Zhang Yong, the founder of Haidilao, has come back from a four-year backstage retreat to take the helm again, a dramatic sign that China’s most conspicuous hotpot chain is confronting an earnings shock. In the first half of 2025 the company reported revenue down 3.7% year-on-year and net profit falling 13.7%. Worse still, foot traffic plunged by 10 million visits and table-turns dropped to 3.8 times per day, beneath Haidilao’s own 4-times benchmark.
The numbers expose a structural squeeze. Average spend per customer, once roughly RMB 110 in 2020, has slipped below RMB 100 as Chinese diners grow more price-sensitive. Attempts to raise prices have repeatedly sparked viral backlash. At the same time, a new cohort of cheaper, local hotpot and fast-casual brands is proliferating, offering diners “value” alternatives that have eaten into Haidilao’s traffic and perceived value.
After an aggressive expansion in the early 2020s — when Haidilao expanded rapidly to seize cheap rents — rising costs and falling efficiency forced a painful adjustment. Management closed roughly 300 underperforming outlets in the so-called “woodpecker” retrenchment and, despite later selective reopenings, net store growth turned negative in H1 2025. The group’s market capitalisation tells the rest of the story: it has collapsed from a peak of more than HK$430 billion to slightly over HK$70 billion, losing more than four-fifths of its value.
Haidilao’s response has been twofold: diversify and re‑imagine the in‑restaurant experience. The “Red Pomegranate” incubator has produced 14 sub-brands and 126 outlets by mid-2025, and the company reports a 227% year-on-year increase in “other restaurant” revenue. Standout experiments include a barbecue chain that doubles as a late-night bar and a low-cost hotpot concept priced around RMB 50 per person aimed at lower-tier markets.
But growth in headline percentages masks scale problems. The revenue from new brands remains small relative to the flagship hotpot business, and internal reporting and media surveys suggest many incubated concepts fail quickly: of 26 brands either incubated or acquired in recent years, more than half have closed and a third lasted less than a year. Operationally, Haidilao still carries a heavy cost structure: its famed “extreme service” model pushes labour to roughly 30% of costs, well above many peers, constraining margin flexibility.
To retain customers Haidilao has also leaned into novelty: premium “Zhenxuan” flagship stores that serve abalone and king crab, themed outlets with outdoor décor, night‑club style events and even one-on-one bartending. These initiatives win headlines and occasional high-spend diners, but so far they have not reversed the broader trend of thinner per-customer spending and softer traffic.
For markets and consumers the stakes are clear. Haidilao helped define a service-heavy, experiential model of expansion that many other Chinese restaurant chains emulated. Its struggle signals that post-pandemic consumer behaviour is more value-driven and less tolerant of premium service that inflates costs but not perceived food value. Zhang’s return is intended to marshal resources, drive an efficiency push and restore investor confidence — but the task will be to reconcile cost discipline with the brand’s service DNA without losing the customers who define Haidilao’s appeal.