The turnover rate decline, single store profitability difficulties and other multiple shortcomings under the constraints of the barbaric expansion of a few years long Haidilao had no choice but to press the pause button, announced the closure of 300 stores. At the same time, the company also launched a "woodpecker program" to seek a breakthrough. However, Haidilao face such a difficult situation behind is really only the company's expansion of the step is too big? Consumers are gradually desensitized to Haidilao's characteristic "standardized service", and the rest of the hot pot brands offer "hot pot + segmentation track" strategy has made the company in the hot pot industry in the chaos seem to be stretched to the limit.

Haidilao is eating its own bitter fruit.

On November 5, Haidilao released an announcement that it had decided to gradually shut down 300 Haidilao stores before December 31, which had relatively low customer traffic and poorer-than-expected business performance.

At the same time, Haidilao also released a "woodpecker" program, aimed at rectifying the poor business performance of the stores.

This is the first time after the listing of Haidilao opened such a large-scale wave of closed stores. According to Haidilao previous financial report, as of June 30, 2021, Haidilao global store number 1597, this calculation, the shutdown of stores accounted for about 18.8% of its total number of stores.

Haidilao through the official microblogging released a letter "to friends who care about Haidilao", which explains the main reasons why some of the company's stores did not meet expectations.

Including part of the new store site selection is unreasonable, the internal organizational structure changes to all levels of management "can not understand and exhausted", the number of excellent store manager is insufficient, excessive belief in "even the interests of" KPI indicators, and the lack of corporate culture construction, etc. have become the bottom of the sea of Haidilao. The lack of construction and other reasons for the need to slow down Haidilao.

But can closing 300 stores solve these problems?

Haidilao's "woodpecker" plan

The financial report shows that in 2019 alone, Haidilao opened 308 new restaurants, with a total number of 768 stores, and the turnover rate has stabilized at 4.8 times per day. And by 2021, Haidilao stores reached 1,597, and its layout gradually shifted from first-tier cities to second- and third-tier cities and the following cities, but the turnover rate has fallen to 3 times / day.

In the face of the continued decline in turnover rate, Haidilao chose to shut down some stores.

In terms of the shutdown criteria, Haidilao said that it will be from the maturity of the external business district where the store is located and the flow of customers, the density of the neighborhood of the store, and the financial indicators of a single store in the three dimensions of comprehensive consideration. "The average turnover rate has not reached 4 times / day, in principle, will not scale up to open new outlets."

At the same time as the contraction of stores, Haidilao will also carry out a series of internal structural adjustments. This includes strengthening some of the functional departments and restoring the regional management system, and strengthening the internal management and assessment mechanism.

Haijilao will be this broken arm to survive the move called "woodpecker program". The relevant person in charge of the sea salvage in the external talk about this program, so said.

Nowadays, many of the sea fish store has long been no longer when the long lines of the prosperous scene. This may be attributed to the original expansion strategy.

Expansion strategy blunders swallow their own bitter fruit

During the 2019 epidemic, the catering industry collective depression, many small catering enterprises due to the scarcity of traffic, the number of people who dine sharply reduced helplessly shut down the store, even if the strong such as Xibei in the epidemic under the influence of the impact of the situation, but also a little burnt out, the force can not help.

However, the catering industry's collective encounter with the cool let Haidilao see a new opportunity, in June 2020 Zhang Yong judgment epidemic 3 months after the end, and resolutely decided to open the counter-trend expansion.

According to public information, in 2019 and 2020, Haidilao opened 308 new stores, 544, 299 new stores in the first half of this year. It can be seen that the three-year expansion plan, the company's pace of opening stores in 2020 is the most rapid, and the year-on-year growth rate of new stores is as high as 76.6%.

After Zhang Yong pointed out the direction, the expansion of the sea salvage as scheduled to fulfill, but against the trend of expansion of the "bad consequences" also soon appeared.

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

The sharp decline in the turnover rate also began the company appeared to increase revenue but not profit, according to the company's 2020 financial report, Haidilao annual revenue of 28.6 billion yuan, an increase of 7.8% year-on-year; net profit of 309 million yuan, a year-on-year decline of 86.8%.

Expansion of stores, for a long time had been Haidilao to maintain earnings growth, and make him highly respected in the capital market. The company's share price touched an all-time high of HK$85.754 per share on February 16, 2021, and the company's share price rose as high as 187.9% at one point.

