When it comes to hot pot, most people probably associate it with words such as "not spicy and not happy", after all, "Sichuan-style hot pot" is the mainstream of the current hot pot market. According to Frost & Sullivan data, Sichuan-style hot pot accounted for 64.9% of China's hot pot market share in 2020.
Of course, in addition to the "red tongtong" Sichuan-style hot pot, there is also a white soup base hot pot that is more popular in Jiangsu, Zhejiang, Shanghai and other regions, which is the "Hong Kong-style hot pot". According to Frost & Sullivan data, Hong Kong-style hot pot accounted for 14.4% of China's hot pot market share in 2020.
Different from the fiery heavy mouth of Sichuan and Chongqing, Cantonese hot pot is mainly light and nourishing, and Laowang LAOWANG HOLDING LIMITE (hereinafter referred to as Laowang), as The largest Cantonese hot pot chain enterprise in China, has also attracted much attention from capital. However, the listing of Laowang is not going very smoothly. Red Star Capital Bureau found that on September 1, 2021, Laowang had submitted a prospectus to the Hong Kong Stock Exchange, but with the failure of the prospectus submitted for the first time, Laowang also chose to submit the form for the second time in recent days and once again broke through the Hong Kong stock IPO.
Looking at the general environment, the current domestic "hot pot stocks" are not very good, and the boss Haidilao (06862. HK) and 00520.HK both showed losses and partially closed stores in 2021. What are the chances of winning this time to fish for Hong Kong stocks in World War II? Is this Hong Kong-style hot pot with a health brand mixed with some "bubbles"?
(i)
Operations: What attracts today's youth?
To do the catering business, you first need to understand who the core user group is. On the hot pot track, there is no doubt that the business is mainly done by young people.
The data shows that among domestic hot pot consumers in 2020, the proportion of young people aged 18 to 35 reached 76.1%. Such a core user portrait, for enterprises, how to attract and retain young people, seize the user's mind has become the key to victory or defeat.
Source: Huajing Industry Research Institute "2021-2026 China Hot Pot Industry Investment Analysis and Development Strategy Research And Consulting Report"
According to the Laowang prospectus: "As of the last practicable date, the Laowang membership system has acquired and maintained a large number of customers, with more than 9.3 million members, of which 1.4 million have provided their age group, of which about 72.0% are under the age of 35".
At the same time, the prospectus also shows: "Laowang attaches great importance to the communication of the brand among the younger generation and has formulated a series of marketing strategies oriented by core values and beliefs, such as cooperation with marketing agencies, co-branding with various brands in multiple fields and continuous strengthening of Laowang's interaction with members of the membership system." As a result, we have increased the brand's visibility among young people, created business opportunities, boosted sales and profits and gathered a large number of users in the online membership system."
To put it simply, at present, the users of Laowang are mainly young users under the age of 35, and enterprises attach great importance to the young market, and operation and promotion mainly revolve around young users.
But can Laowang really attract more young people?
In the face of today's fierce market competition, in order to maximize the embrace of young people, various catering companies have played from store decoration, food layout, special services, IP marketing, etc. Just to create "surprises" for young people, but also to let young people share their "feelings" on social platforms.
For example, big brother Haidilao has launched special services such as "birthday song blessings", "nail art services", "dolls to eat" and so on, and related graphics and video content have been widely disseminated on social platforms, and many young consumers have been attracted to punch in.
Another example is the hot pot brand "Xiang Xiang", which also takes a different approach, grasping the preference of young people who love to drink milk tea, and launching the product positioning of the "hot pot + tea rest" cross-category combination. Among them, the net red product "Da Hong Pao Milk Tea" has attracted a large number of consumers since its launch. Not only successfully out of the circle, but also brought huge profits to the enterprise. According to the minutes of the January 2021 roadshow meeting, the revenue of the tea business has accounted for nearly 20% of the total revenue.
Another example is the Tai'er sauerkraut fish under Jiumaojiu, which has been highly sought after by young people since its launch, in addition to the store decoration (comic style), "strange" dining requirements (only four people per table is less than four people); in the Tai'er WeChat public account also launched a serial comic around the image of "Little Second Brother", the basic content of the relevant public account is 100,000 + reading.
And Laowang, in such a "volume" of the catering track, the ability of enterprises to "do" is currently somewhat insufficient.
Although Laowang has also jointly launched online and offline brand promotion activities with Fart Taojun, such as the offline co-branded dish collection packaged by The Fart Taojun cartoon and the thick soup base modeled on the character of the Fart Peach Jun, the relevant content is not highly disseminated on social platforms such as Xiaohongshu, Weibo, and Douyin, and does not stir up too much waves.
In addition, Laowang also launched two IPs, namely "Fishing Little Craftsman, Fishing Little Love"; but these two IPs in addition to the "self-proclaimed" IP name under the official Weibo of Laowang, there is still not much sense of existence on the network, and it is difficult to see the figure of these two IPs.
Source: Sina Weibo
Red Star Capital Bureau compared the WeChat index data of the above four catering brands, and as of March 24, 2022, the comprehensive data of the past 30 days is also the smallest of them.
Source: WeChat data (Note: "Together" is "湊湊")
The public recognition of the Hong Kong-style hot pot subdivision track is not as good as that of the Sichuan-style hot pot, which also brings a certain natural bottleneck to the fishing king; coupled with the poor effect of the fishing king itself in brand operation, marketing and other aspects, whether the fishing king can open up more young people's market in the later stage may have more uncertainty.
