Consumer Staples Author: 张莹方, Zhiqing Chen Editor: Luke Sheehan Mar 02, 2021 12:48 PM (GMT+8)

On March 1, 2021, Chinese Hotpot Restaurant chain Haidilao International Holdings Co., Ltd. announced that its net profit is expected to register a drop of 90% on the Hong Kong Stock Exchange for 2020.

Haidilao

In contrast to the slumping net profit, Haidilao’s share price nevertheless surged sharply. Within a year from March 2020, Haidilao’s share price had climbed by 133%. By the end of March 1, 2021, the total share price increased by 8.17% and disclosed at HKD 68.86 per share.

The sharp decline was majorly related to the adverse impacts of the pandemic. Due to dine-in restrictions and safety measures, Haidilao experienced less in-store traffic, hammering its businesses hard. As reported, along with COVID challenges, the unstable currency exchange rate between USD and CNY also disturbed the company’s operations, resulting in a drop in net profit of around CNY 235 million.

Haidilao officially released updates showing close monitoring of the market and potential measures to adjust business operations, including store expansions. These measures are intended to ameliorate negative impacts from the pandemic and optimize cost management by lowering general operating expenses. By raising money through debt financing, the company is expected to achieve a positive financial cycle over the next quarters.

Regarding the sharp decline of Haidilao’s net profits, netizens have divergent attitudes towards the matter. Some people consider that the decline of net profit is inevitable because of existing deficits in the company’s operations. Others, meanwhile, complained about the pricing being higher than regular hotpot restaurants in China.

On April 6, 2020, social media platforms saw a 'diss' trend emerge, with netizens attacking Haidilao’s rising prices. By April 10, Haidilao delivered an apology letter to the public, explaining the mistaken decision to scale up pricing and bringing the price range back to normalcy. Other types of indictment also happened. For instance, on February 27, 2020, some presses reported that Haidilao had installed cameras inside private dining rooms. On March 1, the company apologized for this action and explained that the installments are merely for customer safety.

Even though Haidilao has overshadowed its competitors thanks to its well-rounded and innovative services integrating dining and other entertainment activities, its reputation has been constantly challenged due to indictments mentioned above. Thus, the company needs to refine its management models, pricing options, and other marketing strategies while meeting customers’ needs.  

HaidilaoHot Pot