Haidilao’s Hot Pot Empire: Why It’s Losing Steam in China

For any American who has spent a significant amount of time in China over the past decade, the name Haidilao (海底捞 – Hǎidǐlāo) likely conjures vivid memories. Perhaps it’s the image of throngs of people patiently waiting, sometimes for hours, outside its brightly lit entrances, munching on free snacks and playing games. Or maybe it’s the almost surreal experience of having your every whim catered to by an army of relentlessly attentive staff, from complimentary manicures while you wait to having your phone meticulously cleaned at the table. For years, Haidilao wasn’t just a restaurant; it was a cultural phenomenon, the undisputed king of Chinese hot pot, a name synonymous with legendary, almost unbelievable, customer service. Its stock soared after its 2018 Hong Kong IPO ¹, and its praises were sung endlessly across Chinese social media.

To understand Haidilao’s significance, one must first appreciate “火锅” (huǒguō), or hot pot. For the uninitiated, it’s a quintessential Chinese dining experience: a simmering pot of flavorful broth sits at the center of the table, and diners cook a variety of raw meats, seafood, vegetables, and noodles themselves. It’s inherently communal, a meal that fosters conversation and togetherness, making it a beloved choice for celebrations, family gatherings, or just a lively night out with friends. Haidilao specialized in the fiery, numbing Sichuan-style hot pot, but its appeal transcended regional tastes, largely due to its unparalleled service.¹ It positioned itself as a mid-to-high-end establishment, with an average spend per person often exceeding 150-200 RMB.¹ With hundreds of stores across China and an expanding international footprint that began with Singapore in 2012 ¹, Haidilao seemed an unstoppable force.

But lately, the narrative has shifted. The once-ubiquitous long lines seem shorter, the online buzz quieter. Financial reports and stock performance tell a more complicated story of turbulence and challenges.⁴ So, what happened? Why is Haidilao, the titan of Chinese hot pot, not quite as “火” (huǒ – a word that means “fire” but colloquially “popular” or “booming”) as it once was in its homeland? The answer, like a well-crafted hot pot broth, is complex, with many ingredients contributing to its current flavor. The cooling of Haidilao’s “buzz” isn’t merely a numerical dip in customers; it signals a subtle shift in its cultural currency. The initial meteoric rise was significantly amplified by user-generated content on platforms like Weibo, with the “海底捞体” (Hǎidǐlāo-tǐ – Haidilao-style posts) becoming a viral sensation, where users would recount astonishing acts of service.⁵ This made dining at Haidilao more than just a meal; it was a shareable experience, a form of social capital. The current quieter hum around the brand suggests this social capital is diminishing, hinting at deeper shifts than mere operational hiccups; it touches on evolving social trends and what captures the fleeting attention of China’s digitally-saturated populace. Understanding this “legendary” status is key to grasping the dramatic tension of its subsequent struggles, especially for an American audience perhaps unfamiliar with its once-unquestioned reign.⁶

The Golden Era: How Haidilao Served Up a Revolution

Haidilao’s ascent to the zenith of China’s fiercely competitive restaurant scene was built on a foundation of service so extraordinary it often bordered on the fantastical. While other restaurants focused primarily on food, Haidilao’s founder, Zhang Yong, who started the business in 1994 as a small “麻辣烫” (málàtàng – spicy hot soup) shop in Jianyang, Sichuan ¹, had a different vision. He recognized that hot pot inherently allows customers to be “half a chef,” customizing their own meal.⁵ Therefore, to truly stand out, Haidilao had to “overtake on the curve” by excelling in areas beyond the pot itself – namely, service.

And excel it did. The list of complimentary services became legendary: free manicures, shoe shines, and board games for waiting customers; plastic bags to protect phones from splatters, hair ties for those with long hair, and aprons to shield clothes.¹ If a customer was dining alone, staff might place a large teddy bear across the table for company.⁷ The famous “拉面” (lāmiàn – hand-pulled noodle) dance, where a staff member would stretch and twirl dough into noodles tableside, became a form of “retailtainment”.² These weren’t just token gestures; they were meticulously designed to exceed customer expectations, to create moments of surprise and delight. As one netizen famously quipped, “Haidilao servers are only missing paying the bill for you”.⁵ This culture of going above and beyond led to the organic explosion of “Haidilao-style posts” on Weibo, where users shared their almost unbelievable service experiences – like a staff member providing a proper crib for a sleeping baby.⁵ This user-generated content was marketing gold, far more powerful than any paid advertisement.

