Recently, the “Little Hot Pot King” company founded by Taiwanese businessman Mr. He Guangqi released this year’s mid-year report, and once again the performance was disappointing, with a record high net loss.
In 2014, Hai Di Lao went public in Hong Kong and became a sensation, becoming the “number one stock of chain hot pot”.
Its scale once expanded to nearly 1000 direct-operated restaurants in China, firmly holding the leading position in the industry.
Its stock price once surged to HKD 27.15, with a market value close to HKD 30 billion. However, the good times did not last, and in recent years, Hai Di Lao has been facing more and more challenges. Now, its market value is only HKD 1.2 billion, a drop of 90% from its peak.
Why did the once glorious Hai Di Lao suffer a severe setback in stock prices?
The word “呷(xiā)” in Hokkien means to eat mouthful by mouthful, while “哺(bǔ)” implies safe eating. The combination of “呷哺呷哺” means to eat healthily and nourish.
In 1992, Taiwanese businessman Mr. He Guangqi came to Beijing to do jewelry business. In 1996, with his sharp business acumen, he saw the rapid development of Beijing and predicted that future dining and fast-food consumption would become essential. After more than two years of product development, flavor adjustment, ingredient selection, and other preparations, in 1998, he introduced the popular Taiwanese-style hot pot to the mainland, initiating a new dining consumption model for Hai Di Lao. With an affordable positioning of “30 yuan per capita, with vegetables and meat” and a novel hot pot model, it quickly gained popularity in Beijing, Hebei, and other places.
In 2003, during the SARS outbreak, Hai Di Lao’s individual hot pot dining format perfectly met the new dining needs at that time, leading to more diners favoring the brand. Since then, Hai Di Lao entered a period of rapid development. With the introduction of capital, Hai Di Lao maintained a high growth rate. On December 17, 2014, Hai Di Lao successfully listed on the main board of the Hong Kong Stock Exchange, becoming the first stock in the Hong Kong stock market in the chain catering industry, with the stock code of 00520.HK.
After going public, the company pursued a high-end expansion strategy. From 2014 to 2023, Hai Di Lao raised prices almost every year, with the average customer price increasing from 44.4 yuan in 2014 to 62.2 yuan in 2023, a growth of over 40%. Compared to the customer price of 35.2 yuan in 2011, it surged by 76.7%.
In 2016, the Hai Di Lao Group proposed the “Hai Di Lao+ Brand Upgrade Plan” to gradually transform the brand from “grassroots” to “high-end”. That year, it launched the upscale hot pot brand “CouCou”, featuring a new dual-mode business model of “hot pot + tea break”, with the first store opened in the landmark area of Sanlitun in Beijing. With an average customer price of around 140 yuan, it specifically targeted business gatherings and friend meetings. The introduction of CouCou hot pot indeed brought a wave of growth to the Hai Di Lao Group. From 2016 to 2020, the number of stores increased from 2 to 140, with a compound annual growth rate of up to 280%.
Despite the impact of the epidemic, Hai Di Lao continued to expand.
However, starting from 2021, the Hai Di Lao Group has been losing money for three consecutive years, with losses exceeding 1.1 billion yuan. Faced with difficulties, Hai Di Lao had to close stores, totaling 114 closures in 2023, among which “Chenshao,” as one of its three major brands, was completely shut down.
The mid-year report for 2024 shows that the group’s net loss in the first half of 2024 was 270 million yuan, exceeding the full-year loss in 2023.
Faced with the current state of empty restaurants, Hai Di Lao finally couldn’t hold on anymore and announced a comprehensive price reduction midway through the year. However, even with price reductions, profitability in the future is not guaranteed.
A netizen named Sunshine recently watched the video and commented, “Taiwan’s hot pot restaurant ‘Chenshao’ is quite popular! People have to wait in line for almost an hour.” The contrast across the strait is stark.
The strategy of high-end operation and continuous expansion of store openings was not wrong. As the leader in the chain hot pot industry, Hai Di Lao also had capital support for high-end operations. However, the company fell into trouble due to misjudging the consumption capacity of the public.
Since 2015, the seemingly prosperous Chinese economy has been brewing a crisis behind the scenes. The three-year epidemic, the CCP’s policy of city lockdowns, almost reset the economy. After the epidemic, the Chinese economy deteriorated even further, with soaring unemployment rates, plunging into a widespread consumption downgrade. Hai Di Lao failed to adapt better to the market environment of consumption downgrading, not reducing prices and halting expansion in time.
Currently, the CCP is unable to come up with effective measures to rescue the economy, and consumption downgrading will continue. From the current international situation, with Trump being elected as the President of the United States, the Chinese economy is likely to accelerate its collapse.
Mr. He Guangqi’s favorite song is “Love the Fight, Win the Game.” As the lyrics go, “Three points are destined, seven points rely on striving, love the fight to win!” Perhaps “loving the fight” is the secret to Mr. He Guangqi’s and the Hai Di Lao Group’s success.
However, we want to say that sometimes “choice” is more important than “effort”, and only by understanding the trend of the times can we make the right choices.