This is an English adaptation of a FoodBud historical article originally published on August 25, 2021.
Haidilao’s 2021 interim report, released on August 24, showed revenue above RMB 20 billion in the first half, but operating performance fell short of management expectations. During the reporting period, the company’s market capitalization fell by nearly HKD 300 billion.
For the first half of 2021, Haidilao reported revenue of more than RMB 20 billion, up 105.9% year on year, and net profit of RMB 96.5 million, up 110.0%. Restaurant operations remained the core revenue engine: Haidilao restaurants generated RMB 19.419 billion, up 112.2%, and their share of total revenue rose from 93.7% to 96.6%. Delivery revenue declined from 4.2% of total revenue to 1.7%.
Since the pandemic began, Haidilao accelerated new-store openings. In 2020 alone, it added 544 stores, taking the network from 768 stores in 2019 to 1,298. By the first half of 2021, the chain had reached 1,597 stores, growing at nearly 1.6 stores per day.
Founder and chairman Zhang Yong later explained the rationale in a management exchange meeting: he had been too optimistic about the pandemic outlook. “In June last year, I further made the store expansion plan. Looking back, it was indeed blind confidence,” Zhang said. He said the company recognized the problem in January 2021 and responded in March 2021.
The profit comparison was stark. Haidilao’s first-half 2021 net profit was RMB 94.529 million, up 109.8% year on year, but first-half 2019 net profit had been RMB 910 million. In other words, after opening 1,004 stores over two years, from a starting base of 593 stores, and roughly tripling its store count, first-half net profit was only about one-tenth of the 2019 level.
Haidilao attributed the weak performance mainly to three factors: higher expenses from a large number of new stores, longer time to initial breakeven at new stores, and the continuing impact of the pandemic on customer traffic.
The decline also showed up in operating efficiency. First-half net profit fell by nearly 90% compared with the same period in 2019, while turnover and efficiency indicators also weakened. Executive director and chief strategy officer Zhou Zhaocheng told media that second-half store expansion would be relatively tightened, and that improving in-store efficiency and operating standards would be a key focus for the year.
Chinese food industry analyst Zhu Danpeng told media that Haidilao’s expansion addressed symptoms rather than root causes. In the short term, store expansion could lift revenue; over the long term, if Haidilao did not actively innovate, improve food quality, and create new service scenarios, rapid expansion would increase management costs and operating risk.
A more serious issue was the decline in same-store table turnover. Low turnover at new stores could be understood in the context of recurring pandemic disruptions, but Haidilao’s same-store turnover also fell sharply.
In the first half of 2021, table turnover in mainland China was generally between 3 and 3.5 times per day. In the 2019 annual report, disclosed table turnover in mainland China had exceeded 5 times per day.
Zhou Zhaocheng said it was not possible to keep opening stores indefinitely while maintaining high turnover. Compared with the pre-pandemic turnover level, Haidilao had some preparation for a long-term downward trend, but turnover still needed to remain within a reasonable range. He linked turnover to the business model and said the decline had emerged during the chain’s new-store expansion phase. His simplified comparison: one store with turnover of 5 may create less value than two stores with turnover of 4.
On August 24, Haidilao announced that Shu Ping had resigned as non-executive director and audit committee member, effective immediately. Shi Yonghong resigned as executive director.
The company said Shu Ping resigned due to internal organizational restructuring, while Shi Yonghong resigned to devote more time and energy to other businesses.
According to Haidilao’s 2020 annual report, Shu Ping is one of Haidilao’s founders and the wife of founder and chairman Zhang Yong. She became a company director in 2015 and was redesignated as a non-executive director in 2018, mainly responsible for supervising group management and strategic development.
Shi Yonghong is also a founder and has been regarded as Haidilao’s second-in-command. He became a director in 2015 and was redesignated as an executive director in 2018, with responsibility for participating in and supervising group management and strategic development. Beyond Haidilao, Shi was also executive director and chairman of Yihai International, Haidilao’s hotpot condiment supplier, and held directorships at several Haidilao member companies.
Haidilao also appointed Yang Lijuan as deputy chief executive officer and Cai Xinmin as audit committee member. The company added seven executive directors: Yang Lijuan, Li Peng, Yang Hua, Liu Linyi, Li Yu, Song Qing, and Yang Li. It also added two independent non-executive directors: Ma Weihua and Wu Xiaoguang.
Before the appointment, Yang Lijuan was Haidilao’s chief operating officer, responsible for overseeing group operations. As deputy CEO, she would assist the CEO in managing the group’s overall operations.
Yang Lijuan joined the workforce in Jianyang, Sichuan, in 1994 at age 16 and later joined Haidilao. Starting as a server, she moved quickly through frontline roles including team leader and lobby manager, reportedly being promoted roughly every six months. In 1998, she fully took over Haidilao’s first old store in Jianyang as store manager.
In 1999, Yang helped bring Haidilao into Xi’an.
From 2012, Yang took charge of operations across all Haidilao stores. That same year, Haidilao began expanding overseas with its first international store in Singapore, then entered the United States in 2013. Outside Haidilao’s four founders, she was one of the few shareholding executives.
On September 26, 2018, Haidilao International Holding Ltd. listed on the Main Board of the Hong Kong Stock Exchange, with chairman and co-founder Zhang Yong and COO Yang Lijuan participating in the listing ceremony. As of the article’s publication, Yang’s net worth was estimated at about RMB 13.65 billion, ranking third on the Chengdu female entrepreneur rich list.
In August 2021, Yang Lijuan was appointed deputy chief executive officer.
Note: Market capitalization, net worth, IPO-related details, and forward-looking operating comments are historical figures and statements from the 2021 article.