The misjudgment of the trend of the epidemic and the neglect of the new challenges of the company's management made Haidilao want to "bottom up" after the epidemic and was "trapped", and now, it has decided to survive
Photo/Visual China
Text | "Finance" reporter Yang Liyun Wang Ying Feng Yiying
Edit | Yu Le Lu Ling
Hot pot leading enterprise Haidilao (6862. HK) is set to close 300 stores by the end of 2021, amid an uproar. This figure is equivalent to the number of new stores opened by Haidilao in 2019, and it is also equivalent to about 20% of the total number of stores.
Haidilao has implemented an expansion strategy since 2019, and after the epidemic, it has expanded against the trend and decided to "bottom out" to open stores. However, this decision has proved to be a misjudgment of the trend of the epidemic and a neglect of the difficulty of management. The expansion strategy led to revenue growth, but the turnover ratio and net profit margin fell one after another. Less efficient stores are dragging Haidilao down.
On November 9, Yang Lijuan, executive director and deputy CEO of Haidilao, was interviewed by Caijing reporters. She said that many of the 300 stores that announced the closure are newly opened in 2020 and 2021. This shows that Haidilao has misjudged the recovery speed after the epidemic.
"The epidemic situation in March 2020 tended to be stable, and when it reopened in April and May, the recovery was relatively fast, coupled with the fact that the shops were easy to find at that time, and there were many preferential conditions (rent, etc.), we thought it might be an opportunity and wanted to seize this opportunity." I didn't expect that the epidemic would repeat itself and last so long. ”
In addition to Haidilao, another listed company in the hot pot industry, Sipping And Feeding (0520. HK) also announced its decision to close 200 loss-making stores in August 2021. The competition in the hot pot jianghu is becoming more and more fierce, the tastes of consumers are changing, and the epidemic has repeatedly superimposed on the rise in raw material prices, which has made it more difficult for catering operators to move forward, and the spring of the industry is far away.
At the same time as shrinking stores, Haidilao also announced the launch of the "Woodpecker Plan" and carried out a series of internal structural adjustments. "Our vision is to live." Yang Lijuan said: "Today seems to be a particularly big difficulty, maybe five years later I don't feel that it is a difficulty." ”
After the epidemic, I want to copy the bottom and am "trapped"
Haidilao's "break- and separation" this time released a signal that the company will shrink its business expansion plan in due course.
In the first half of 2020, when the epidemic was the fiercest, Haidilao had a net loss of 965 million yuan, and in the second half of 2020, it achieved a turnaround. For the whole year of 2020, Haidilao achieved operating income of 28.6 billion yuan, an increase of 7.8% year-on-year; net profit was 309 million yuan, down 86.8% year-on-year.
In the first half of 2021, the situation has not been much improved, with revenue of 20.094 billion yuan and net profit of 96.5 million yuan during the reporting period, although it has increased by more than 100% year-on-year, but it has not yet returned to the pre-epidemic level, and the net profit is only about one-tenth of the first half of 2019.
For the phenomenon of increasing revenue without increasing profits, Daniel Zhang, chairman of the board of directors of Haidilao, responded at the performance communication meeting in June 2021 that the catering industry is a traditional industry with boundaries, unlike the larger the business scope of Internet companies, the lower the cost. Our catering company makes money by opening two stores, and opening three stores may lose money. Opening more stores can increase income is not bad, more likely to not even increase income. Therefore, in the past, it was not common for catering companies to be listed.
Daniel Zhang also admitted at that meeting that he had misjudged the trend of the new crown epidemic, "In June 2020, I judged that the epidemic would end in September, but until today, our stores in Taiwan and Singapore have not been able to open due to the epidemic." Last June, I further made plans to expand my store, and now I see that I am really blindly confident. It was January when I realized the problem, and It was March when I reacted. ”
Yang Lijuan said that the repeated epidemics have triggered some chain reactions, such as excess shopping malls, and there are also mistakes in the location of some stores. These chain reactions are transmitted to the operation of Haidilao stores. "Later, we found that the newly signed shops were not as good as expected, and at first we wanted to observe for two or three months, improve management, and wait for it to warm up, but there are still many difficulties in continuing to this day." Yang Lijuan said that based on the operating conditions of these stores and various problems in themselves, the company made a decision to close these stores.
For the eliminated stores, Haidilao has its own set of screening criteria. Yang Lijuan said that the closed stores are screened from three dimensions: external passenger flow, density of surrounding stores and financial data, of which the main indicators of financial data are the turnover rate and the profitability of stores. "We did the calculation one by one, not thinking about cutting down 20% of the overall store." However, she did not disclose specific indicator values.