But the magic wasn’t just in the freebies; it was deeply embedded in the company’s human resources philosophy. Haidilao empowered its employees to an unprecedented degree. Frontline staff had the authority to give customers free dishes or even waive the cost of an entire meal to resolve complaints or simply make a customer happy.⁷ Zhang Yong’s philosophy was clear: “If your sister goes to buy vegetables for you, would you send someone to supervise her? Of course not”.⁷ This trust fostered a proactive, problem-solving service culture.

This empowerment was coupled with remarkably good compensation and benefits, especially for the era and the industry. One oft-cited example is a laid-off woman in her 40s who found work at Haidilao, earning over 4,000 RMB a month, and claimed she would “smile in her sleep” from gratitude.⁷ Perhaps most astonishing was Haidilao’s “嫁妆” (jiàzhuang – dowry), a generous severance package for departing managers. A store manager with over a year’s tenure could receive 80,000 RMB upon leaving, even if poached by a competitor. A district manager (overseeing about five stores) could receive 200,000 RMB, and a regional manager could even be gifted a Haidilao restaurant, valued at around 8 million RMB.⁵ Unsurprisingly, this fostered incredible loyalty. In its first decade-plus, with hundreds of managers, only three had reportedly taken this “dowry”.⁷ This made it incredibly difficult for competitors to poach Haidilao’s well-trained talent.⁵ This approach wasn’t just good HR; it was a strategic operational advantage, ensuring service consistency and retaining experienced staff who were genuinely invested in the brand’s success.

Early on, Haidilao also showed a customer-centric flexibility by allowing patrons to bring their own ingredients and drinks ¹, a bold move that signaled confidence and a focus on the overall customer experience. This combination of revolutionary service, employee empowerment, and smart business acumen propelled Haidilao’s rapid growth. After a satisfied customer from Xi’an encouraged Zhang Yong to expand, the first branch outside Jianyang opened there in 1999.¹ International expansion began in 2012 with a store in Singapore ¹, followed by a listing on the Hong Kong Stock Exchange in 2018.¹ Haidilao became so influential that even tech giants like Xiaomi and corporate behemoths like Huawei reportedly mandated their executives to experience and learn from Haidilao’s service model.⁵ It was a masterclass in leveraging “emotional labor” – making customers feel genuinely cared for – and creating “social proof” long before these became common marketing buzzwords.

The Cracks Appear: Signs the Broth Was Thinning

For a long time, Haidilao seemed to have found the perfect recipe for success. Yet, even the most robust empires can develop vulnerabilities. Gradually, signs emerged that the once-boiling enthusiasm for Haidilao was beginning to cool.

A. The Service Paradox: Can You Be Too Attentive?

The very service that catapulted Haidilao to fame began, for some, to feel like a double-edged sword. What was once perceived as delightful and surprising started to be viewed by a segment of diners as intrusive, performative, or simply overwhelming. This shift in perception was particularly noticeable among younger consumers and those identifying with a popular Chinese internet slang term: “社恐” (shèkǒng), short for “社交恐惧症” (shèjiāo kǒngjù zhèng – social anxiety disorder), but used more broadly to describe introversion or discomfort in social situations.

For these “社恐” individuals, the constant hovering of staff, the expectation to interact, and especially the public spectacles – like the boisterous birthday celebrations complete with singing, LED signs, and the entire restaurant’s attention ⁶ – became a source of anxiety rather than pleasure. As one viral article title lamented, “Never let Haidilao know it’s your birthday, it’s terrifying hahaha”.⁶ The sentiment was clear: for some, the “extreme service” felt less like pampering and more like pressure.

Recognizing this evolving sentiment, Haidilao began introducing “请勿打扰” (qǐng wù dǎrǎo – please do not disturb) signs in some of its outlets around 2019.⁶ These tabletop cards allowed customers to opt-out of the more detailed, interactive services, requesting only basic assistance like food delivery and clearing empty plates. Options included “I’ll put the food in myself” or “no detailed service needed”.⁶ This was a direct response to customer feedback and a tacit acknowledgment that its signature service model was no longer universally adored.

