Author | Han

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Competition in the restaurant industry is fierce, and Haidilao changed its mind to take group meals in established companies as the next stop of expansion.

Haidilao (06862.HK) and Xiaomi Group (01810.HK) originally led the way on two very different tracks, catering and technology, but recently they have quietly joined hands across borders.

According to media reports, recently, Xiaomi Diner officially signed a contract with Haidilao. On New Year's Day 2025, the Haidilao branch in Beijing's Xiaomi Science Park is expected to open. This will also be Haidilao's first corporate hot pot restaurant in Beijing. Does Lei Jun favor Haidilao? Or is Zhang Yong particularly fond of Xiaomi? Or maybe the two bosses hit it off and go in both directions?

It is worth noting that recently, Haidilao also entered the BYD Zhengzhou park, and opened an independent tea drink brand “Hi Hi Tea” for employees in the park for group meals on the basis of a hot pot restaurant. The products have also gone through new research and development. There are also newly developed creative drinks such as strawberry matcha, raw watermelon coconut, etc., which are popular in hot pot restaurants, as well as newly developed creative drinks such as beaten orange and aromatic oat coconut.

According to Haidilao, after the opening of the BYD store in Zhengzhou, Haidilao will open another corporate hot pot restaurant at the BYD production site in Xi'an, Shaanxi. Previously, Haidilao was also stationed at Huawei research institutes in Xi'an, Shaanxi, and Nanjing, Jiangsu.

As can be seen, in addition to traditional consumption scenarios, Haidilao is trying to develop another commercial idea — corporate group meals. Whether it will succeed is unknown. The move of joining hands with brands such as Xiaomi, BYD, and Huawei has already garnered a lot of attention.

Entered corporate parks and opened to university campuses

Before joining hands with Xiaomi, Haidilao had already entered quite a few companies, and the partners were all star companies such as Huawei and BYD (002594.SZ).

Notably, Haidilao moves very quickly.

On March 25, according to the “Pengpai” news report, Haidilao's first corporate store landed at the Huawei Xi'an Research Institute. The nearly 400-square-meter store offers both package and order services, opening up the membership system to “collect coins” and enjoy exclusive discounts.

The second piece of chess fell in Nanjing, Jiangsu. On August 8, Haidilao's second company, Hot Pot, opened at Huawei's Nanjing Research Institute.

In November, in Zhengzhou, Henan, the new energy vehicle giant BYD also began trial operation at the Haidilao Hot Pot Restaurant located at the production base in the airport area.

In addition to the recently popular Beijing Xiaomi Science Park store, Haidilao has completed exploring corporate stores in several major cities in North China, South China, and Western China.

The one that entered the university cafeteria a little earlier than the company that settled in.

In the fourth quarter of 2023, Haidilao opened its first campus store in Xi'an, and then quickly expanded campus stores in many colleges and universities in Xi'an, Zhengzhou, Beijing, Nanjing, Fuzhou, etc.

Haidilao is also exploring cafeteria stall scenarios that are more suited to college students' consumption. In May 2024, according to CCTV reports, the country's first Haidilao campus cafeteria counter was opened in the cafeteria of Shandong Foreign Languages Vocational and Technical University.

The difference between campus stores and cafeteria counter stores is that the former mostly sells packages that cost tens of yuan per person, while the latter can “eat noodles for 9.9 yuan,” focusing on noodle snacks, and costs around 15 yuan per person.

Can this kind of price range attract “migrant workers” or students to spend?

On social media, there were two different consumer voices about Haidilao entering corporate parks and opening university campuses. On the Xiaohongshu platform, some students shouted “Come to our school soon”; there are also students who have spent it who think that without Haidilao's special service, the cost performance ratio of tens of yuan per person is actually not as outstanding as that of an ordinary hot pot restaurant.

Is the “internal volume” of the industry forcing a change of battleground?

Since 2024, the overall growth momentum of social retail has slowed, and consumer spending has become more cautious. According to data released by the National Bureau of Statistics, the total retail sales rate of the national restaurant industry slowed to 3% to 3.3% year-on-year in the third quarter of 2024, down significantly from nearly 7% at the beginning of the year.

