The market value has evaporated by 250 billion, Haidilao boss tortures human nature, where does the capital go?

Financial crocodile Soros famously said: "The history of the world economy is a series based on illusions and lies. To gain wealth, the way is to recognize the illusion, invest in it, and then quit the game before the illusion is recognized by the public."

In just four months, the market value has dropped from more than 450 billion Hong Kong dollars in February this year to less than 200 billion Hong Kong dollars today. The performance of Haidilao (06862.HK) has made investors deeply appreciate Soros’ words. It also puts the underlying logic to the test.

Source: wind

However, the founder Zhang Yong was quite calm about the fact that the company's stock price plummeted. This can be seen in the recent Haidilao performance exchange meeting, Zhang Yong's courageous and domineering response.

01. Haidilao is not delicious?

On June 25th, the topic of #张勇’sreplying Haidilao’s bad food# directly rushed to the top of Weibo’s hot search.

The reason is this. Some consumers on the Internet say Haidilao's service is good, but the taste is average? Zhang Yong said: "There is a difference between the catering industry and the rocket going to the sky. The rocket going to the sky has standards, but there is no standard for catering. It's just that some companies emphasize the promotion of taste, and we don't take it seriously. Looking at the report, our marketing expenses are zero."

When talking about insight into human nature, Zhang Yong used the analogy that Haidilao is not delicious, "Insight into human nature is hard to tell. For example, consumers say that Haidilao is not delicious, but it may be expensive."

Source: Haidilao's official website

Two flowers bloom, one on each table, let’s explore them one by one.

Regarding the question of whether it is good or not, there are a thousand Hamlet in the eyes of a thousand people. The east is sour and the west is spicy, the south is sweet and the north is salty.

But what is interesting is that it is the “mao” of hot pot. When we talk about Haidilao, the first impression is not the taste, but the service.

When customers wait for meals, Haidilao will provide free manicures, shoe shine, fruits, and snacks; during meals, Haidilao will provide aprons, waterproof cases for mobile phones, and hot towels; on birthdays, Haidilao employees will sing your birthday. Happy song...

For a long time, Haidilao’s "perverted" service has made it unique in the catering industry, but it has also made its main business lack the most fundamental support.

For example, there are many user comments on Weibo, "The service is sometimes overdone, and I feel disturbed. The taste is really not worth the price"; "It's really not delicious, it's just made very'famous'"; "Everyone I've eaten it, and I feel that the taste is just the same, and Xinqijin is over and I don't want to go.

In the view of Node Finance, as a catering brand, if it wants to grow longer and better, ingredients and taste are the key. Returning to the most primitive human instinct to eat, the public is here to eat hot pot, and they care more about the quality of the dishes and the fullness of the taste. Service as an embellishment, if anti-customer-oriented, it will hurt the brand competitiveness in the long run.

For the question of whether it is expensive or not, the data can prove it.

According to the financial report, since 2020, Haidilao has often "sneaked up" prices. In 2020, Haidilao's per capita consumption will reach 110 yuan, higher than 105.2 yuan in 2019.

Data source: Haidilao's 2020 financial report

I visited the store and compared the menus of Haidilao in 2020 and 2021. Node Finance found that the price of most dishes has been increased by 1-3 yuan. For example, half of the pepper-fragrant kidney rose from the original 19 yuan to 22 yuan, and the half is green. The bamboo shoots rose from 10 yuan to 12 yuan.

In other words, we will have another Haidilao hot pot meal in 2021, and the per capita 110 yuan may be unstoppable.

Compared with Jiu Mao Jiu, which is also listed on the Hong Kong stock market, the per capita consumption of Tai Er and Jiu Mao Jiu are 70 yuan/person and 60 yuan/person respectively. The cost of eating hot pot is much higher than eating pickled fish and northwestern dishes.

02. How to maintain the continuous growth of performance?

In 2020, net profit will shrink by about 90%, and the turnover rate will continue to decline. Regarding the performance issue of external concern, Zhang Yongyu is not surprisingly dying: "As the largest shareholder of Haidilao, I have no hope. A company is an organization and a person. It’s also vital. This year is good, not necessarily next year; this year is not good, not necessarily next year."

At the same time, he believes that the catering industry is a traditional industry with boundaries, unlike Internet companies, the larger the business scope, the lower the cost.

Although not as full of confidence as most heads of their own career prospects, Zhang Yong’s answer truly reflects the unspeakable concealment of the catering industry: do business around one of the people’s livelihood, how to do it all. The scope of business is limited; with service attributes, it is impossible to replace labor with machines on a large scale, and the cost of food materials cannot be saved, so the cost will not decrease with the expansion of scale.

Looking at the development of Haidilao, as Zhang Yong said, in addition to making hot pot, it is still making hot pot, but in recent years, under the influence of "house" culture, it has added self-heating small hot pot. The business background has actually not changed, which promotes performance. The main thing going forward is to open a store.

But in 2020, opening a shop against the trend has put Haidilao in a "dilemma."

Generally speaking, when the cycle expands at the bottom of the cycle, rental costs and property costs will be low. As the economy picks up and the flow of people increases, corporate performance is expected to enjoy high flexibility and increase market share in industries that are constantly clearing.

Based on the above-mentioned bottom hunting logic, Haidilao opened 544 new stores in 2020, a year-on-year growth rate of more than 70%, and the total number of stores worldwide reached 1,298.

Unfortunately, after the consumption recovery that Zhang Yong was looking forward to, the surging situation did not appear in Haidilao. Its overall turnover rate in 2020 was only 3.5 times/day, while in 2018 this indicator was still 5 times/ day.

"My judgment on the trend was wrong. In June last year, I made further plans to expand the store. Now it is indeed blind and self-confident. In June 2020, I judged that the epidemic would end in September, but until today, our Taiwan and Singaporean The store was still unable to open due to the epidemic. It was already January of this year when I realized the problem, and it was already March when I reacted," Zhang Yong said frankly.

From an industry perspective, the "appetite" of serving the public has largely determined the fatal weakness of the catering industry: the threshold is low and it is difficult to build a moat.

Competition in the Chinese catering market is fierce, with the top five companies having CR5 only 3%. In other words, the popularity is like Haidilao, but still like a drop in the deep sea.

On the other hand, catering is a market that anyone can enter and anyone can do. Even if someone creatively cooks a few dishes, it is difficult to apply for patents and put on protective armor like smart phones, automobiles, chips, software and other industries.

Therefore, the cost of imitation and plagiarism in the catering industry is very low. The "moat" cast by Haidilao's service is not strong enough, and it is difficult to predict how long it will "protect".

Above the fundamentals, how to look at the investment value of Haidilao? Zhang Yong's advice is still valid: "Everyone has a myth of Haidilao, and I am very disgusted. You must be rational and be cautious in investing. If you want to know what is not worthy of the name, just look at Haidilao."

Node Finance Statement: The content of the article is for reference only. The information or opinions expressed in the article do not constitute any investment advice. Node Finance does not assume any responsibility for any actions taken due to the use of this article.

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