If you are looking for a barometer for the Chinese catering market, Haidilao may be one of the most representative brands.
This hotpot brand, born 30 years ago, has over 1300 stores in China. Catering is one of the industries closest to consumers, and with the fluctuations in the industry and macro environment, Haidilao is also experiencing ups and downs and adjustments.
Haidilao once landed on the capital market in 2018 with the title of "top student" in the catering industry, and its stock price continued to rise. However, in 2020, due to a "misjudgment", its performance sharply declined.
Since 2020, Haidilao has launched a major adjustment almost every year: after experiencing a low point in 2020, in 2021, Haidilao implemented the "Woodpecker Plan" to save itself, closed loss making stores, and adjusted its expansion strategy; After the "pains", in 2022, Hai Di Lao proposed a "tough plan" to reopen some closed restaurants after multiple evaluations and achieve a turnaround from losses to profits in the same year.
In 2024, after a stable rebound in performance, Hai Di Lao announced the implementation of the "Pomegranate Plan", aimed at encouraging the incubation and development of more new catering brands and promoting innovation in catering services.
After experiencing "peaks and valleys", Hai Di Lao wants to become a more "new" company. On the occasion of the 20th anniversary of the founding of the Daily Economic News, Zhou Zhaocheng, Vice Chairman of the Board of Directors of Hai Di Lao, accepted an exclusive interview with a reporter from the Daily Economic News (hereinafter referred to as NBD).
Talking about performance: turnover rate is not the only measure
NBD: In the first half of 2024, Haidilao achieved a revenue of 21.491 billion yuan, a year-on-year increase of 13.8%. Specifically, what adjustments and measures did the company take in the first half of the year?
Zhou Zhaocheng: The business philosophy and management principles that Hai Di Lao has adhered to for many years are "one hand for employees, one hand for customers". When stores implement this philosophy, their business situation is usually not bad. In addition, the more challenging the external environment is, the more cautious the consumer's consumption attitude is, and they tend to concentrate on top enterprises.
In summary, one is the impact of external environment on consumer consumption habits, and the other is our own business. The combined effect of these two factors ensured the stability of performance in the first half of the year.
NBD: The overturning rate of Hai Di Lao in the first half of the year was 4.2 times/day. Are you satisfied with this result?
Zhou Zhaocheng: The turnover rate is a tool, a lever, and one of the many ways we measure and evaluate performance, but it is definitely not the only way. Of course, internally, the turnover rate is often used as a reference indicator to evaluate the performance of store operations, as a high turnover rate usually means a larger number of customers, which in turn can obtain more customer feedback and promote repeat purchases.
However, a high turnover rate does not necessarily equate to a high customer experience, and an excessively high turnover rate can sometimes actually affect the customer experience. Due to the high turnover rate often accompanied by prolonged customer waiting time, employees face increased pressure, and the efficiency of handling customer needs and solving problems may decrease as a result. Therefore, there is a very subtle and interdependent relationship between the turnover rate and customer experience. We ultimately need to see if the customer experience is effectively guaranteed while maintaining a stable turnover rate.
NBD: During the implementation of the "Woodpecker Plan", Haidilao explicitly stated that it would not expand its stores on a large scale until the turnover rate reached 4. Now that the turnover rate has exceeded the "passing line", does Haidilao have any new plans for expanding its stores?
Zhou Zhaocheng: Our original statement is that we will not carry out large-scale store expansion until the turnover rate reaches 4, but this does not mean that once the turnover rate reaches 4, we will immediately carry out large-scale store expansion. All business decisions and management actions are not determined by a simple data point. We must comprehensively consider multiple factors such as external environment, consumer willingness to consume, and market changes in order to decide whether to carry out large-scale store expansion.
But our pace of expanding stores has not stopped, and our number of stores is still increasing. However, in terms of quantity and speed, we are relatively cautious. Overall, we are still maintaining a moderate and cautious pace of expansion.
Talking about innovation: bottom-up exploration is where the power lies
NBD: Based on environmental changes, what more subtle changes and adjustments has Hai Di Lao made?
Zhou Zhaocheng: When we propose the concept of "one hand for employees, one hand for customers" to our stores, and the external environment faces challenges, the stores need to think about how to better leverage their innovation capabilities and explore more new scenarios. For example, campus hotpot, from the perspective of top-level design, we are more focused on how to attract college students to the store. However, when it comes to landing in various regions, one may wonder why campus hotpot is not directly offered on campus, so that college students can enjoy Haidilao more directly.
After this innovative model emerged, managers from various regions began to ponder: if we can enter the campus, can we also enter the enterprise? Under the promotion of this innovative concept, the previous group meal mode has completely transformed its thinking and approach. These continuous innovations and explorations of business models have continuously expanded the reach and reach of Hai Di Lao hotpot.
'Grasping customers with one hand' does not only refer to how to interact with customers in the store, but its core lies in the need to deeply consider how to solve customers' pain points and problems. It is obviously impossible to set a clear boundary for serving customers, limited to a certain framework, and the true essence of serving customers must break these boundaries.
This is a change brought about by our exploration of numerous innovative business models in the past two years. Grasping customers with one hand "is not just about grasping in stores, but also about actively stepping out of the store and reaching out to customers. This is the result of innovation, which is not forced from top to bottom by the company, but driven by the power of innovation.
NBD: As a management team, what would you do in the face of these bottom-up innovations?
