Haidilao Crisis: Revenue Growth Slows, Profits Drop Double Digits, Takeout and Multi-Brand Strategies Unable to Save the Day

Not long after the earnings release, on April 9, an employee claiming to have worked at Haidilao for six years published a lengthy article exposing long-term mismanagement practices experienced at one of Haidilao’s stores. The article mentioned that employees were mandatorily required to purchase gifts at their own expense of 500 yuan as punishment whenever customer complaints occurred, regardless of the reasons. Multiple fines for violations were imposed without any legal basis. Haidilao once again trended on social media due to issues between customers and employees. On April 11, Haidilao issued a statement regarding the “Haidilao Partner Forced to Buy Gifts Due to Customer Complaints Incident,” marking the event's conclusion.

On March 24, Haidilao International Holding Ltd. (hereinafter referred to as Haidilao, 06862.HK) officially released its full-year financial report for 2025. This highly anticipated report not only reflects the overall growth pressures faced by the industry but also highlights a series of risks facing Haidilao itself, including sluggish core business performance, insufficient support from new businesses, and challenges in strategic transformation. Its growth logic and risk resistance capability as a leader in the hot pot industry are now under severe scrutiny.

Mid-Life Crisis: From 'Growth Myth' to 'Revenue Without Profit Increase'

A seemingly 'passable' earnings report hides the most glaring contrast. In 2025, Haidilao achieved revenue of 43.225 billion yuan, a slight year-on-year increase of 1.1%, but net profit fell by 14% year-on-year to just 4.042 billion yuan. The divergence between modest revenue growth and declining profits has shattered Haidilao's long-standing growth myth.

Notably, looking at the past decade from 2017 to the present, aside from 2022 during the pandemic, the slow pace of revenue growth in 2025 ranks second lowest. This largely reflects the significant pressure the company is currently facing.

The warning signs in core operational metrics are the most direct manifestation of the main brand’s difficulties. Data shows that in 2025, revenue from Haidilao's main brand restaurants was 37.543 billion yuan, a year-on-year decrease of 7.1%, forming a stark contrast with the overall revenue’s modest 1.1% increase, becoming the key factor dragging down profits.

In 2025, the overall table turnover rate for self-operated Haidilao restaurants was only 3.9 times per day, continuing to decline from 4.1 times per day in 2024, falling below the industry-recognized breakeven 'lifeline' of 4 times per day. Single-store operational efficiency continued to decline, significantly compressing profitability. A drop in table turnover rate indicates further loss of customer traffic. In 2025, Haidilao served a cumulative total of 384 million customers, a substantial decrease of 7.5% compared to 415 million in the previous year, equivalent to losing over 31 million customers in one year.

However, CITIC Securities Brokerage (Hong Kong) believes that although the recovery of table turnover rates is crucial, research suggests that store expansion is more likely. Despite fierce price competition, Haidilao's table turnover rate of 3.9 times in 2025 remains strong. Its EBIT margin in 2025 has surpassed the level seen in 2019. Data from Canyan shows that China’s hot pot stores decreased by about 40,000 in 2025. Easing competition will support store expansion.

Data shows that raw material and consumables costs for Haidilao decreased by 4.3% from 16.946 billion yuan in 2023 to 16.211 billion yuan in 2024, then increased by 8.1% to 17.526 billion yuan in 2025, with the percentage of revenue rising from 31.5% in 2023 to 40.5% in 2025. Meanwhile, average spending per customer from 2023 to 2025 was 99.1 yuan, 97.5 yuan, and 97.7 yuan, respectively. Against the backdrop of high costs, the inability to raise prices further compressed single-store profitability.

The decline of the main brand essentially represents a structural crisis compounded by multiple factors. Amid a wave of consumer rationalization, 'service premium' no longer holds appeal. Compared to the recovery period in 2023, when the catering market experienced revenge consumption, Haidilao achieved dual growth in revenue and profit thanks to its brand advantage, with table turnover rates rebounding and customer numbers increasing substantially year-on-year. At that time, growth relied heavily on 'recovery dividends' and the concentrated release of market demand.

But by 2025, as recovery dividends faded and the catering consumption market entered a rational cycle, consumers placed greater emphasis on 'cost-effectiveness.' Excessive service became a burden, turning what was once a core advantage into 'ineffective investment,' and the service premium gradually disappeared, significantly weakening the main brand’s differentiated competitiveness.

Zhu Danpeng, an analyst at the China Food Industry, stated that amid increasing macroeconomic uncertainty, with consumer willingness, ability, and confidence all trending downward, catering companies like Haidilao, which are positioned in the mid-to-high-end segment without a clear cost-performance advantage, will inevitably face greater operational pressure. 'This is not an issue of a single brand but a common challenge faced by the entire catering industry. Therefore, building a product portfolio that balances cost-effectiveness and quality-price ratio will become a core issue the entire industry urgently needs to address.'

