Haidilao in trouble: What did Zhang Yong judge wrong?

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In the first half of 2021, the turnover rate of Haidilao dropped to 3 times per day.

Turnover rate is a commonly used term in the catering industry. 3 times/day what is the concept? A large number of studies on Haidilao show that if the turnover rate is only 3, Haidilao's net interest rate will be less than 1%. According to the company's semi-annual report, Haidilao's net profit margin was 0.48% in the first half of this year.

As the number one myth in the catering industry, Haidilao’s turnover rate is 4 or even 5 all the year round. It is difficult for other restaurants to reach half of Haidilao’s level; and , which is also a hot pot, Xiabuxiabu , its turn-over rate is around 2, and Coucou hot pot is mainly between 2-3.

However, the unpredictable epidemic situation and the weak recovery of Haidilao have made the capital market suspicious of it. From 2020 all the way to the decline after the Spring Festival in 2021, 's current market value of Haidilao "only left" more than 170 billion. Although the financial report showed "turning losses into profits", the market did not buy it.

People use their feet to vote whether they like a city, but capital uses real money to express that they don't like a company. Haidilao, as the "No. 1 catering brand in China," has made three moves in the past two years. Looking back, all three moves have encountered difficulties.

1. Unable to expand: the fault is not to expand the store against the trend, but to misjudge the epidemic situation

2. Unable to rise: the price increase is scolded, but it is difficult to live without the price increase

3. Vice is not easy: seeking a second growth curve is equivalent to starting a new business

Is Haidilao okay? This article will disassemble the "three moves" of Haidilao,To answer this question.

01 Cannot expand

Expanding stores is an inevitable trend for the development of chain catering companies, especially China’s No. 1 catering brand like Haidilao.

Generally speaking, catering business growth formula = same store growth + new store expansion + new brand incubation (second growth curve) . New store expansion is an important value indicator for catering companies-opening more stores often means making more money, and when new stores enter a mature period, they will also contribute incremental performance.

If a brand can open a large number of stores, firstly, it proves that it has strong funds, and secondly, it also indicates that its single-store model can be copied in batches, and its development potential is huge. This is also the view of many research institutions on Haidilao.

A research team based on the single-store model of Haidilao, the population of each tier city, and the number of stores/population density, and came up with the following ceiling forecast for the total number of stores: between 2,000 and 5,500. At present, Haidilao’s total number of stores is only more than 1,500, which has not yet reached the upper limit.

At the same time, 's chain rate of hot pot industry reached 18.3% in 2020, an increase of more than 3% year-on-year. This means that not only Haidilao, but also hot pot restaurants such as Coucuo and Laowang are expanding their stores.

So, the decision to expand the store itself was not wrong. Due to the epidemic, the hot pot industry will undergo a major reshuffle in 2020, with an average closing rate of close to 25%, which is equivalent to 1 out of 4 hot pot restaurants closing down. At this time, there are many high-quality properties to choose from, and leading companies take advantage of the trend. And the optimization of the rent side will also appear gradually. Many shopping centers have extended the rent-free period from one year to two or three years.

Most leading companies believe that the epidemic is a window period for the development of new stores. After the epidemic, the turnover will rise, just waiting to count the money.

Haidilao's Zhang Yong thinks the same way. In 2020, Zhang Yong asserted that the epidemic will basically end in September and should be expanded ahead of schedule. Therefore, Haidilao expanded 530 stores last year,The total is over one thousand.

How strong is Haidilao's determination to expand against the trend? The number of new stores opened last year was 4 times the total number of Laowang stores (135 stores) and 7 times that of Banu Hotpot (77 stores).

However, no one thought that the epidemic would repeat. In June 2021, the mutant virus delta hit Guangzhou. Haidilao’s rate of overturning in Guangzhou went from 3.1 to 1.2.

This year, Haidilao’s overall turnover rate of 3 times/day is 0.3 lower than last year’s data. Some people classify this as a new store that dilutes the overall turnover rate, but the same store (that is, the relative The turnover rate of mature stores) is only the same as last year.

When a company makes a decision to expand a store, it often needs to dynamically adjust its store opening plan based on changes in the overall same store growth rate (same store turnover/occupancy rate). If further encryption in some cities will show significant store diversion, the company should release Delay the city’s store encryption plan.

