ability to "query the turnover rate of each store and each region" in real time.

But at the moment, it remains unknown when Haidilao can return to the passing line.

External environment, affordable hotpot is on the rise. As young people flock to the B1 floor of shopping malls, rotating hotpot restaurants such as Nong Xiaoguo are expanding rapidly. The average customer spending at these restaurants is around 40 yuan - less than half of Haidilao, and they are quickly seizing the market share of hotpot brands such as Haidilao.

Internal environment: Haidilao's increase in turnover rate is based not only on low prices, but also on Haidilao's long business hours (most Haidilao restaurants are open 22 hours a day, from 9 am to 7 am the next day). This means that if Haidilao wants to increase its turnover rate again, there is very limited room for improvement.

03 Premium service business

The 4.0 times/day table turnover rate red line is the mark of Haidilao in the era of contraction.

At the same time, Haidilao's services have been reduced. Many consumers are dissatisfied with its measures, such as not allowing customers to order soup pots, charging for nail services in some stores, not allowing customers to order half-portions of dishes, canceling beef cubes, and not giving toys to adults, and thus turn to other brands.

The reason for the reduction in Haidilao’s service is simple: cost control.

When the turnover rate is high, Haidilao's business is booming. The ultimate service combined with marketing can directly help attract customers. The crowds of people queuing up at the door of Haidilao to get manicures, eat free snacks and drink tea are also footnotes to the era of consumer prosperity.

However, after passing the apex of the parabola and entering the sliding channel, Haidilao, whose table turnover rate has yet to meet the required standards, must learn to save money.

Taking Haidilao's nail art service as an example, the base salary of nail artists in many regions is around 3,000 to 4,000 yuan. Based on the configuration of 2 or more nail artists in each store and the number of 1,374 stores in 2023, the manicurist's labor cost alone is at least 10 million yuan a year, which is a pure expense. Reducing services is equivalent to saving personnel expenses.

Nowadays, Haidilao's manicure service has begun to be clearly priced. According to media reports, many Haidilao manicure services have begun to charge, and a Haidilao employee in Shanxi said that the highest charge for manicure can be as high as 79 yuan.

Judging from the development in the past few years, Haidilao’s table turnover rate and service level have basically maintained a positive correlation.

Zhang Yong once said in public that customer satisfaction is the most important thing, and the way to show it is through service. However, in the past few years when the turnover rate was not "passing", Haidilao's service also showed a "failing" trend, which was controversial.

"Sanlian Life Weekly" once launched a poll on "Why people don't like to eat Haidilao anymore", 18,000 people participated, and more than 8,000 people voted for "small portion, low cost performance", more than 6,000 people voted for "the taste is average, there are so many hot pot restaurants, this one is not a must", and nearly 1,000 people voted for "the service is too comprehensive, and socially fearful people reject it".

On the one hand, Haidilao, which is determined to boost its turnover rate with services, is inevitably radical. The "Subject Three" in 2023 is a typical example, and the online rumor that "the clerk can help children with homework" and other services have made many netizens call it outrageous.

More importantly, under the general trend of consumption downgrade, people prefer real money benefits rather than paying too much for pure service premium. - No need to refute with the example of Pang Donglai. The ultimate service is indeed the competitiveness of Pang Donglai, but the root of supermarket profitability is still SKU management. Compared with the complex supermarket supply chain, the hot pot track where Haidilao is located, the SKU difference is difficult to form a deep enough moat.

Back to Haidilao.

Its current situation is more like that of a middle-aged person in the turmoil of the workplace. It has had its moments of glory, but some of its ideas and practices seem to be out of tune with the times. It seems that it has done nothing wrong, but it also seems that everything is wrong. It has no right to stop or lie down, after all, it has a family to support (nearly 140,000 employees).

Even the way Haidilao tries to adapt to the changes is very much like a middle-aged person. For example, it keeps the average customer spending below 100 yuan and strictly controls the scale expansion before the turnover rate is "passing". This is like a middle-aged person who is anxious about "unemployment". When the income growth stagnates or even declines, he will consciously cut back on expenses.

Seeking stability is a conditioned reflex.

To some extent, Haidilao, which seeks stability, seems to be trapped in the turnover rate. It wants to increase the turnover rate by providing services, but the service cost cannot be increased; it wants to increase the turnover rate by reducing prices, but it cannot compete with the affordable hot pot restaurants.

Some people may say that Haidilao is also very popular in foreign markets and seems to have found other growth markets. But this is like a middle-aged programmer who works hard to support his family and does a "side job" after get off work. At least at the moment, the income from the "side job" is not enough to support his family. He still needs to work hard to keep his main job.

The same is true for the trapped Haidilao. It can only push itself a little harder and wait for the "cooled" table turnover rate to boil again.