How are employees placed after the store is closed? Yang Lijuan revealed that the closure of the store involved 20,000 employees, and Haidilao promised not to lay off employees, and would properly place all employees, most of whom would be assigned to existing stores. According to her, the closure is gradual, many stores themselves have a labor gap, with the natural loss and turnover of employees, existing stores will not have overstaffing.
Will new stores be opened in the future? Haidilao said in the open letter that if the average turnover rate of restaurants is less than 4 times / day, in principle, it will not open new Haidilao stores on a large scale.
In the past, Haidilao's ultra-high turnover rate has always been beyond the reach of peers. In 2018, the average overturning rate of Haidilao reached 5.2 times per day. Even in 2019, when more than 300 stores were expanded, the average turnover rate of Haidilao reached 4.8 times per day.
However, in 2020, this data fell to 3.5 times / day, and the epidemic in 2020 had a greater impact, but in the first half of 2021, when the epidemic eased, the turnover rate further fell to 3.0 times / day, of which the new restaurant turnover rate was only 2.3 times / day.
Yang Lijuan believes that due to too many external changes, it is currently impossible to predict when the 4 times / day turnover rate will be reached. She said that at present, the company's most important thing is the turnover rate and profitability, and once the target is reached, it will continue to expand in the future.
Although Haidilao values the turnover rate and profitability, it will not be assessed to the store.
"Now and in the future, Haidilao's assessment of stores will be 'employee effort and customer satisfaction' two aspects, and will not assess the turnover rate and profit margin." Yang Lijuan said that because there are many factors that affect the turnover rate and profit margin, such as store location, it will cause unfairness. If you use these two indicators to assess stores, it is the simplest, but it will also bring a lot of negative effects. For example, if the store should be repaired, it will not be repaired, and the money that should be spent will not be spent.
Reduce the radius of management Restore the regional management system
Haidilao also mentioned in the open letter that "organizational structure changes make managers at all levels incomprehensible and exhausted, the number of excellent store managers is insufficient, excessive belief in the KPI indicators of connecting interests, and the lack of corporate culture construction" are also part of the reasons why store operations have not met expectations.
Yang Lijuan said that the 300 stores did not meet the standards, mainly because of their own management problems. "For example, originally the newly opened stores were to be checked, tested, and reviewed, but after the epidemic, cross-regional and cross-city was not so convenient, bringing certain difficulties to management, and some problems were hidden inside, and they broke out at a time node."
The change of organizational structure has become an unavoidable proposition of Haidilao.
The "Woodpecker Project" was interpreted by haidilao's senior management as "finding the pests under the skin of the tree". The plan aims to integrate underperforming stores while initiating the rebuilding and strengthening of product functions, the restoration of regional management systems, and the reduction of management radius.
Yang Lijuan explained that before 2018, Haidilao adopted a regional management system, in which the regional manager managed the family chief and store manager.
The family chief and the store manager are Haidilao's mentor-apprentice relationship, and they adopt an incentive policy of fission of interests. When an apprentice brought by a master fissions 6-12 stores, he can establish a "family", the master becomes the "family leader", his main responsibility is to spread the corporate culture, the apprentice opens the store "pass, help, belt"; every time the apprentice opens a new store, the master can get a performance commission. This is Haidilao's famous "mentor-apprentice system" model, and it is also part of "connecting interests and locking management".
However, after 2018, Haidilao changed the past regional management system and adopted a coach management method. Yang Lijuan introduced that in this model, Haidilao has a total of 10 coaches, each coach is responsible for the store's personnel, engineering, store coaching, product innovation, food safety, etc., but everyone has to manage all the stores, when there are only three or five hundred stores, Haidilao believes that this model can improve management efficiency.
However, as the scale expanded, the coach was unable to whip the 1579 stores across the country. Therefore, the Woodpecker Project emphasizes the restoration of the regional management system and the reduction of the management radius.
Yang Lijuan once managed more than 100 stores alone when she was the regional manager. Now after the restoration of the regional management system, Haidilao has set up a total of seven regional managers, and one regional manager manages no more than 300 stores, which can theoretically manage a total of 2100 stores.
Regarding the change of management model, Yang Lijuan said, "No management model can be permanent and omnipotent. As the scale becomes larger, the adjustment of the organizational structure is inevitable. Somewhere something went wrong and we'll adjust it back. ”
Dilation disorders
Along with the sluggish performance, Haidilao's stock price has also experienced roller coaster-like ups and downs.
