Text | Bohu Finance, Author | Liu Ping
The tide of the era of consumption downgrade finally poured into the hot pot industry. The plummeting profits of the top brands have sounded the alarm bell of the industry reshuffle.
On August 2, Xiabu Xiabu Group released a semi-annual report forecast, showing that its expected revenue was about 2.4 billion yuan, a year-on-year decrease of about 15.9%; It will record a net loss of approximately $260 million to $280 million, compared to a net profit of $212 million in the same period last year.
Xiabu Xiabu turned around a loss, mainly due to the overall market environment, consumption was weak and consumption was downgraded, resulting in a sluggish willingness of catering customers to visit the store.
Not long ago, Jiumaojiu Group increased revenue but did not increase profits, which released a signal of serious involution in the hot pot industry in advance, even if it took the initiative to reduce prices, the turnover rate still declined.
According to the profit warning announced by Jiumaojiu Group, it is expected that the revenue in the first half of the year will be 3.064 billion yuan, a year-on-year increase of about 6.4%; It is estimated that the net profit will not be less than 67 million yuan, a year-on-year decrease of no more than 69.8%. Among them, the performance of its hot pot was the most damaged. As soon as the news came out, the stock price slipped nearly 5%.
The question is, is price reduction still a good way to break the game?
01 Under the price war, there are no survivors?
In the first half of 2023, the hot pot will be promoted to the second growth curve of Jiumaojiu Group. In the first half of 2024, hot pot has become the biggest oil bottle.
According to the financial report data, in the second quarter of 2024, the per capita consumption amount of customers of hot pot will be 104 yuan, 17 yuan less than the first half of last year, which is the largest decline among all brands in the group.
Last year, there were only 43 stores in the first half of the year, and this year the number increased to 73, but the average daily sales of the same store shrank by 36.6%, which exceeded the sum of Taier sauerkraut fish and Jiumaojiu Northwest cuisine, while the first quarter fell by 34.8% year-on-year, indicating that the performance of the hot pot is deteriorating.
Consumers did not pay, and the hot pot was forced to slow down the pace of expansion.
In order to alleviate the pressure on performance, Jiumaojiu Group said that it will adopt a prudent expansion strategy, adjust the expansion target for 2024 set at the beginning of the year, and adjust the target of opening 35-40 new restaurants in hot pot to 25.
The rapid change of the situation is closely related to the highly involuted environment of the hot pot industry, and many brands have adopted models such as "9.9 yuan" and "free food" in an attempt to seize the market at low prices.
In fact, as early as September 2023, Haidilao launched a new sub-brand "Hi Lao Hot Pot" (later renamed "Xiao Hi Hot Pot"), focusing on affordable hot pot, with the bottom of the pot as low as 9.9 yuan, and lowered the prices of some dishes, driving the average customer unit price of Haidilao to less than 100 yuan.
The move of the industry boss has caused many brands to have a sense of crisis, and finally pushed the price war to a climax in 2024.
At the beginning of this year, Banu began to adjust prices, and the average order value dropped from 144 yuan in January to 130 yuan in May.
Following last year's disguised price reduction by increasing small portions, Xiabu Xiabu went further in May this year, and the unit price was generally reduced by more than 10%, bringing the unit price back to less than 60 yuan.
Also in May, Nan Hot Pot announced the opening of the store 3.0 era, launching 1.9 yuan of vegetarian dishes, 9.9 yuan of fresh beef, and 39.9 yuan of pot bottom.
In the face of competitive pressure, the hot pot also took the initiative to "admit it", and posted an announcement in the store in June to lower the price system, starting from 8 yuan at the bottom of the pot, 9.9 yuan for meat dishes, 6.6 yuan for vegetarian dishes, and 6 yuan for stewed rice.
In addition, the hot pot also promotes money-saving strategies on social platforms, teaching consumers to "pick wool", such as "24 yuan DIY three-grid pot bottom", "Poor ghosts eat money-saving methods of cowardice factories" and other posts, trying to shorten the distance with consumers.
Baheli beef hot pot, which has been on the must-eat list for 8 consecutive years, was late but arrived, announcing on July 1 that "the price returned to 10 years ago", and the first price adjustment involved high-quality tender meat, signature fat beef, raw beef balls, cooked beef balls, cooked beef tendon balls, Chaoshan cuttlefish balls and other popular products, and the large single high-quality tender meat was lowered from 32 yuan to 28 yuan.
