Paying for Strategy: Haidilao Warned of a RMB3.8 Billion-Plus Loss While Jiumaojiu Reported RMB330 Million-Plus Profit

This is an English adaptation of a FoodBud historical article originally published on February 22, 2022.

On February 21, Haidilao issued a profit warning: 2021 revenue was expected to exceed RMB40 billion, up more than 40% year on year, while net loss was expected to be about RMB3.8 billion to RMB4.5 billion.

One day later, on February 22, Jiumaojiu announced that 2021 net profit would be no less than RMB330 million, up at least 165.9% year on year. Full-year revenue would be no less than RMB4.1 billion, up more than 51%. Its Tai Er Suancai & Fish store count rose from 233 in 2020 to 350.

The timing of Jiumaojiu's disclosure was hard to miss.

Haidilao's One-Time Reset

Haidilao attributed the expected loss mainly to one-time losses and impairment charges from the closure of more than 300 restaurants in 2021, plus weaker restaurant operating performance. These items totaled about RMB3.3 billion to RMB3.9 billion.

In November 2021, Haidilao had announced that it would gradually close around 300 underperforming stores by December 31, 2021. Some locations would be temporarily suspended and potentially reopened later, with the suspension period capped at two years. To improve operations, the company launched its "Woodpecker Plan," led by executive director and deputy CEO Yang Lijuan.

Haidilao's market capitalization had fallen from a peak of more than HKD400 billion to HKD105.4 billion. After closing 300 stores, taking one large provision and releasing the bad news in one go could be seen as a rational restart.

Compared with Jiumaojiu's 2021 performance, Haidilao was paying for earlier strategic missteps. Digesting those decisions could take more than one year, or even three years. Even so, Haidilao remained the leader in China's hotpot market, and a painful restructuring was part of the process.

Haidilao was also reorganizing some invested brands. For example, U Ding U announced on its WeChat account that some stores would stop operating.

Direct Operations, Vertical Strength, Horizontal Difficulty

Both Jiumaojiu and Haidilao are strong in direct-operated systems. That model supports tight control, but usually reduces openness.

Haidilao has performed well in vertical expansion across the hotpot ecosystem. Yihai International, focused on hotpot soup bases and seasonings, had already listed. Shuhai had become a leading supply-chain company. The group also had Weihai, focused on HR consulting, and Honghuotai, a joint venture with Yonyou Network.

But Haidilao's horizontal multi-brand expansion had not yet produced a breakout brand. Investing RMB2 million through each store manager is not enough by itself to create another strong brand. U Ding U was one example: even with strong support from Haidilao, it did not break through.

Jiumaojiu's Multi-Brand Playbook

Jiumaojiu had also learned lessons from investment. It had tried both acquisitions and incubation. Its conclusion was that the better models were either to incubate brands internally, or to take only a small equity stake and act more like a coach or advisor.

The company's view was that the restaurant industry does not have an especially high entry barrier: capable people often want to be their own boss, while those willing to be acquired may either be seeking liquidity or may lack capability.

Jiumaojiu's core strategy was to use multiple brands to capture mall traffic. Its method was to modernize mature categories. The key idea was continuous micro-innovation, with relatively little disruptive innovation.

Another important feature was appointing young brand founders:

• Tai Er Suancai & Fish's founder was born after 1985.
• Song Hotpot's founder was born after 1990.
• Lai Meili Grilled Fish's founder was born after 1995.
• Song's brand head had previously worked on the Bu Pa Hu beef brisket and Song cold-pot skewer projects.
• Lai Meili's head had previously operated in tea drinks.

Jiumaojiu puts younger people in charge of the front end, while experienced operators handle back-end execution. Chairman Guan Yihong, positioned as a product-focused leader, controls key decisions in internal brand incubation.

The group also ties incentives through equity and benefit-sharing mechanisms. The brand teams for Tai Er Suancai & Fish, 2 Egg Pancake, Song Hotpot and Uncle Chef respectively held 12%, 20%, 20% and 25% equity in the brands they managed.

This is Jiumaojiu's bet: use the same system to create the next "Tai Er" and find more growth curves.

A Cautious Year Ahead

According to the China Cuisine Association's report, "2021 China Catering Market Analysis and 2022 Market Outlook Forecast," China's national foodservice revenue reached RMB4.6895 trillion in 2021. That represented a return to positive growth of 18.6% year on year, but the two-year average was still down 0.5%, meaning the market had not yet recovered to its pre-pandemic 2019 level.

With COVID-19 still recurring at the start of 2022, the year may remain unsettled. In an uncertain environment, restaurant-chain groups may become increasingly cautious: less aggressive store expansion, more emphasis on stability and avoiding defeat.

Note: forward-looking guidance, market capitalization, IPO/listing references and equity figures are historical as of the article's original February 2022 context.