Combined with multiple factors such as overinvestment in the early stages, the anxious situation of “increasing revenue but reducing profits” is spreading in the catering industry. According to data released by the Beijing Bureau of Statistics, the total profit of catering companies above the Beijing quota in the first half of the year was 0.18 billion yuan, a sharp drop of 88.8% over the previous year.

The “price war” intensified, and internal developments spread to segments such as hot pot.

Since no one will be the winner if the internal roll continues, let's change the battlefield. So Haidilao took the lead. Driven by such logic, Haidilao is rapidly expanding “non-frontal battlefields” such as corporate park restaurants and university cafeteria stalls, which seems to have the meaning of being dark and clandestine.

In fact, this strategy is no longer a secret. In the 2024 interim report, Haidilao wrote that at present, the company has expanded more forms of high-frequency food and beverage consumption close to everyday life around the core scene of hot pot restaurants to meet the personalized and diverse needs of customers. Starting in 2023, Haidilao campus hot pot, corporate hot pot, and camping hot pot will be enriched step by step. In addition, hot pot takeout is also an expansion of the scene, hoping to open up more room for performance.

In fact, within the catering industry, campuses and corporate scenarios all fall within the scope of “group meals.” In 2020, the industry discovered that in the face of a year-on-year decline in the size of the catering market, group meals also achieved 2% contrarian growth, showing resilience.

The “2022 China Group Meal Development Report” jointly released by the China Hotel Association Group Meal Professional Committee and Chen Rui Capital once pointed out that in the vast market for group meals, although the market size is large, the market concentration is low. The market share of the top 100 group meals in China is only 6.7%, while the share concentration of the top four in the North American group meal industry is as high as 92%. The gap between the two data also reflects a broad space for imagination.

Can supply chain advantages be leveraged?

Haidilao enters the group meal market. The brand effect is on one side; the deeper advantage lies in the supply chain.

Zhang Yong's Haidilao is not so much a catering company as a food supply chain empire. According to the Chaos Academy review, Haidilao has successively set up two companies, “Shuhai” and “Yihai International,” which focus on catering supply chain services and condiment business. According to Tianyancha data, the independent operation of Shuhai Company began in 2007, and now has independent financing to the B round; Yihai International already landed in Hong Kong stocks in 2016, two years earlier than Haidilao.

With the development of Haidilao, these two platforms also quickly became important players in the industry. In 2013, Haidilao established “Yihai International”, which covered the condiment business, with a market capitalization of 100 billion Hong Kong dollars at its peak.

Haidilao, which became popular in front of consumers for its thoughtful service, was supported by two major supply chain companies, Shuhai and Yihai International. Covering the entire industrial chain, it shows Haidilao's strength and moat as a leading restaurant leader.

Therefore, according to industry insiders, the most obvious advantage of Haidilao, which has a high degree of standardization in operation and management and a complete upstream and downstream ecological chain, is that the marginal cost is lower. The industry media “Catering O2O” analyzed that Haidilao's entry into group meal scenarios such as enterprises and universities can improve efficiency in multiple dimensions such as human resources, supply, and operation management, and lead the group meal industry towards standardization and branding.

Implementing low cost into the consumer scenario means more affordable prices and better service. As a simple example, it is also a bowl of tomato noodles in a university cafeteria. Haidilao can be produced at 9.9 yuan, and the production is stable, but the artificial stall next door probably doesn't have the power to be as cheap, so the competitiveness of the two will rise.

However, competition in the group meal market is already burning, and other restaurant chain brands are taking quick action. According to the “Securities Times”, at the end of June 2024, the China Chain Management Association published an article stating that many catering companies, including Guangzhou Restaurant, Hefu Noodle, and Quanjude, have officially announced their entry into the group meal market. If you take a close look at the companies listed above, each one is struggling to sweep the market with branding, intensification, and standardization. These competitors have also more or less built up supply chain capabilities.