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

However, in 2021, although the severity of the epidemic was gradually alleviated, the company's performance was still very weak, and even deteriorated further.

2021 H1, the company's core data turnover rate further decline. According to the company's financial report data, 2021H1 the company's overall turnover rate was 3.0, of which the turnover rate of first-tier/second-tier/third-tier and below/overseas cities was 3.0/3.1/2.9/2.2, respectively, year-on-year flat/decreased by 11%/19%/15%, respectively.

The decline in the turnover rate ultimately affects the performance of the profit side, according to the company's financial report, in the first half of 2021, Haijilao same-store sales of 84,800 yuan, the net profit of a single store is only 59,200 yuan, the net profit margin of 0.48%, and in the same period of 2019, the three indicators were 143,700 yuan, 1,536,000 yuan, and 7.78%, respectively.

In this regard, the company's chairman Zhang Yong frankly admitted his mistake and said at the half-yearly performance exchange conference, "I judged that the epidemic ended in September, but until today, our Taiwan, Singapore stores are still affected by the epidemic can not open.

My judgment of the trend was wrong, last June I further made plans to expand the store, and now see that it is indeed blind confidence. When I realized the problem it was already January this year, and by the time I reacted it was already March."

Acknowledging the mistake, waiting for is the cliff-style decline in market value. 17 February to date, the company's stock price cumulative decline of more than 75.79%, compared with the peak of the year has shrunk nearly 350 billion Hong Kong dollars.

Haijilao closed store behind the "hidden"

In fact, the development of Haijilao in trouble behind the perhaps not all of the Zhang Yong mouth of the "wrong judgment of the epidemic, the company was affected by the epidemic is too large". The later to catch up and the company's marketing model is gradually out of touch, *** with the same caused by today's scene.

As we all know, the domestic hot pot market is a market full of opportunities and challenges, the industry space is huge, the market players are many, the industry competition is fierce have become one of the domestic hot pot market label.

In the early years, Haidilao relied on its unique "standardized" quality service from the fierce competition to kill out.

Public data show that in 2015, the number of stores in Haidilao is just over 100, compared to the current 1597 more than 10 times.

The ultimate service experience behind, reflecting the depth of its management wisdom. The quality of the ingredients is the basis of excellent catering enterprises, management ability is the catalyst for excellent catering enterprises to stand out. The good quality of the ingredients and the excellent management ability to give Haidilao the ultimate service experience, to build its brand moat.

Only the "good service" label in the past two years is not working well, many consumers have a lot of complaints about the company's service. In a microblogging survey, 49.5% of participants believe that "Haidilao excessive service", only 11% of users choose "I like the enthusiasm". In fact, some industry insiders indicate that the trained service and behavior, the consumer's perception, more purpose is to improve the turnover rate.

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

Previous media reports, due to the lack of practical experience, newcomers can not adapt to the intensity of the work of the sea saloon, resulting in the increase in the rate of departure of new employees, coupled with the serious lack of middle-level cadres, resulting in the sea saloon in the personnel level of the serious deficiencies, which directly results in the new store climbing period elongated, dragging the leg of the business.

In fact, Haidilao is currently facing not only "internal", more countless "external". 700 billion on the hot pot track, there are more than 140 companies are on the way to listing.

This year, in addition to the widely known Lao Wang, Zhou Shibei, Banu and other Sichuan-style hot pot restaurant chain brands have received hundreds of millions of dollars in investment financing; in addition to the hot pot takeaway retail brand Jingpai Fresh Halo, as well as the main hot pot base of the Chaotianmen Quay. Behind the institutional lineup is luxurious, including IDG Capital, Jiaoyu Fund, Tiantu Investment, Black Ant Capital, Tomato Capital and other institutions focusing on the consumer sector.

Hot pot is originally a homogenized and competitive industry, want to break out must have characteristics, which makes the major hot pot brands to segmentation track digging, and strive to seek breakthroughs in a single point.

To the king, for example, the company to "can drink soup hot pot" cut into the market, the main pepper pork belly chicken, "targeting health and well-being of the new consumer concept. Open a variety of review software, netizens are also more "soup fresh off the tongue", "boiled rice YYDS", "every month to card to drink soup" such comments. Not to mention the main flavor of Xianhezhuang, duck blood as a niche track breakthrough Tan duck blood and frog as a means of brother Lao Guan.

And if Haidilao can't hold on to its own acreage, it will be much harder to regain share from these upstarts in the future.