Under the constraints of multiple negative factors such as declining turnover rate and difficulty in single store profitability, Haidilao, which has been expanding wildly for several years, has no choice but to press the pause button and announce the closure of 300 stores. At the same time, the company also launched the "Woodpecker Project" to break the situation. However, is it really that the reason why Haidilao is facing such difficulties is that the company's expansion has taken too far? Consumers are gradually becoming desensitized to Haidilao's characteristic "standardized services", and the "hot pot + segmented track" strategy adopted by other hot pot brands has made the company appear to be in a difficult position in this fierce battle in the hot pot industry.

Haidilao is reaping the consequences.

On November 5, Haidilao issued an announcement stating that it had decided to gradually close 300 Haidilao stores with relatively low customer traffic and operating performance not as expected before December 31. .

At the same time, Haidilao also released a "Woodpecker" plan aimed at rectifying stores with poor operating performance.

This is the first time Haidilao has embarked on such a large-scale store closing trend since its listing. According to Haidilao’s previous financial report, as of June 30, 2021, Haidilao had 1,597 stores worldwide. Based on this calculation, the stores closed this time accounted for approximately 18.8% of its total stores.

Haidilao released a letter "to friends who care about Haidilao" through its official Weibo. The letter explained the main reasons why the operation of some of the company's stores did not meet expectations.

Including unreasonable location selection for some new stores, internal organizational structure changes that make managers at all levels "incomprehensible and exhausted", insufficient number of outstanding store managers, and excessive belief in "continuous operations". The KPI indicators of "living interests" and the lack of corporate culture construction have become the reasons why Haidilao needs to slow down.

However, will closing 300 stores solve these problems?

Haidilao’s “Woodpecker” plan

Financial reports show that in 2019 alone, Haidilao opened 308 new restaurants , the total number of stores reached 768, and the table turnover rate remained stable at 4.8 times/day. By 2021, Haidilao has 1,597 stores, and its layout has gradually shifted from first-tier cities to second-, third-tier and below cities, but the turnover rate has dropped to 3 times/day.

Faced with the continued decline in turnover rates, Haidilao chose to close some stores.

In terms of closure standards, Haidilao said that it will consider three factors: the maturity and passenger flow of the external business district where the store is located, the density around the store, and the financial indicators of a single store. dimensions are considered comprehensively. "The average table turnover rate has not reached 4 times/day. In principle, new branches will not be opened on a large scale."

While shrinking stores, Haidilao will also conduct a series of operations. Series internal structure adjustment. This includes strengthening some functional departments and restoring the regional management system, and strengthening internal management and assessment mechanisms.

Haidilao calls this attempt to survive with a broken arm the "Woodpecker Plan." "The specialty of woodpeckers is that they are good at finding pests under the surface of trees and are tenacious. The person in charge of Haidilao said this when talking about this plan.

Nowadays, many Haidilao stores no longer have the prosperity of long queues. This may be attributed to the original expansion strategy. >

During the 2019 epidemic, the catering industry suffered a collective depression. Many small catering companies had no choice but to close their stores due to sparse customer traffic and a sharp drop in the number of diners. Even those as strong as Xibei were affected by the epidemic. I feel a little overwhelmed and overwhelmed.

However, the collective cooling of the catering industry allowed Haidilao to see new opportunities. In June 2020, Zhang Yong judged that the epidemic would end in three months and made a resolute decision Start counter-trend expansion.

According to public information, Haidilao opened 308 and 544 new stores in 2019 and 2020 respectively, with 299 new stores added in the first half of this year. It can be seen that in the three-year expansion plan, the company will open stores at the fastest pace in 2020, with the year-on-year growth rate of new stores as high as 76.6%.

After Zhang Yong pointed out the direction, Haidilao's expansion was carried out as scheduled, but the "negative consequences" of expansion against the trend also soon appeared.

According to the company’s 2020 financial report, Haidilao’s average turnover rate dropped from 4.8 times/day in 2019 to 3.5 times/day in 2020.

The sharp decline in the turnover rate also caused the company to increase revenue without increasing profits. According to the company's 2020 financial report, Haidilao achieved annual revenue of 28.6 billion yuan. , a year-on-year increase of 7.8%; net profit was 309 million yuan, a year-on-year decrease of 86.8%.

Expanding stores has been a magic weapon for Haidilao to maintain performance growth for a long time, and has made it highly sought after in the capital market. The company's stock price hit a record high of HK$85.754 per share on February 16, 2021, and the company's stock price rose as high as 187.9%.

At the beginning of the company's performance change, the market attributed all problems to "the impact of the epidemic", believing that as long as the company is given a certain amount of time, the impact of the epidemic will eventually dissipate. , the company's performance will return to the upward channel.

However, as time enters 2021, although the severity of the epidemic has gradually eased, the company's performance is still very weak, and has even worsened.