The ability to upgrade and iterate on group meals is limited. In addition, major consumer groups such as college students, young white-collar workers, and park employees are increasingly demanding food flavors and formats, and it is still unknown who can seize a favorable first-mover position in the future. Other media also pointed out that in the domestic market, if you want to qualify for cooperation in consumer scenarios such as university cafeterias, you need to rely on “networking resources.” High-quality points are also a scarce resource, and the fierce competition for “more monks and less porridge” may be arriving at an accelerated pace.

Expansion and contraction coexist

At a time when the “new battleground” for group meals is in full swing, we can turn our attention back to the “main battleground” of consumption at traditional Haidilao stores and find that the company's operations may still face challenges.

On August 27, Haidilao announced its results for the first half of 2024, achieving revenue of 21.491 billion yuan, an increase of 13.8% over the previous year; core operating profit reached 2.799 billion yuan, an increase of 13.0% over the same period last year. However, due to changes in net exchange profit and loss and the cancellation of preferential VAT deduction policies, net profit was 2.033 billion yuan, showing a slight year-on-year decline.

Despite improvements in revenue and core operating profits, it is an indisputable fact that the industry is against the wind. SPDB International once expressed five major concerns about Haidilao in a research report published on August 28.

First, Haidilao's main brand has limited room to open and expand its stores. According to this research report, Haidilao opened a total of 11 new stores in the first half of the year, but 43 stores were closed at the same time, and the total number of stores declined. The store expansion situation throughout the year fell short of the market's expectations at the beginning of the year.

Second, Haidilao introduced a franchise model. Because the selection requirements for franchisees are very high, the effect on store expansion and decline may be limited.

Third, Haidilao's turnover rate has now reached 4.2 times the excellent rate, but if it wants to continue improving, it will become more and more difficult, and I'm afraid it will require more investment in personnel and services.

Fourth, although operating profit increased by 13%, it was slower than revenue growth. Against the backdrop of a sharp increase in the overall turnover rate and a sharp year-on-year expansion in gross margin, the pressure to increase profit margins will increase.

Fifth, it is aimed at Haidilao's multi-brand strategy. SPDB International noticed that in fact, as early as many years ago, Haidilao had already launched multi-brand operations and tried food categories other than hot pot, but the results were difficult to say ideal. As a result, the visibility of this road is still very low.

However, in a research report published on October 14, SPDB International revised its views on Haidilao's prospects. An important detail mentioned in the research report comes from Haidilao's multi-brand plan. The report stated that during the Business Day event at the time, Haidilao management gave high guidelines on the opening goals of its new brand “Flame Request”, and detailed the synergy between this new brand and Haidilao in terms of procurement and labor.

“Although there is still uncertainty about whether the new brand will eventually succeed, the stable performance of Haidilao's main brand and the company's positive layout for the second brand are expected to greatly enhance market confidence and facilitate the recovery of Haidilao's valuation” — the report argues.

The above two SPDB International reports also reflect from the side that whether new brands and new businesses can create a “second growth curve” is an important factor for institutions to focus on Haidilao's growth.

The “Flame Request” mentioned above is the first yakiniku brand under the Haidilao Group. According to public reports, this yakiniku brand has already opened stores in Xi'an, Shaanxi, Yiwu, Zhejiang, Nanjing, Jiangsu, and Hangzhou, Zhejiang. Also, Haidilao's first yakitori brand “Flame Guan Barbecue” opened in Wuxi on November 14, marking Haidilao's entry into the yakitori category.

Testing the waters in markets such as yakiniku and yakitori, and exploring group dining businesses in college cafeterias and corporate parks, Haidilao's series of tests the waters focuses on differentiated competition. However, competition in the restaurant market is fierce, and the hot pot giant Haidilao will have to forge ahead if it wants to “cross borders” and gain a foothold.

There is no official and widely accepted explanation for the origin of the name Haidilao. One statement is that “Haidilao” is a form of victory for “Dahu” in Sichuan mahjong. Now expanding its business from hot pot to barbecue and group meals, whether Haidilao can “kill Sifang” and “Big Hu” requires not only the luck of picking cards, but also the ability to conquer consumers' taste buds with taste and service.