Zhou Zhaocheng: The most important source of innovation is to provide sufficient space for it. The word 'innovation' is very big. When it comes to 'innovation', people often associate it with innovation in the field of technology. However, in the catering industry, many micro innovations are also very important. These micro innovations gradually help us optimize various problems in our work, especially customers' needs for various consumption scenarios and pain points in the consumption experience. At present, at Haidilao, everyone from employees to store managers, and then to regional managers, is encouraged to improve their innovation ability and boldly propose their own innovative ideas. Currently, Haidilao has an average of 200 innovative project submissions per day.
At the recent Haidilao Work Conference, we commended multiple innovative projects. Taking sugar painting as an example, it was originally a traditional intangible cultural heritage technique. We introduced it into our stores and hired professional craftsmen to make it on site, providing customers with corresponding value-added services. It is very popular among children. Sugar painting was not our first creation, and this master is not our official employee, but it successfully created an experience scene in the store that enhances customer and store stickiness, which is innovation.
For us, innovation is not just a proprietary term in the field of technology. As long as it can make customers feel different and experience a novel feeling, this is innovation. Changing things that people used to take for granted is innovation.
Discussing the 'Pomegranate Project': A Natural Product Accumulated through Years of Practice
NBD: What were the considerations behind Hai Di Lao's proposal of the "Pomegranate Plan" in 2024?
Zhou Zhaocheng: The 'Red Pomegranate Plan' is a natural product of Haidilao's entrepreneurial and innovative practices accumulated over the past few years.
Haidilao started internal entrepreneurship a long time ago. We did not set specific goals for cultivating and incubating our second brand, but let it grow naturally. After various attempts, collisions, and even failures, not only the entrepreneurial team itself, but also the organizational system of the entire company and people in different links of each organizational chain have gained a deeper understanding of innovation and entrepreneurship.
The reason for proposing the "Pomegranate Plan" now is that Haidilao's innovation and entrepreneurship have developed to a certain stage and can be promoted as a publicly advocated and encouraged plan by the company. In the past, everyone tried individually, but lacked a guiding principle to oversee the overall situation. Nowadays, the reason for having a core program that commands the overall situation is because a solid foundation has been laid in the past few years, and now different buildings need to be built on this foundation. During this process, each employee is a designer and can fill in the best designs.
NBD: What preparations has Hai Di Lao made for the smooth implementation of the "Pomegranate Plan"?
Zhou Zhaocheng: The 'Red Pomegranate Plan' involves corresponding organizational structures and incentive systems. In response to the potential for numerous entrepreneurial projects and multi store management needs in the future, talent reserves are an important issue. Haidilao currently has numerous excellent store managers and qualified personnel - more than 1300 stores have store managers, and there are also thousands of qualified personnel who have not actually held the position in reserve. In the future, these reserve personnel may not necessarily participate in the opening of Hai Di Lao stores, but may also devote themselves to the development of entrepreneurial stores.
At the same time, we proposed a multi store mechanism, in which a manager of Haidilao store can manage other sub brand stores nearby while being responsible for the existing stores. For store managers, managing two stores will also increase revenue and motivate them. So in the future, large-scale expansion may not necessarily be achieved by increasing the number of Hai Di Lao hotpot restaurants on a large scale.
Based on the 'Pomegranate Plan', the corresponding organizational system and incentive mechanism have been constructed. This is not just about blindly implementing a plan, it must rely on sound organizational supporting measures to ensure its stable development and form an organic whole with the entire enterprise.
NBD: Do you have specific goals and expectations for the final outcome of the 'Pomegranate Project'?
Zhou Zhaocheng: Peel open the red pomegranate and you will find it difficult to count how many pomegranate seeds are inside. Similarly, it is difficult to predict how many entrepreneurial projects will emerge in the future, but this number is bound to be large, as the saying goes, 'more seeds, more blessings'.
But we cannot set a specific target quantity, just like how Haidilao never sets a goal from top to bottom when it comes to expanding stores. If we set how many entrepreneurial stores we want to open next year, the problem we face is what the basis for this data is, and how the stores should be decomposed during execution so as not to deviate from the direction.
Talking about the catering industry: there is no price war in the industry
NBD: Many restaurant owners say that catering is not easy to do this year. Does Hai Di Lao have this feeling?
Zhou Zhaocheng: There is a saying that goes' Every year is bad, every year passes'. The catering industry has always been fiercely competitive, but this year may be even more difficult. When other industries are not easy to do, some people with funds often choose to invest their funds in the relatively low threshold catering industry, but they may not be familiar with the products or services themselves.
In the catering industry, service requires patience and endurance, not just claiming to be good. It requires a holistic corporate culture and a series of specific supporting measures to achieve. However, some new entrants may not have high-quality products, do not know how to improve services, and do not understand effective ways to attract customers. The only strategy they adopt is discounts, which has also led to the current "price competition" in the catering industry.
In the so-called "involution" phenomenon, leading enterprises actually show restraint, but despite this, they are inevitably influenced by the overall environment and participate in the "involution".
NBD: Do you think there is a "price war" in the catering industry this year? How did Haidilao deal with it?
Zhou Zhaocheng: Strictly speaking, I don't think the price war is fully established. When it comes to price wars, a brand often decides to lower prices for highly similar competitors. But in the catering industry, it is not necessary to target a specific industry. The choice of price reduction or discount by peers is not necessarily targeted at a particular brand, but rather a marketing strategy or means of attracting customers.
There may be a "discount trend" in the catering industry now, but if there is a price war, are there competitors and targets? Who do you want to defeat? I don't think there is a direct competitor in the current catering industry. If the purpose of hot pot restaurant discounts is to reduce the customer flow of a certain fast food brand, this is obviously not valid; Discounting fast food brands does not necessarily mean a corresponding decrease in customer traffic for Chinese cuisine. Therefore, there is no real target for price wars.