According to the research report of Zheshang Securities, in addition to Xiabu Xiabu, the head brand of hot pot has continued to be under pressure since September last year, and its customer unit price has continued to be under pressure, with the greatest intensity of hot pot and the most hesitant Xiabu Xiabu.
(Trend of unit price of major hot pot brands (year-on-year in June 2023), source: Zheshang Securities Research Report)
In order to attract customers, many small and medium-sized hot pot restaurants have launched cash coupons of "9.9 generation 100 yuan" on major group buying platforms, or 9.9 yuan to eat shabu-shabu such as kidney slices, hairy tripe, and fat beef, with small ingredients "free to eat".
After more than half a year, the price reduction failed to bring significant market increments to the hot pot, and Xiabu Xiabu was injured, with expected revenue and profits both declining, with a net loss of about 260 million yuan to 280 million yuan, a year-on-year profit to a loss.
02 Is it actually back to normal levels?
Once, consumers liked to say, "There is nothing that can't be solved by one hot pot, and if it doesn't work, just two." As a result, the hot pot restaurant has become one of the most pyrotechnic representatives.
But slowly, the workers found that the magic of hot pot to relieve the pressure of life has not disappeared, but when checking out, the stomach is full, and the wallet is easy to lose weight.
In the first few years of this round of price reductions, the unit price of customers in the hot pot industry continued to rise, and a hot pot meal often cost hundreds of yuan, which made the workers shout "can't afford to climb" and felt that they had suffered a backstab.
A Chongqing netizen once hit the nail on the head and complained that in the past, two people ate hot pot for 80 yuan and supported the wall, but now it is 100 yuan per person, and they dare not order casually.
At the beginning of 2023, a customer in Xi'an said that there were only five slices of potatoes served at 18 yuan in Banu hot pot, which put "sky-high potatoes" on the top of the hot search. Although Banu hot pot quickly apologized, it also said that "the price reduction will not be considered for the time being", leaving a cold image on netizens.
Banu Hot Pot was founded in Zhengzhou, Henan Province in 2001, benchmarking against Haidilao. According to Jiuqian Consulting, in 2018~2020, the brand has grown rapidly, and the price of products has also increased every year, with the explosive hairy belly rising from 65 yuan all the way to 78 yuan, and the per capita consumption is close to 200 yuan.
And Haidilao is often on the cusp because of disguised price increases. In 2022, Haidilao will cancel beef cubes, snacks and other categories, while reducing the amount of dishes to reduce the cost of raw materials. In 2023, there will also be stores that charge 8 yuan per person for self-service drinks.
The data shows that Haidilao has indeed become more and more expensive in previous years, with the unit price of customers rising from 97.7 yuan in 2017 to 110.1 yuan in 2020, and from 2021 to the first half of 2023, the unit price of customers will remain above 100 yuan.
The market supply and demand determines the price of hot pot, which has long been the largest category in the catering industry and is one of the most popular entrepreneurial tracks, attracting a large amount of capital to enter the game.
During the period of working from home, the first thing consumers want to do most is to eat hot pot. Therefore, hot pot has become the first category in the catering industry to recover, and the demand side has driven the prosperity of the hot pot industry, giving hot pot restaurant owners the courage to raise prices and expand vigorously.
According to the "China Catering Development Report 2022", the scale of the mainland hot pot market decreased to 526.8 billion yuan in 2020, ushered in a rebound in 2021, reaching 563 billion yuan, and is expected to reach 604.6 billion yuan in 2022, with the number of stores reaching 550,000, ranking No.1 in the catering segment.
Nowadays, feng shui is taking turns, consumers are more price sensitive, pursuing higher cost performance, and no longer easily paying for high-priced hot pot, bringing the hot pot industry to another extreme.
However, the comparison shows that although the price of hot pot restaurants has been greatly reduced, consumers still feel that it is not cheap.
Haidilao's 2023 financial report shows that its customer unit price is 99.1 yuan, falling to the lowest level in the past five years, but it is more expensive than 97.7 yuan in 2017, and the amount often does not increase but decreases.
Xiabu Xiabu's customer unit price in 2023 is 62.2 yuan, while in 2011, the customer unit price is only 35.2 yuan, which is highly sought after by migrant workers.
