Exclusive Interview With Zhou Zhaocheng, Chief Strategic Officer Of Haidilao: How Can Hotpot Giants Gain Higher Market Value?

? ? ? Although Haidilao (06862. HK) turned losses into profits in the first half of this year, some investment banks and institutions did not seem satisfied with its performance. For example, the latest research published by Credit Suisse believes that Haidilao "needs to give a clear signal of operational recovery or new growth momentum to prove its higher market value".

In this regard, Zhou Zhaocheng, executive director and Chief Strategic Officer of Haidilao, said frankly in an exclusive interview with 21st century economic reporter on August 25, "it is true that everyone has high expectations for Haidilao."

On August 24, the latest interim financial report of the company was officially announced: the company realized 20.094 billion yuan of operating revenue, with a year-on-year growth of 105.9%; The net profit was 96.5 million yuan, up 110.0% year on year. However, the report card of double growth of revenue and net profit did not get a piece of praise from inside and outside the company.

Just a month ago, the "Introspective" performance forecast has been fermented. In the medium-term performance forecast on July 25, Haidilao self-reviewed that compared with the first half of 2020, the company changed from loss to profit in the first half of 2021, but the performance did not meet the expectations of the company's management.

The decline of some business indicators really needs the company's management to reflect and make countermeasures. The positive sign is that when the interim results were announced, Haidilao quickly adjusted the management team structure, including the removal of two founding team members and the promotion of seven frontline employees with an average age of less than 39 to the board of directors.

For Haidilao, which has relatively stable finance and abundant liquidity, needs to release more growth power if it wants to win the recognition of the capital market again.

Will adjust the opening rhythm

Undeniably, Haidilao's store expansion in the first half of this year has achieved good results.

As of June 30, Haidilao had 1491 stores in mainland China, 106 stores in Hong Kong, Macao and Taiwan and overseas. Compared with the number at the end of 2020, Haidilao added 299 stores in the first half of this year.

It is worth mentioning that the size of Haidilao's new stores has not changed much, and there is no consideration of small stores.

"There are more new stores in the second half of 2020 and the first half of this year, and the volume and quantity of capital expenditure of new stores are relatively large." Zhou Zhaocheng believes that in addition to capital expenditure, under the influence of the epidemic situation and changes in consumer habits, the cycle for new stores to reach break even for the first time has been lengthened. Among the reasons, the epidemic led to fluctuations in the operation of new stores, and nearly 700 new store managers were in the adaptation period on their posts.

"In the short term, one of the challenges we are facing is how to implement the enterprise's management philosophy, management values and important guidelines accurately, and implement customer satisfaction and employee efforts." Zhou Zhaocheng told the 21st century economic reporter.

Objectively speaking, with the relaxation of epidemic prevention and control measures in the first half of this year, the number of business days of Haidilao stores increased, the passenger flow increased, and the number of stores increased, which jointly contributed to the substantial growth of the company's operating revenue during the reporting period. At the same time, in terms of revenue structure changes, the proportion of Haidilao's takeaway business in the total revenue in the first half of the year decreased to 1.7% from 4.2% in the same period last year.

In the case of the gradual recovery of hall food, consumers are more inclined to shop for consumption. This also means that the offline "battlefield" will be the core soil for Haidilao to find its growth momentum in the post epidemic era. In the process, Haidilao will not open its shop blindly.

"In the second half of this year, Haidilao's overall opening speed and rhythm will tend to be steady. Our focus will be on the improvement of the operation quality and operation management level of the opened stores. " In Zhou Zhaocheng's view, Haidilao currently has no burden of cash flow. "If the new stores have gone through the climbing cycle, the single store operation is improved, and the single store net profit returns to a reasonable range, then the subsequent growth will be more optimistic."

Actively layout and sink the market

Zhang Yong, chairman of Haidilao's board of directors, once said, "it's better to be indomitable than to be outstretched.". This directly laid the tone of Haidilao's management and made public catering.

Therefore, from the perspective of Haidilao's positioning and overall strategy, it is expected that the sinking market will be actively arranged.