In H1 of 2021, the company's core data turnover rate further declined. According to the company's financial report data, the company's overall turnover rate in 2021H1 was 3.0, among which the turnover rates in first-tier/second-tier/third-tier and below/overseas cities were 3.0/3.1/2.9/2.2 respectively, which were the same/down 11%/19%/year-on-year respectively. 15%.

The decline in table turnover rate has finally affected the performance on the profit side. According to the company's financial report, in the first half of 2021, Haidilao's same-store sales were 84,800 yuan, and the net profit of a single store was only 84,800 yuan. It was 59,200 yuan, with a net profit margin of 0.48%. In the same period of 2019, these three indicators were 143,700 yuan, 1.536 million yuan, and 7.78% respectively.

In response, the company’s chairman Zhang Yong frankly admitted his mistake at the semi-annual performance exchange meeting and said, “I judged that the epidemic would end in September, but until today, Our stores in Taiwan and Singapore are still unable to open due to the epidemic.

My judgment on the trend was wrong. In June last year, I made further plans to expand stores. Now it seems that it is indeed true. Blind confidence. It was already January of this year when I realized the problem, and it was already March when I reacted. ”

Admit the mistake, it will come later. It’s a cliff-like decline in market value. Since February 17, the company's stock price has fallen by more than 75.79%, shrinking by nearly HK$350 billion from its peak during the year.

The "hidden story" behind Haidilao's closure of stores

In fact, there may not be everything behind Haidilao's development difficulties. This is what Zhang Yong said: "The judgment of the epidemic was wrong, and the company was greatly affected by the epidemic." The catching up of latecomers and the gradual disconnection of the company's marketing model have both caused the current situation.

As we all know, the domestic hot pot market is a market full of opportunities and challenges. The huge industry space, numerous market players, and fierce competition in the industry have become one of the labels of the domestic hot pot market. one.

In the early years, Haidilao relied on its unique "standardized" high-quality services to stand out from the fierce competition.

Public data shows that in 2015, Haidilao only had more than 100 stores, an increase of more than 10 times compared to the current 1,597 stores.

Behind the ultimate service experience, it reflects its deep management wisdom. The quality of food ingredients is the foundation of excellent catering companies, and management capabilities are the catalyst for outstanding catering companies to stand out. A good foundation of food quality and excellent management capabilities give Haidilao the ultimate service experience and build its brand moat.

However, the label of "good service" has not been used in the past two years. Many consumers have complained a lot about the company's service. In a Weibo survey, 49.5% of the participants believed that "Haidilao is over-served" and only 11% of netizens chose "I just like this enthusiasm." In fact, some people in the industry said that the purpose of trained services and actions, as well as the observation of consumers' actions, is to increase the turnover rate.

In addition, the company's "good service" model is difficult to replicate in large quantities in a short period of time, and the company's service personnel reserve cannot keep up with the company's expansion needs, resulting in the company's turnover rate decline.

It has been previously reported by the media that due to lack of practical experience, newcomers are unable to adapt to the intensity of work at Haidilao, resulting in an increase in the turnover rate of new employees. Coupled with the serious lack of middle-level cadres, resulting in Haidilao has serious shortages at the personnel level, which directly results in a prolonged ramp-up period for new stores and hinders business.

In fact, Haidilao is currently facing not only "internal troubles", but also countless "foreign troubles". On the 700 billion hotpot market, more than 140 companies are on their way to listing.

Since this year, in addition to the well-known Laowang, many Sichuan-style hotpot restaurant chain brands such as Brother Zhou and Banu have successively received hundreds of millions in investment and financing; in addition, there are also hotpot takeout retail Brand Jingpai Fresh Braised Sauce, and Chaotianmen Wharf which specializes in hotpot base ingredients. The lineup of institutions behind it is luxurious, including IDG Capital, Jiayu Fund, Tiantu Investment, Black Ant Capital, Tomato Capital and other institutions focusing on the consumer field.

Hot pot is an industry with serious homogeneous competition. If you want to break through, you must have unique features. This has led major hot pot brands to dig into segmented tracks and strive to compete in single markets. Seek breakthroughs.

Taking Laowang as an example, the company has entered the market with "hot pot that you can drink soup", focusing on "pepper pork belly chicken", aiming at the new consumption concept of health and wellness. Open various When commenting on the software, netizens mostly commented like "The soup is so delicious that it will make you lose your tongue", "YYDS for claypot rice", and "I come here every month to drink soup", not to mention that Xianhezhuang, which specializes in braised food, uses duck blood as its main ingredient. Tan Yaxue, who breaks through in the subdivision track, and Ge Laoguan, who uses Meiwa as a means, will have trouble in the future if Haidilao can't defend its one-third territory. It will be even harder to regain share from these up-and-comers.