Rather than saying that hot pot brands are cutting prices to please consumers, it is better to say that consumers vote with their feet and protest against the excessively high price of hot pot, forcing hot pot restaurants to put down their bodies.
03 What do you call diners back to the table?
The power of price wars is already being felt. According to data from Narrow Door Restaurant, as of July 6, about 210,000 new stores have been added to the hot pot track in the past year, but the net increase is only about 68,000.
According to the financial report, in the whole year of last year, Xiabu Xiabu Group closed 114 stores, namely 99 Xiabu Xiabu stores and 15 Coucou stores, resulting in an impairment loss of about 165 million yuan on related assets.
In this regard, Xiabu Xiabu explained that the reason for the closure of these stores is that most of them are loss-making, and most of them do not meet the "cost-effective" model promoted by Xiabu Xiabu.
The loss suffered due to the price increase, Xiabu Xiabu may know best.
Xiabu Xiabu, which focuses on "one-person food" small hot pot, was once popular for its ultra-high cost performance, and therefore became the "No. 1 Chain Hot Pot Stock" in 2014, 4 years earlier than Haidilao.
From 2014 to 2023, it has been raising prices every year, and the unit price has risen from 44.4 yuan to 62.2 yuan, an increase of more than 40%. Compared with the unit price of 35.2 yuan in 2011, the increase is as high as 76.7%.
Under the general trend of price reduction in the hot pot industry, Xiabu Xiabu is still rising against the trend in January this year, except for the original pot and Suki pot, the price of the bottom of the pot has not increased, and the price of the rest of the pot has increased by 3 yuan, which naturally attracted netizens to complain.
Behind the price increase, it is Xiabu Xiabu's high-end dream, striving to keep up with Haidilao.
In 2016, Xiabu Xiabu carried out brand transformation and launched a high-end sub-brand Coucou hot pot, featuring the "hot pot + tea" model, trying to fill the market vacancy other than small hot pot, and the store opening speed has maintained a fast pace, and in 2019, a new store was opened every 13 days on average.
As a result, the profit you want to make does not make money, but falls into the quagmire of losses. From 2022 to 2023, Coucou Hot Pot will lose 71.1 million yuan and 295.7 yuan respectively, while Xiabu Xiabu Group will be profitable in 2023. In the financial report, the group admitted that Coocou hot pot is still expensive.
Xiabu Xiabu could have enjoyed the dividends of the parity market, but for the sake of the difficult high-end market, it lost a large number of users, which is really not cost-effective.
In 2023, more than 280 stores will be opened in Wai Spicy Small Hot Pot, and more than 300 stores will be opened in one go, reflecting that there is still a huge opportunity for parity.
On the other hand, Haidilao, which Xiabu Xiabu envies, is obviously much more sober about price power.
After the unit price reached the highest point of 110.1 yuan in 2020, Haidilao realized that there were more negative reviews from consumers, so it began to gradually reduce the price, and further reduced it to 99.1 yuan in 2023.
After experiencing the pain of a loss of 4.16 billion yuan in 2021, Haidilao achieved a net profit of about 1.373 billion yuan in 2022, and a significant increase in net profit to 4.495 billion yuan in 2023, an increase of 174.6% year-on-year.
But for enterprises, it is obviously not enough to just reduce prices.
"Brands claim to 'reduce prices without reducing quality', showing confidence in supply chain management. A strong supply chain can not only help brands reduce costs, but also ensure the stability of product quality, which is an important weapon for brands to deal with price wars. Some industry insiders said.
In 2022, Haidilao implemented the "Woodpecker Plan" to slow down its expansion, optimize its supply chain, and reduce procurement costs. In 2023, it will continue to reduce the cost of raw materials by increasing the proportion of prefabricated dishes.
Other players, such as Tinker, have apparently noticed this as well. Jiumaojiu Group revealed that it transferred "Uncle Nawei is a chef" and "Lai Meili sour soup grilled fish", concentrated resources on the operation of Taier sauerkraut fish and hot pot, and took a multi-pronged approach in terms of products, channels, and brands to cater to market changes.
04 Write at the end
There is a view that Sichuan hot pot originated from the wine city of Luzhou millet beach on the bank of the Yangtze River. The boatmen used a variety of vegetables and peppers, peppercorns and other seasonings to cook and eat in crockpots to ward off cold and dampness.
For this food that sprouted in the market, what can be consumed and eaten as much as it is delicious.