The sinking expansion idea is also reflected in the financial report. According to the Chinese newspaper, Haidilao has 287 stores in first tier cities, 593 stores in second tier cities, 611 stores in third tier and lower tier cities. The number of outlets in third tier and lower tier cities accounts for 41% of restaurants in mainland China; 161 new cities were added in the third tier cities and below, accounting for more than 50%.

"Chain enterprises want to cover different groups of people." In an interview with the 21st century economic reporter, Zhou Zhaocheng said that in terms of layout, Haidilao's strategy is to "increase the number of first and second tier cities, and set up locations in cities of the third tier and below.". In his view, in terms of the number of people and consumption capacity, the consumer groups in the third tier and lower tier cities are no less than those in the second tier cities. They have broad market space, and can play the advantages of chain brands to achieve deep reach, reduce costs and increase efficiency.

The 21st century economic reporter has noticed that in terms of the strategy of "encrypting the first and second tier cities", there are outside voices questioning whether it will evolve into "brothers' infighting". In this regard, Zhou Zhaocheng, for example, points out that the value created by a store with an average turnover rate of 5 is not as much as the sum of the two stores with a turnover rate of 4. "This is a" big account "problem. The goal of encryption is to increase the overall passenger flow and improve the consumer experience of customers."

To be sure, compared with overseas developed countries, the domestic catering industry chain rate is low, and there is much room for improvement in the future. And the key market to enhance the catering chain is to sink the market. Compared with the first and second tier cities, the scale and behavior of consumers in the sinking market are different, which tests the accuracy of Haidilao's management strategy in the sinking market.

"Although there are differences among levels, regions and cities in the sinking market, we will find commonness and then look at individuality." Zhou Zhaocheng said that "cost performance" is a common feature. "We will adhere to this principle and provide services to customers in a cost-effective way."

At the same time, in the sinking market, the size of urban population will affect the mobility of tourists“ In small cities with small population and relatively fixed consumption areas, we need to increase the repurchase rate of consumers. " Zhou Zhaocheng believes that the goal can be achieved through the comprehensive experience of brand, cost performance, high-quality food materials and service.

In addition, in view of the regional differences, Haidilao formulates the differentiation of single store in terms of product innovation and product pricing by giving regional managers the power to localize products.

The board's "big change" is in line with the "successor" plan

In April 2020, Haidilao's "successor" plan once again attracted the attention of the industry.

In this plan, Haidilao will open the selection mechanism of management personnel to all employees, and the plan period is 10-15 years. The essence of the plan is to reserve and train talents for the sustainable development of enterprises by strengthening the effective internal promotion mechanism.

The 21st century economic reporter noted that when the interim results were announced, public opinion paid more attention to the replacement of board members announced by Haidilao.

In the newly announced list of board members, two "veterans" of the founding team withdrew from the board of directors: Shu Ping resigned as a non-executive director and a member of the audit committee, and Shi Yonghong resigned as an executive director. According to public information, Shu Ping is the wife of Zhang Yong, founder and chairman of Haidilao. Zhang Yong and his wife actually hold about 68% of Haidilao's shares; Shi Yonghong is the co-founder of Haidilao and the second largest shareholder of Haidilao. In this regard, Haidilao stressed that Shu Ping and Shi Yonghong confirmed that they had no disagreement with the board of directors.

Seven new members of the board, including Yang Lijuan, Li Peng and Yang Hua, served as executive directors of Haidilao, while Ma Weihua and Wu Xiaoguang became independent non-executive directors.

"The most important part of this staff adjustment is the addition of seven executive directors, all of whom are relatively young, with an average age of 38.9." Zhou Zhaocheng told the 21st century economic report that the seven new executive directors all grew up from the grass-roots level of Haidilao, including product director, purchasing director and financial director, and several of them were from the background of waiters and grew up to senior executives all the way.

Zhou Zhaocheng explained the idea of personnel change to the 21st century economic reporter. "On the one hand, the adjustment of new board members helps the board of directors to hear more diversified views when making decisions. On the other hand, they are all growing from the front line, helping the decision-making of the board of directors can better reflect the changes in the external environment and demand."

"In April last year, we launched the" successor "program. Excellent young members will understand and evaluate some things from a higher perspective. This has laid a good foundation for us to cultivate a new management team in the future." Zhou Zhaocheng said.

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