On 26 September 2018, Haidilao was listed on the Hong Kong Stock Exchange at an issue price of HK$17.8 per share. Since August 2020, Haidilao's stock price has soared, and by February 2021, Haidilao's stock price has reached a record high of HK$85.75 per share, and the total market value was once close to HK$470 billion.
But then the stock price began to fall off a cliff. As of November 10, Haidilao closed at HK$20.6 with a total market capitalization of HK$112.5 billion. The stock price has fallen by 75% from its year's high, and its market value has shrunk by three-quarters.
In the face of the sharp decline in stock prices and the shrinking of market value, Yang Lijuan said: "We don't think much about the stock price, the stock price is uncontrollable, first of all, do a good job in their own performance." ”
Nowadays, the competition in the hot pot jianghu is becoming increasingly fierce, and almost every subdivision track has its own main brand, from sipping and feeding, Banu to Xiaolongkan, Laowang, etc., Haidilao's market competitors are emerging in an endless stream. At the same time, consumers' taste needs are also changing, preferring to taste early and punching in online red shops.
In the face of this situation, how should Haidilao, who is thin, highlight the siege? Haidilao, which was once named a benchmark in the catering industry for its service and management, how to play its cards well?
Yang Lijuan believes that some consumers think that Haidilao is a service win, in fact, dish innovation, food safety, store environment are also services, "our core advantage is not a narrow sense of service, but supply chain advantages, food safety control system, long-term Haidilao consumption customers, are valued these capabilities." ”
In order to find a new growth curve, in recent years, Haidilao has also been constantly testing new formats, from noodle shops, taverns to milk tea shops, plus takeaway, self-heating hot pot and other retail peripheral products, what is the cross-border effect?
According to the 2021 interim report, Haidilao's takeaway business accounted for 1.7%, the revenue from the sale of seasoning products and ingredients accounted for 1.1%, and the revenue from "other restaurant operations" accounted for only 0.5% of the total revenue.
Yang Lijuan said that at present, Haidilao still focuses on the hot pot dine-in itself, and the company's involvement in pre-made dishes and takeaways is to comply with new consumer demand, is a supplement to services, and is not a market to focus on, accounting for a relatively small proportion of the whole.
Behind the breakthrough of Chinese restaurant chains
In 2019, haidilao was the second largest hot pot chain in China in terms of the number of stores, ranking behind sipping and feeding. At the end of 2019, the total number of sipping and feeding stores reached 1124, while haidilao had 768 stores worldwide.
2020 was a turning point, when the number of restaurant stores decreased to 1,061, while the Haidilao restaurant network expanded further, with 544 new stores opened that year and 1,298 stores worldwide.
According to the real-time data of the third-party catering data platform Narrow Door Dining Eye, in November 2021, there are currently 20 hot pot chains with more than 300 stores in China, and 11 hot pot chains with more than 500 stores, of which the top few are: Haidilao 1571, 956 sipping and feeding, 871 Wang Po prawns, and 859 Xiaolongkan. The hot pot track is more sticky around the competition in the number of stores.
However, even after closing 300 stores, Haidilao is still the largest hot pot chain.
At present, the data on the turnover rate of its catering released by listed catering enterprises has not returned to the level of 2019.
Data source: listed company financial report, pending listed company prospectus
Among the hot pot brands, the turnover rate of most brands is significantly lower than that of 2019. Among them, in the first half of 2021, the overturning rate of Haidilao fell the fastest compared with before the epidemic, but it was still higher than other hot pot brands. Although the turnover rate of sipping and breastfeeding is not much different from that in 2019, it is lower than that of several others.
A large commercial real estate northwest region investment officer Peach (pseudonym) told the "Finance" reporter that the epidemic in the past two years has had a great impact on shopping malls, shopping mall passenger flow has been greatly affected, Taier sauerkraut fish, Haidilao and other catering brands are mainly open in shopping malls, will also be affected.
Peaches took the MixC city in a provincial capital city as an example, she said that the Haidilao in the project is an old store, and there are no other shops around, it has always been relatively scarce, so the agglomeration will be better, and the performance has always been the top few in the city, and it has not been affected too much. However, due to the recent impact of the epidemic, this Haidilao must also close its store for half a month.
Song Xiangqian, founder of CAV Capital, once said in an interview with Caijing, "Whether it is a food chain, a pharmaceutical chain or other chain formats, as a modern retail, it is a relatively advanced format. Chained enterprises must be branded, standardized and scaled. The chain should 'connect the interests, lock the management', and this process requires management science and wisdom."