Additionally, intensifying competition within the hot pot sector has led to significant customer diversion effects. In recent years, Banu Tripe Hot Pot, focusing on 'product-driven philosophy,' and Song Hot Pot under Jiumaojiu (09922.HK), targeting 'youth-oriented social scenarios,' have both precisely met segmented consumer demands through their product positioning and scene creation, continuously diverting Haidilao's core customer base—especially younger consumers. At the same time, regional hot pot brands, leveraging local advantages and lower prices, have further squeezed Haidilao’s market space, placing the main brand in the awkward situation of being 'caught between a rock and a hard place.'

Combined with the sluggishness in the business sector, Haidilao's 2025 financial data also reveals issues such as tightening cash flow and imbalanced debt structure, leading to a decline in financial stability and raising questions about its risk resistance capability.

In terms of asset and liability structure, from 2024 to 2025, current liabilities surged significantly from 7.104 billion yuan to 9.324 billion yuan, indicating a notable rise in short-term debt repayment pressure; non-current liabilities dropped from 5.26 billion yuan to 2.761 billion yuan, while total liabilities decreased from 12.36 billion yuan to 12.09 billion yuan. Haidilao’s asset-liability ratio slightly increased from 54.27% to 54.71%.

Net cash flow from operating activities in 2025 fell from 7.634 billion yuan in 2024 to 6.23 billion yuan, marking an 18.4% year-on-year decline. The contraction in operating cash flow reflects a weakening profitability of the group’s core business and a reduction in cash generation ability. Meanwhile, cash and cash equivalents plunged significantly from 6.407 billion yuan to 3.951 billion yuan, indicating a weakened capacity for cash reserve security.

Facing continued pressure on operations and finances, Haidilao once again witnessed a key leadership change. On January 13, 2026, founder Zhang Yong returned to take over as CEO, sparking heated market discussions on whether his return was to 'put out the fire' for the struggling Haidilao or to 'add fuel' to its transformation journey. Just a day after assuming office, Zhang Yong swiftly completed a crucial move: redeeming the remaining $285 million from the $600 million bond issued in 2021. This action hinted to the market that before advancing strategic transformation, Haidilao must first clear its historical financial burdens—a responsibility that ultimately fell back on the founder.

Additionally, the optimization of labor costs reflects operational pressures. As of the end of 2025, Haidilao Group had a total of 125,600 employees, down by 11,600 compared to 137,178 in 2024. Total employee costs fell from 14.113 billion yuan to 14.073 billion yuan. Although cost-cutting measures achieved a slight decrease in labor expenses, this also highlighted the group's efforts to control costs and alleviate profitability pressures by reducing its workforce, which may be an inevitable response to declining operational efficiency and slowing business expansion.

From the perspective of store distribution and operations, Haidilao is caught in a passive situation of 'slowed expansion and optimized contraction.' During the reporting period, the company owned multiple restaurant brands. As of December 31, 2025, under the Haidilao brand, the company operated 1,383 restaurants, including 1,304 self-operated restaurants, with 79 new openings during the year, and 79 franchised restaurants, with 21 new openings in the same period. Additionally, 45 self-operated restaurants transitioned to franchises during the year. During the reporting period, 85 self-operated restaurants were proactively shut down or relocated due to subpar performance, commercial landmark shifts, or outdated facilities. Beyond the Haidilao brand, the group operates 20 other restaurant brands, totaling 207 restaurants.

Looking at regional contributions, lower-tier markets have become the revenue backbone for Haidilao. In 2025, 487 stores in second-tier cities generated revenue of 13.853 billion yuan, accounting for 36.9%, while 571 stores in third-tier and below cities contributed 15.581 billion yuan, representing 41.6%. Together, these two segments accounted for nearly 80% of total revenue. However, as competition in lower-tier markets intensifies, both per-store performance and table turnover rates are under pressure. Whether the advantage in store numbers and revenue scale can reverse the downward trend of the main brand remains to be tested by the market.

Are food delivery and multi-brand strategies a 'lifeline' or just 'a drop in the ocean'?

Amid the decline of the main brand, optimistic voices persist in the market. Most interpretations praise Haidilao’s second growth curve—food delivery revenue grew by 111.9% year-on-year, while multi-brand operations under the Red Pomegranate Plan surged by 214.6%. These two businesses are seen as potential 'lifelines' to support Haidilao’s secondary growth. However, beyond the allure of growth rates, a closer look at revenue contributions and profitability reveals that this so-called 'second curve' is far from being a true 'lifeline.'

