Haidilao plans to launch the "Pomegranate Plan" emphasizing diversified layout.
On August 27th, Haidilao International Holdings Limited (Haidilao, 6862. HK) announced its interim results as of June 30, 2024. In the first half of the year, Haidilao achieved a revenue of 21.491 billion yuan, a year-on-year increase of 13.8%; The net profit for the period was 2.033 billion yuan, a year-on-year decrease of 10%; The profit attributable to the company's owners was 2.038 billion yuan, a year-on-year decrease of 9.7%; The core operating profit reached 2.799 billion yuan, an increase of 13% compared to the same period last year.
In the first half of the year, both the revenue and core operating profit of Haidilao reached a historic high. The financial report points out that the core operating profit data excludes the impact of non core business related and unsustainable items such as interest and investment income, tax deductions, and exchange gains and losses, mainly focusing on the performance of core operating projects. The decline in net profit in the first half of the year was mainly due to the change in net exchange gains and losses and the cancellation of the preferential policy of value-added tax deduction in Chinese Mainland.
According to Wind data, Haidilao's revenue reached a historic high in the first half of the year, with a slight year-on-year decline in net profit but still at a historical high.
Past performance, sourced from Wind
As of the close on August 27th, Hai Di Lao was trading at HKD 12.26 per share, up 2.85%, and down 11.56% year to date.
Haidilao's turnover rate exceeded 4 times per day in the first half of the year, and the number of store expansions is expected to increase significantly in the second half of the year
In addition to the double increase in revenue and core operating profit, Haidilao has also achieved a new breakthrough in the turnover rate after many years.
According to the financial report, the total number of customers received by all restaurants in Haidilao Greater China in the first half of the year exceeded 200 million, with a turnover rate of 4.2 times per day, compared to 3.3 times per day in the same period last year. According to the reporter's understanding, this time the turnover rate has once again exceeded 4 times per day after more than four years. The last time was 4.8 times per day in 2019, when Haidilao had 768 global stores.
In addition, the per capita consumption of customers in the first half of the year was 97.4 yuan, compared to 102.9 yuan in the same period last year. According to calculations, it decreased by 5% year-on-year, mainly due to changes in the consumption structure of dishes and increased discounts.
At present, Haidilao Restaurant accounts for nearly 40% of the revenue in the second and third tier cities in the Chinese Mainland market, of which the second tier cities have the highest turnover rate of 4.3 times/day.
In terms of the number of stores, as of the end of the first half of the year, Hai Di Lao operated a total of 1343 restaurants in China, of which 1320 were located in mainland China and 23 were located in Hong Kong, Macau, and Taiwan. In terms of the number of stores, 11 new restaurants were opened in the first half of the year, with a total of 43 stores closed. Some restaurants that did not meet expectations and had insufficient growth potential were also closed, and some restaurants ceased operations due to property adjustments and other commercial reasons.
Overall, according to data from the National Bureau of Statistics, the catering revenue in China reached 2.6243 trillion yuan in the first half of this year, a year-on-year increase of 7.9%; The catering revenue of units above the quota was 719.2 billion yuan, a year-on-year increase of 5.6%. According to third-party data from Chenzhi in the catering industry, in the first half of 2024, the scale of catering stores in the first and second tier markets will still experience significant negative growth, and competition will become increasingly fierce; The sinking market continued to maintain a slight increase of over 8%.
Haidilao opened up franchising in March this year, with a focus on direct sales and timely introduction of franchise operation models. This financial report also pointed out that the plan is to expand Haidilao's coverage through franchising, achieve steady growth in the number of stores, and enter the sinking market.
To ensure the overall good business performance of Haidilao Restaurant, we maintain the principle of cautious expansion. Haidilao pointed out in its financial report that in the second half of the year, it will continue to adopt a bottom-up approach to opening stores. With further improvement in management capabilities, the number of Haidilao stores is expected to increase significantly compared to the first half of the year. Haidilao will continue to strengthen its regional layout, steadily expand its restaurant network, and ensure that every newly opened restaurant can provide high-quality services and achieve excellent profitability.
At the annual general meeting of shareholders in June this year, the management of Hai Di Lao mentioned that the opening and closing of stores has entered a stage of normalized management. For some underperforming stores, Haidilao will promptly close them or search for better surrounding commercial districts to reopen, in order to bring the maximum investment return to shareholders. The opening of stores is also steadily progressing according to the plan.
The newly launched 'Pomegranate Plan' aims to promote innovation and diversified layout of catering services
On August 27th, Haidilao also announced that the board of directors has appointed Zhang Junjie, founder of the Bawang Tea Ji brand, as an independent non-executive director, effective immediately. His main responsibility is to supervise the Haidilao board of directors and provide independent judgment. Zhang Junjie has signed a letter of appointment with Hai Di Lao as a legislator, with a term of three years starting from today, and has the right to receive an annual salary of 1.2 million yuan.
According to the announcement, Zhang Junjie, originally named Zhang Jun, is 29 years old. Zhang Junjie founded the Bawang Tea Lady brand in June 2017 and currently serves as the Chairman and CEO of Chagee Holdings Limited. I have over 13 years of operational and management experience in the catering industry.
