Chinese hot pot chain Haidilao slows growth as COVID-19 curbs consumer appetite

BEIJING, Oct 20 (Reuters) – China’s largest sizzling pot chain Haidilao is slowing its rollout of latest eating places and rising diversification of its fare, tempering its fast growth throughout the coronavirus pandemic to deal with a subsequent hunch in shopper spending.

Haidilao, which grew to become so widespread lately that it appeased prospects in hours-long queues for its soups by offering free manicures, snacks and shoe shines, is on the forefront of a reckoning in China’s restaurant trade post-pandemic.

The chain has seen falling desk turnover charges and income as customers dine out much less and new shops cannibalise enterprise at older places.

“We’ll open shops primarily based on market demand, and in comparison with earlier than, will appropriately decelerate our opening tempo,” the corporate stated in a written response to Reuters’ questions on its technique.

China’s catering trade shrank 4.5% in August, earlier than recovering for progress of three.1% final month. Analysts stated it’s going to probably stay unstable for a while amid the nation’s broader patchy financial restoration.

“This 12 months, recent waves of the epidemic occurred repeatedly, and passenger circulation in industrial areas is unstable, affecting the restoration of core enterprise indicators,” Tianfeng Securities wrote in a analysis notice final month.

Haidilao was initially undeterred by the pandemic, embarking on an growth drive in early 2020 that has doubled its retailers since then to nearly 1,600 at present. It did so by snapping up websites left behind by vacating weaker gamers, typically helped by deep reductions supplied by landlords.

However that growth pushed Haidilao’s desk turnover charge down to three.0 – or three units of consumers per day on common – within the first half of this 12 months, from 4.8 in 2019.

Xiabu Xiabu , one other Hong Kong-listed Chinese language sizzling pot chain, has stated it plans to close 200 of its 1,010 shops after dropping 50 million yuan ($7.76 million) within the first half of 2021.

Haidilao’s share worth has fallen to round HK$30 from a document excessive of HK$86 in February.

“The corporate might want to create demand going ahead, which is tougher than fulfilling demand,” China Renaissance analysts wrote in an August notice.

DELIVERY AND DRINKS

To show its fortunes round, Haidilao has opened greater than 10 retailers specialising in quick meals resembling noodles and dumplings, transferring past the recent pot, the signature dish of southwestern Sichuan province the place the corporate was based 27 years in the past.

Nevertheless, with a most of simply 5 shops every and a mean spending per visitor of 10 to twenty yuan – versus 107.3 yuan for the Haidilao eating places – the sub-brands contributed simply 0.5% to first-half income.

Haidilao final month closed a potato noodle restaurant lower than a 12 months after opening it within the central metropolis of Zhengzhou, with out publicly citing a motive.

In different diversification makes an attempt, the corporate has opened bars in three of its Beijing eating places and is selling its supply service, a unit the place income initially rose throughout the pandemic.

Nevertheless, supply income dropped from 409.6 million yuan, or 4.2% of complete income, within the first half of 2020 to 345.7 yuan, or 1.7% of complete income, within the first half of 2021.

“(Consuming) sizzling pot has a powerful social function so individuals are much less prone to order sizzling pot at dwelling,” stated Zhu Danpeng, an unbiased meals trade analyst.

Haidilao opened a retailer on Alibaba’s market Tmall a number of months in the past to promote gadgets together with lipsticks impressed by its soup bases with names resembling “capsicum rouge” and “summer season tomato”.

Zhu stated Haidilao’s multi-brands technique was the appropriate transfer however the firm didn’t have a whole lot of room for progress: “Haidilao has reached a sure part with its improvement, as a person has reached his center age.”

($1 = 6.4459 Chinese language yuan renminbi)

Reporting by Sophie Yu and Brenda Goh; modifying by Jane Wardell

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