It cannot be denied that Haidilao’s food delivery and multi-brand operations exhibited explosive growth in 2025. Data shows that food delivery revenue reached 2.658 billion yuan, up by 111.9% year-on-year, with over 1,200 delivery locations established nationwide, forming an initial dual-driver model of 'in-store + at-home' services. Revenue from other restaurant operations, namely multi-brand businesses, amounted to 1.521 billion yuan, surging by 214.6% year-on-year. By the end of 2025, Haidilao had launched 20 sub-brands, operating a total of 207 restaurants, marking a 1.8-fold increase from 2024. The 'Red Pomegranate Plan' has shifted from internal incubation to a market expansion phase.

In terms of growth rates, the performance of these two businesses is indeed remarkable, especially the multi-brand segment, which achieved a growth rate exceeding 200%, seemingly showcasing strong growth potential. However, when considering total revenue, their scale appears insignificant — Haidilao's total revenue in 2025 was RMB 43.225 billion, with food delivery contributing only 6.1% and the multi-brand segment just 3.5%. Combined, these two businesses accounted for less than 10%, while the main brand's revenue still dominated at 86.9%.

More critically, the high growth of these two businesses is far from sufficient to offset the decline of the main brand. In 2025, revenue from the main brand fell by 7.1% year-over-year, equivalent to a reduction of approximately RMB 3 billion. Meanwhile, the food delivery business added about RMB 1.4 billion in revenue, and the multi-brand segment contributed an additional RMB 1 billion, bringing the combined increase to just RMB 2.4 billion, leaving a shortfall of RMB 600 million unfilled. The so-called 'second curve' can't even achieve 'loss mitigation,' let alone act as a 'lifesaver.'

Looking beyond growth rates and proportions, a deeper analysis of the profit logic of these two businesses reveals significant concerns hidden behind the high growth. The so-called 'growth' seems more like 'selling at a loss for attention.'

First, consider the food delivery business: high growth but low margins, with unclear profitability prospects. The rapid expansion of this segment primarily depends on network expansion, channel diversification, and extending usage scenarios. However, it cannot avoid the pain points of profitability common to the food delivery industry. Mainstream food delivery platforms typically take commissions ranging from 15-20%. Add to that the special packaging costs for delivery ingredients, delivery fees, and ingredient wastage caused by long-distance deliveries, making Haidilao's food delivery gross margin much lower than its dine-in operations.

The annual report shows that the company's other expenses increased by 21.8% from RMB 1.864 billion in 2024 to RMB 2.27 billion in 2025, with its share of revenue rising from 4.4% in 2024 to 5.3% in 2025. This was mainly due to increased promotional and support costs related to the food delivery business, along with more diversified marketing activities, resulting in an additional RMB 294 million in business development and platform-related costs. Additionally, administrative, warehousing, and routine maintenance expenses rose by RMB 108 million as revenues grew.

Next, consider the Red Pomegranate Plan within the multi-brand segment: wide-spread deployment with few profitable brands. In 2025, Haidilao accelerated its multi-brand expansion, adding nine new brands within a year, reaching a total of 20 by year-end. These span seafood diners, sushi, Western light meals, small hot pot restaurants, and more, totaling 207 outlets. However, its expansion model leans more towards 'casting a wide net' rather than 'precise incubation.' Despite establishing a dual-system incubation mechanism — where employees are encouraged to independently create ('Head Chef') and develop community-oriented dining ('People’s Restaurants') — most brands remain in the incubation phase. Only a few, such as 'Yanqing BBQ Shop' and 'Jugao Self-service Hot Pot,' show moderate success, while the remaining 18 have yet to achieve economies of scale or stable profitability.

It is worth noting that multi-brand expansion has also led to a significant rise in management costs. With 20 brands covering various niche segments, operational models, target customer groups, and product systems vary significantly, placing extremely high demands on Haidilao's management capabilities. Rising management costs further squeezed overall profit margins, trapping the multi-brand segment in an awkward cycle of 'expansion equals losses.'

Zhu Danpeng stated that many catering companies today implement the 'Five Multiples Strategy': multiple brands, categories, scenarios, channels, and consumer demographics, aiming to cover all age groups and consumption levels. Haidilao's move to establish new brands aligns with this trend. At the same time, Haidilao's main brand has nearly reached its growth ceiling, which explains why accelerating sub-brand deployment is central to its strategy — nurturing new brands to stabilize revenue and profits. However, these sub-brands require substantial resource and financial support to succeed.