But Haidilao did not. opened 310 new stores in the first half of 2021 when the same-store growth rate declined, and the total number of stores is now as high as 1,597.

We must know that although the epidemic has repeated, economic activities this year are recovering: in the first half of 2021, the total number of visitors to shopping malls with more than 30,000 square meters in 321 cities across the country reached 14.65 billion, a year-on-year increase of 46%.

The shopping mall is the main place for Haidilao to open stores. The warmer passenger flow should take Haidilao to take off, but customers did not choose Haidilao. In some of the more mature cities, the turnover rate did not increase but declined.

As the saying goes, whoever is low is embarrassed. At the same time that Haidilao’s overturning rate is weak, the passenger flow of other catering companies is visibly recovering. Xiabuxiabu’s Coucou hot pot has a turnover rate of 1.9 in the first half of 2020, and has recovered to 2.6 in the first half of this year; the turnover rate of nine cents sauerkraut fish has risen from 3.4 in 2020 to 3.7. The best performance among all listed restaurant companies.

Zhang Yong, who misjudged the situation, learned his lesson from this year's general meeting of shareholders: "I made a wrong judgment on the trend (I made a store expansion plan)... Now it is indeed blind and self-confident.

But the giant wheel wants to brake, and the inertia has to push it forward for a few kilometers. Zhang Yong discovered that the problem was that in January this year, it was already March when the decision to suspend the opening of the store was made. The prolonged impact of the epidemic has superimposed the aging of the brand.

02 Unmovable

The climbing time of Haidilao’s new store has been extended, and the company is in a dilemma. Revenue capacity has a profound impact: it is caught in a dilemma where revenue growth is weak, but costs continue to pile up.

Haidilao’s revenue includes 96.6% of Haidilao’s revenue, food delivery 1.7%, seasoning and various types of retail. Only 1.1%, that is to say, dining at the store is the main source of income for Haidilao. Haidilao’s take-out is not as good as 99% (take-out accounts for 15%), and its ability to breed multiple brands is slightly inferior. Therefore, to increase revenue, it has two ways-1. Expand the store and sell more, 2. Raise the price.

The expansion of the store is what Haidilao is doing, but it has suffered a sustained blow from the epidemic. On the contrary, the “epidemic bargain hunting” has become the main factor dragging down the performance. As for the price increase, with the lessons learned from netizens who criticized Haidilao’s price increase last year, the ability to continue to raise the price is really limited.

In March 2020, the seabed that has just resumed work Lao Xin announced a nationwide price increase, which was once as high as 80%. Unexpectedly, what was exchanged was a curse from consumers. The turnover rate plummeted, so Haidilao hurriedly issued an apology statement, only to return. “Preferring fans”.

The annual report is drawn and compared, the unit price of has increased from 105 yuan in 2019 to 110 yuan in 2020. However, in the first half of this year, Haidilao’s unit price will not rise. The overall customer unit price was 107 yuan (112 yuan in the same period last year), which did not rise but fell.

Why the price can’t rise — the epidemic has repeated, income has fluctuated greatly, and the rise of various hot pot takeaway restaurants, "outside is not safe "It has also affected people's desire to go to the store for consumption. And the mid-end catering where Haidilao is located has always been in an awkward situation regarding price increases.On the contrary, high-end catering can rise, consumers are willing to pay for the location and environment; low-end catering can also be fine-tuned, after all, consumers have no cheaper places to go.

While the price increase is not easy, the cost of Haidilao has been increasing year by year. In Haidilao’s cost structure , has 42.3% of raw materials and 35.6% of staff costs (the highest among all listed restaurant companies) , and staff costs are likely to be the main part of Haidilao’s cost growth in the future.

Many people know that Haidilao absolutely does not allow a customer to secretly celebrate his birthday, secretly pour water, secretly clean up the table... Therefore, Haidilao reserves 100-150 restaurant employees for each restaurant, while other hot pot restaurants The average number of employees is below 80.

The catering industry has a large turnover of personnel, and service is a tiring job that consumes physical and energy. Haidilao needs to maintain its attractiveness to talents, and high wages are the most direct way.