It is worth noting that, following the previous Woodpecker Plan and Hardbone Plan, Haidilao announced the launch of the "Pomegranate Plan" in this semi annual report, encouraging the incubation and development of more new catering brands and promoting innovation in catering services.
Previously, Haidilao began a "correction" expansion strategy in 2021 and launched the "Woodpecker Plan" in November of the same year to close nearly 300 stores that did not meet expectations, timely shrink the group's business expansion plan, rebuild and strengthen some functional departments, and restore the regional management system. In 2022, as the external epidemic gradually improved and the internal "Woodpecker Plan" achieved certain results, Haidilao launched the "Hardbone" plan in September of that year, gradually selecting "Hardbone" stores that meet the conditions for reopening.
With the support of the Woodpecker and Hardbone Plan, the current development of the main brand has stabilized. In response to market changes, Haidilao has made a new round of strategic adjustments based on its previous position. In fact, Haidilao has been actively exploring diversified forms and models since last year, and multiple sub brands have also begun to accelerate their development this year.
For example, in terms of innovation in catering services, the financial report pointed out that since last year, Haidilao has opened multiple camping hotpot, campus hotpot, enterprise hotpot, etc. across the country, expanding more daily and high-frequency catering consumption forms.
In terms of food delivery, the proportion of one person food business has increased in the first half of this year, bringing more revenue and profit space to the company. Specifically, the takeaway business revenue in the first half of the year was 581 million yuan, a year-on-year increase of 23.3%, mainly due to the company's provision of one person premium fast food from the second half of 2023, which made a significant contribution to revenue growth.
Separate business income
Currently, the operating revenue of the main brand Haidilao Restaurant has increased by 13.8% year-on-year due to the increase in turnover rate, and the revenue proportion remains at 95%. In terms of new brand incubation and innovation, Hai Di Lao has a total of 5 entrepreneurial projects in operation in the first half of the year, including barbecue, hot pot, Chinese fast food, etc.
The Pengpai News reporter learned from Haidilao that in terms of sub brands, Xiaohai Hot Pot has opened stores in Beijing, Hebei, Zhejiang and other places, and the number of stores has increased to 10. In the future, it will gradually sink to third - and fourth tier cities. Xiaohai Love Fried Chicken, a fried chicken brand under its umbrella, opened in Taiyuan in August this year and will expand to cities such as Tianjin, Shijiazhuang, and Shaoxing in the next two months. Senior Brother Miao was founded in 2021 and will gradually expand into new first tier cities and second - and third tier cities starting from 2023. Currently, the number of stores nationwide has reached 15.
To support the efficient implementation of the 'Pomegranate Plan', Haidilao is also planning a new round of organizational innovation. The financial report points out that the newly appointed CEO Gou Yiqun will lead the Innovation and Entrepreneurship Committee, integrate resources at the group level, and lead and promote the incubation and development of new brands and businesses. At the same time, the "Operation Five Tigers" are composed of a senior management team, focusing on innovation and entrepreneurship projects and the overall development of the company in five major areas: entrepreneurial mechanism, product innovation, supply chain guarantee, operational collaboration, and marketing support.
In addition, in order to achieve the scale development and layout of entrepreneurial brands, the financial report also pointed out that the company will comprehensively use measures such as equity incentives to enhance employees' enthusiasm for participating in entrepreneurial and innovative projects, and encourage employees with ideas, abilities, and perseverance to step out of their comfort zone and engage in entrepreneurial projects according to the specific needs of different innovation and entrepreneurship projects.
Haidilao has sent multiple signals of diversification in recent years. According to reporters' analysis, in June of this year, Haidilao welcomed its new CEO Gou Yiqun after more than two years. Under his leadership, Haidilao has established an Entrepreneurship and Innovation Committee and a Digital Operations Committee. Among them, the former aims to develop new innovative models and incentive mechanisms, leading Haidilao towards multi-level and multi category development in the future.
In terms of innovation and entrepreneurship, the continuous promotion of new categories and formats of Hai Di Lao has also become a long-term plan. According to previous reports by reporters, the management of Hai Di Lao proposed at the annual shareholders' meeting held in June that the company has made many attempts at new formats and brands internally, and will weakly regulate innovation to ensure that everyone's innovation has the opportunity to be implemented. Although the scale of each brand is still relatively small, the trend is positive. I also hope that in the future, the store manager of Hai Di Lao can manage multiple stores of different formats for resource sharing.
However, from an industry perspective, the creation of new brands usually does not see significant changes in a short period of time. Whether opening a diversified growth curve can improve performance requires time to test. Whether to innovate well and become a Chinese catering group covering multiple categories worldwide will also be the responsibility of the new CEO.
In terms of future prospects, Hai Di Lao continued to mention in its semi annual report that it will continue to explore diversified business strategies, such as mining catering start-up brands and exploring restaurant franchise formats; Strategically seeking to acquire high-quality assets to further enrich the form of catering business and customer base.