Additionally, during the 2025 earnings call, Haidilao's senior management expressed clear expectations for the future growth of standout sub-brands like sushi and seafood diners. Over the next three years, they believe the seafood diner model has the potential to reach a target of 500 stores.

Currently, both businesses are still in their infancy, lacking stable profit models and sufficient scale to help Haidilao completely overcome its mid-life crisis and achieve secondary growth. For the so-called 'second curve' to grow into a towering tree, it requires careful cultivation and optimization.

Haidilao's 'Relative Advantage' in the Context of a 5 Trillion Yuan Catering Market

Looking at Haidilao's performance for 2025 in isolation, terms like 'revenue growth without profit growth,' 'decline of the main brand,' and 'weak second growth curve' seem to indicate entirely negative signals. However, when placed within the harsh environment of the 5 trillion yuan catering market in 2025—amid a wave of store closures sweeping through the industry and small and medium enterprises struggling to survive—Haidilao’s 'stability' becomes its biggest highlight and an irreplaceable relative advantage.

By 2025, China’s catering market size reached 5.7982 trillion yuan, with a year-on-year growth of 3.2% (National Bureau of Statistics), which appears to be moderate growth. However, behind this figure lies fierce competition over existing market share and a surge in store closures. Industry data shows that by the first half of 2025, 1.61 million catering outlets had closed, with a closure rate of 22.66%, equivalent to over 8,800 stores closing daily or about 6 per minute. At this pace, nearly 3 million stores are projected to close throughout the year, with closure rates in first-tier cities as high as 35%.

Consumer demand is cooling simultaneously. Meituan data indicates that average order values for catering fell by 8.3% year-on-year in the first half of 2025, with orders below 30 yuan rising to 62% of total orders. Rational consumption and prioritizing cost-effectiveness have become mainstream trends. The pressure on costs has proven even more fatal, with continuous increases in ingredient prices coupled with full compliance to social security regulations starting July 2025, leading to an average rise of 20% in labor costs. Add to this fixed expenses such as rent and environmental upgrades, and many small and medium-sized catering businesses find themselves trapped in a situation of 'difficulty in profitability and survival.' The industry is rapidly consolidating towards a 'stronger-get-stronger, weaker-get-eliminated' pattern.

In this macroeconomic environment, 'survival' has become the core objective for many catering companies. Yet, not only has Haidilao 'survived,' but it also achieved positive revenue growth and a net profit of 4 billion yuan, far exceeding the industry average.

Compared with peers, Haidilao’s advantages are particularly evident. First, compared to other publicly traded catering companies, Haidilao’s profitability stands out as a 'benchmark.' In the first half of 2025, Jiǔmǎo Jiǔ reported a net profit of just 58.714 million yuan, while Haidilao's annual net profit reached 4.042 billion yuan—nearly ten times Jiǔmǎo Jiǔ’s 2024 full-year net profit of 44.8 million yuan. Xiābǔ Xiābǔ has faced persistent profitability pressures in recent years. Although its full 2025 annual report has not been released, based on past performance, its net profit scale falls far short of Haidilao’s. In the hot pot sector, Haidilao remains a leader in profitability.

Furthermore, Haidilao's digital capabilities and organizational management skills give it an edge in cost control and operational efficiency over small and medium-sized enterprises. For example, through its intelligent scheduling system, Haidilao reduced labor costs by 18%. Its digital platform construction further enhanced multi-brand operational efficiency. These advantages are difficult for small businesses to replicate.

From a longitudinal self-comparison perspective, by the second half of 2025, Haidilao's operating metrics showed signs of marginal improvement: revenue growth turned from a 3.7% drop in the first half to a 5.9% increase in the second half; the decline in main brand revenue narrowed from 9.0% to 5.1%; customer traffic increased by approximately 4.3 million compared to the first half, and table turnover rates improved. These figures indicate that Haidilao is gradually alleviating the challenges facing its main brand, further demonstrating its resilience.

Guosheng Securities noted that Haidilao, as the leader in hot pot catering, has built its brand image around exceptional service. In recent years, it has continuously innovated and refined management, steadily improving store performance. Currently, the company is implementing dual-store and multi-store models, introducing franchising, launching the 'Pomegranate Plan,' reinstating the founder as CEO, and diversifying the board. This is expected to steadily enhance overall group service quality and operational efficiency. Revenue forecasts for 2026-2028 are projected at 47.6/51.9/56.3 billion yuan respectively, with attributable net profits estimated at 4.58/5.11/5.57 billion yuan. The current stock price corresponds to PE ratios of 15.9X/14.2X/13.0X, maintaining a 'Buy' rating. (Produced by Harbor Finance)

Harbor Business Observer, Xiao Xiuni

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