In 2019, Haidilao's per capita annual salary reached 78,000 yuan, while Xiabuxiabu only 49,000 yuan during the same period. In the second half of last year, Haidilao was suspected of a trend of employee loss due to its massive expansion of stores, and the basic wages of frontline employees were uniformly raised. This is bound to further increase Haidilao's labor costs.

In order to save costs, Haidilao has also made many attempts, such as introducing robots, but the sensitivity of the food delivery robot is not high enough and can only be used during off-peak dining periods.

The recovery fell short of expectations, and the net profit margin was much lower than other peers. In the first half of 2021, Haidilao’s net sales margin was 0.48%, and the net profit margin was 9.2%. Haidilao, which is not rising, has put a question mark on its revenue growth potential.

The capital market has always expected Haidilao to expand its competence circle and export its reputation and management capabilities to new brands. So, how about Haidilao's sideline business?

03 Vice is not easy

is a side job,Essentially, they are looking for a second growth curve. Food and beverage brands generally have the problem of limited life cycles. The exploration of multiple brands and multiple formats is the general trend of the industry. However, this is a choice with large investment and high uncertainty.

For example, Xiabuxiabu, a big hot pot owner, has more than a thousand stores, but it is very difficult to live because of the aging brand and the decline in operating efficiency. Recently, Xiabuxiabu’s share price has experienced a free-fall plunge. One of the main reasons is the resignation of Zhang Zhenwei, CEO of its brand "Coucuo Hot Pot".

Coucou hot pot can be described as the savior of Xiabuxiabu. At the beginning of its establishment in 2016, it pulled the parent company's stock price upward. At present, it has 149 stores nationwide, and its revenue accounted for the group's total sales rose from 31% in 2020 to 37% this year.

A good sideline can not only add value to the company, but also open up more income channels and broaden the moat.

However, Coucou was not made by Xiabuxiabu's management.

At the beginning of the opening of Coucou Hot Pot, Zhang Zhenwei spent half a year running through the entire supply chain. In order to differentiate the market, Coucou launched the first "hot pot•cha rest" model in the market, and milk tea became their popular product. They have also put a lot of effort into the decoration and the appearance of the dishes, in order to stimulate the desire of customers to take pictures and forward them, and promote them by "planting grass" on social platforms.

Hot pot and making hot pot is also returning to the old line, but the business model is completely different. Cou Cou can be regarded as a second venture of "breaking first and then standing".

Looking back at Haidilao, its all-round layout in the catering industry chain is now one of the best in the industry. Due to the lack of public information, currently understands that Haidilao’s sideline business is mainly divided into three types: 1. Use supply chain brands to do Retail products; 2. Opening a new business in Haidilao stores; 3. Rebranding.

1. Self-heating hot pot

Among the three side businesses of Haidilao, Haidilao’s self-heating hot pot has the fastest investment effect: First, you don’t need to open a store, and second, you can reuse the resources of the original supply chain. ,Copy and paste the original "quality and low price" advantages. During the 618 period in 2020, it ranked first in Taobao's sales in the same category, with a market share of more than 30%, and it has a certain degree of dominance in this rising emerging market.

However, Haidilao does not sit back and relax. New brands such as Mo Xiaoxian and Zihaiguo are very strong in marketing through various channels.

2. Milk tea business

At present, Haidilao’s milk tea business is mainly sold next to hot pot stores, trying to create a “hot pot•cha rest” model similar to Coucuo.

There are two ways to sell milk tea in Haidilao. One is the "tea making paradise". In the hot pot store, a special area is reserved for customers to make milk tea. Scan the QR code, make milk tea, and pick up the product. The self-service beverage area of ​​the Hamburg fast food restaurant is priced at 9.9 yuan per cup.

The homemade milk tea area of ​​Haidilao hot pot store

The second is the "milk tea shop", which is also open next to the store. There are privately-made teas. There are at least 2 types of sku , and there are at most 6 types. The average price is 18-20 yuan, according to the evaluation on Xiaohongshu, the product is very similar to tea Yanyue color.

Haidilao milk tea shop, take the hot pot and tea-rest route, sku looks like a tea-like color

For the tea paradise of 9.9 yuan/cup, the attitude of netizens is: Haidilao wool! The taste evaluation of the milk tea shop is generally quite good. According to agency statistics, the average daily sales volume of Wuhan’s first "tea making paradise" in April can reach 300-400 cups. At present, it has opened more than 20 Haidilao shops across the country. It will accelerate the promotion this year and is expected to be held in October Expanded to 100.