(ii)
Performance: Single-store efficiency has declined
In 2010, Laowang's first store opened in Shanghai, and since 2018, the store has continued to expand. According to the latest prospectus, there are currently 146 Laowang pot material management restaurants in China, in addition to two pot season restaurants and two Laowang soul belly chicken soup.
Source: Prospectus, Red Star Capital Bureau
Red Star Capital Bureau found that the unit price of Laowang in 2021 decreased significantly, according to the prospectus, the unit price of Laowang in 2019-2021 was 123.7 yuan, 128.1 yuan and 124.4 yuan, respectively.
Generally speaking, the decline in the unit price of customers is because enterprises want to attract more consumers, after all, most consumers are still price-sensitive users, not to mention that the epidemic has not completely "turned off", so the king of fishing lowered the unit price of customers, obviously in order to improve the turnover rate of restaurants. Theoretically, lowering the threshold and generally paying more attention to health in the post-epidemic era have created a good market space for The positioning of Laowang's health hot pot, but this is not the case.
According to the data of the overturning rate of Laowang, from 2019 to 2021, the overturning rate of Laowang was 3.0 (times/day), 2.5 (times/day), and 2.3 (times/day), respectively. The turnover rate has shown a continuous downward trend, and the turnover rate in 2021 is even lower than that in 2020, when the epidemic was the worst.
The capital market, often the most important thing is also the turnover rate of chain catering enterprises, and the performance of the overturning rate of Laowang today may be difficult to obtain the attention and favor of investors.
Due to the decline in both the unit price and the turnover rate in 2021, it has also led to the limitation of the company's revenue capacity.
From the cost side, the cost of catering cannot be avoided by the three mountains (rent, raw materials, and employees), and the three types of Laowang are very "heavy". According to the prospectus, in 2021, rental costs accounted for 14.4%, raw material costs accounted for 36.8%, and employee costs accounted for 29.9%. The total cost of these three items in 2019 accounted for 76.7%, rising to 79.2% in 2020 and rising to 81.1% in 2021.
The high cost is mainly due to the positioning of Laowang in the middle and high-end, in terms of rent, the store site selection core business circle, due to the lack of corporate influence, compared to Haidilao, Starbucks and other giants do not have much bargaining power. In terms of the cost of ingredients, this is also related to the size of the enterprise, and the bargaining space with upstream suppliers is still limited.
As for staff costs, Laowang has 4629 employees, including 2115 regular employees and 2514 outsourced personnel. It can be seen that Laowang has entered into agreements with service outsourcing companies to alleviate labor costs, but the average labor cost of the catering industry is generally about 20%, while Laowang has reached 29.9%.
The data on the revenue side and the cost side have not developed in a good trend, and the operating efficiency of The single store of Laowang has been greatly challenged.
According to the latest prospectus data, from 2019 to 2021, the revenue of Laowang was 1.095 billion yuan, 1.125 billion yuan and 1.3 billion yuan respectively, showing a slower growth trend. In the same period, the profit was 0.8 billion yuan, 0.67 billion yuan and 0.14 billion yuan respectively, and the company's income increased without increasing profits, and the profit showed a continuous downward trend.
There is too much uncertainty about the operating efficiency of Laowang's single store, and there is a greater risk in sprinting for an IPO without a complete run of the single-store profit model. At least for now, the overall operating conditions of Laowang are not very optimistic.
(iii)
Continuous store opening: enterprises are like "walking tightropes"
According to the prospectus plan, the fundraising is mainly to further open stores and build a new central factory. In terms of stores, from 2022 to 2024, Laowang plans to open 44, 60 and 80 new stores respectively; compared with 26 new stores opened in 2021 (6 stores closed, net increase stores 20), the pace of planned expansion has accelerated.
For chain enterprises, the supply chain is crucial, which is the key to ensuring quality control and reducing costs in the later stage.
At present, Laowang has only one central factory in Suzhou that can meet the soup demand of 300 stores, but the factory will expire in 2024.
Source: Prospectus
According to the prospectus, Laowang plans to establish Central Plant No. 2 and lease regional refrigerated warehouses across China to significantly increase production capacity and support nationwide expansion, and the construction of Central Plant No. 2 is expected to be completed by the third quarter of 2023.
Laowang raised funds to continue to open new stores while completing the supporting supply support required after expansion, which is indeed reasonable. But for today's Laowang, it is more like "walking a tightrope", and it is necessary to maintain a balance between single-store operation and branch expansion.
For chain enterprises, the continuous expansion of stores may make the supply exceed demand, the market can not digest so many stores, there will be a decline in single store revenue, and then the profit growth rate slows down or even declines, so it is crucial to find the optimal solution and constantly adjust the optimal solution.
Looking at Laowang again, back to what was said earlier, the current single-point operating efficiency of enterprises is not optimistic, and the more stores there are, the heavier the burden on enterprises.
On the other hand, most of Laowang's stores are currently concentrated in Jiangsu, Zhejiang and Shanghai areas, where the diet is generally lighter, and Laowang is more in line with the catering preferences of local consumers. However, in the later period, if The King of Fishing wants to continue to expand nationwide, it may be easy to have the phenomenon of not going away from the water and soil.
brief summary
Can the IPO of Hong Kong-style hot pot leader Laowang Erchong succeed? It is still unknown.
However, through the prospectus and public data, it is not difficult to find many difficulties of this company, such as the marketing effect that is not "powerful", the business performance that is not optimistic, and the "white soup" hot pot that is not recognized by general users, which are limiting the imagination space of this company.
Red Star News reporter Yu Yao Liu Mi
Edited by Yang Cheng
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