Haidilao selling milk tea is more like adding a new category to the original channel.Rather than build a channel and build a new brand.

This method of selling milk tea in hot pot stores mainly radiates customers from Haidilao’s original customers. Originally, everyone bought milk tea before entering the store, and now they can order milk tea when they enter the store. But in the future, if Haidilao really wants to independently sell milk tea in hot pot restaurants, it will encounter strong competitors in any market- hi tea (high-priced market), tea Yanyue color (mid-end market), Michelle Bingcheng (low-price market), and the profit logic behind different price bands is not the same thing. Instead, it is now relying on the practice of selling milk tea in hot pot stores to save people, save rent and increase income.

3. Fast food standardized catering

Haidilao has also created a new fast food noodle restaurant brand-"Eighteen Boil", the stores are concentrated in Beijing.

Eighteen boil specializes in cheap noodles, the customer unit price is less than 20 yuan; the store is small and sophisticated, and the restaurant has a clear line of movement: self-collecting plate-self-selected side dishes and beverages-choice of noodle toppings-self-checkout; maximum 10 employees in the store; stores Special take-out and tea windows are set up, and the business hours cover three meals.

Eighteen Boil has a new catering business "gene"-standardized supply chain, semi-self-service and semi-service model, take-out business increases profitability, but it still lacks the important characteristics of a fast food restaurant: to meet timely consumption, instant shop The shop rate is high.

Fast food, as a high-frequency consumer product, should be easily accessible. With the reputation of "the first noodle shop in Haidilao", people may drive 10 kilometers to try the fresh food once, but they will not run 10 kilometers every time to eat a fast food. Has anyone seen the headline of the tweet on Xiaohongshu, "Driving all the way to KFC McDonald's, I must go once in this life"?

In addition to eighteen buns, Haidilao also has a number of sub-brands that are incubating. The track covers rice noodles, fast food, barbecues and pubs...Almost all addictive, standardized and replicable food and beverage tracks have been involved, and the pricing is universal not tall. The method of play can be summarized as "using the success of Haidilao to recreate N brands", that is, informatization system + smart moving line + standardized processes and products.It can be said to be a set of templates to take the world.

However, the timely consumption characteristics of fast food (high frequency and low price) require that stores should be spread as much as possible, and the marginal cost of each new store will be higher: store leasing, personnel recruitment, take-out operations, and those catering experienced by Haidilao The management problem must be experienced again in these fast food brands.

Many direct-operated fast food chain brands in China, such as Hefulao Noodles, have taken as little as 3 or 5 years to expand from their operations to their current scale. To make any new brand, Haidilao is nothing more than starting a business again, which is really "not easy."

Concluding remarks

Haidilao’s expansion against the trend is correct. This action was also sought after by capital in 2020, and the stock price has nearly doubled, but when the time comes to 2021, the epidemic did not end as scheduled, and it mutated Virus strains are still emerging, and Haidilao's stock price has fallen by half this year.

Haidilao suffered from the "expansion sequelae". The dilemma was not actually due to the expansion of stores against the trend, but from the judgment of the length of the "industry downturn". Zhang Yong underestimated the long-term impact of the epidemic. Of course, Haidilao is obviously not the only one who made this wrong "underestimation".

When will the epidemic end? This is the question most people want to know the most in their minds. In this way, the author remembered a story of Taleb, the author of "Black Swan"-Taleb was born in Lebanon, and war broke out in his hometown during his childhood. He described it in the book "Black Swan" as follows:

When I was young, adults kept telling me that this war ( Lebanon War) would only last "a few days", and many people fled to , Cyprus, hotel rooms in Greece, France and other places or other temporary residences. Waiting for the war to end. In fact, the war lasted for nearly 17 years.

Companies that have been severely hit by the epidemic are waiting for the day when the epidemic disappears. And companies like Haidilao that bet against the trend,Certainly at some point I am very sure that this day is coming. But to apply a sentence from and Mark Twain : is not the unknown that makes you trouble, but the things you are sure of, I am afraid it is not what you think.

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Source｜Yuanchuan Research Institute-Li Juzi

compilation | Dining O2O-Xiaobei

Phone/WeChat ID: 13392164760

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