The introduction of the “Please Do Not Disturb” sign is more than a mere customer service option; it’s a symptom of Haidilao’s core value proposition encountering the limits of its appeal. The company built its empire on a specific type of high-touch, often performative, service. The emergence of a vocal “社恐” demographic and the subsequent need for such signs indicates that this key differentiator is no longer a universal positive. It suggests that as a market matures, or as new consumer cohorts like Gen Z become more influential, service preferences diversify. What was once a unique selling proposition can become a point of friction if not adaptable. This raises a critical question: if Haidilao’s service becomes optional or significantly toned down, what remains as its primary differentiator against competitors who might be focusing more on product quality or price? Furthermore, the rise of “社恐” as a recognized consumer segment highlights a broader cultural shift in China towards greater individualism and a desire for more personal space, even in traditionally communal settings like restaurants. This challenges service models that rely heavily on unsolicited interaction or public displays.

B. The Price of Popularity: Sticker Shock and Shrinking Portions

Haidilao had always positioned itself in the mid-to-high-end of the hot pot market.¹ Over time, however, the average customer spend began to creep upwards, often exceeding 100 RMB, and reaching around 110 RMB by 2020.⁸ While many loyal customers were willing to pay a premium for the unique Haidilao experience, there was a limit. Attempts by the company to implement straightforward price hikes, particularly during the economically sensitive period of the pandemic, were met with significant public backlash online, forcing Haidilao to quickly retract them.⁴ This indicated a surprising level of price sensitivity, even among its supposedly devoted fanbase.

More insidiously, complaints began to surface about “变相涨价” (biànxiàng zhǎngjià – disguised price hikes). Customers reported that portion sizes for various dishes seemed to be shrinking, while prices remained the same or even increased.⁹ One widely circulated example involved a customer in Xiong’an New Area who paid 8 RMB for what was supposed to be half a portion of lettuce, only to receive a mere two leaves. The store manager’s defense that the dish met the standard weight of 120g did little to assuage public frustration.⁹

Adding fuel to the fire was the “must-order soup base” controversy in March 2023. Haidilao implemented a new rule nationwide requiring customers to order at least one paid soup base, effectively eliminating the popular and budget-friendly option of choosing up to four “清水锅” (qīngshuǐ guō – plain water pots), which were previously free.⁹ This was widely perceived as a forced spending measure and drew considerable criticism.

These pricing strategies and perceived reductions in value began to erode Haidilao’s reputation for offering a fair deal. The brand equity, largely built on exceptional service, proved insufficient to command significant price premiums when the tangible value – the food itself and the cost – felt compromised. Consumers felt the implicit “social contract” was being broken: they were being asked to pay more (or the same for less) while the core offering, the food, wasn’t necessarily improving at the same rate, and the once-unique service was becoming less of a novelty. The negative reaction to the mandatory paid soup base was particularly telling. Haidilao had cultivated an image of generosity with its array of free services and snacks. This new rule felt like a regression, a “nickel-and-diming” tactic that was quickly identified and amplified by consumers, damaging trust and goodwill, especially in an economic climate where many were becoming more cautious with their spending.

C. Growing Pains: The Perils of Aggressive Expansion

Perhaps the most significant self-inflicted wound came from Haidilao’s own aggressive expansion strategy. Starting around 2019, the company embarked on a massive store opening spree. In 2019 alone, 308 new restaurants were launched.¹⁰ This accelerated in 2020 when founder Zhang Yong, by his own admission, made a “blindly confident” decision to expand even further, adding an astonishing 544 new stores. He believed the COVID-19 pandemic would subside quickly, creating opportunities.⁴ By mid-2021, Haidilao’s global store count had ballooned to 1597.¹⁰

This rapid, almost unchecked, growth came with severe consequences:

• Diluted Management and Service Quality: The sheer speed of expansion outpaced the company’s ability to train and cultivate enough excellent store managers. Maintaining the famously high service standards consistently across such a vast network became increasingly difficult.¹⁰ Reports emerged of newer stores, particularly in lower-tier cities, where the service didn’t quite live up to the Haidilao legend.¹⁰
• Poor Site Selection: In the rush to expand, some new stores were opened in suboptimal locations with insufficient customer traffic or too close to existing Haidilao outlets, leading to cannibalization.¹⁰
• Plummeting Table Turnover Rates (翻台率 – fāntáilǜ): This crucial metric, indicating how many times each table is occupied by a new set of customers per day, took a nosedive. From a healthy and stable 4.8 times/day in 2019, it fell to 3.5 times/day in 2020 (when the pandemic’s impact was severe) and further to an alarming 3.0 times/day by mid-2021.⁴ For comparison, some competitors like Coucou managed to maintain or even slightly increase their turnover rates during similar periods.⁴ This decline was a critical leading indicator of oversaturation and waning store-level performance, suggesting that new and existing stores were serving fewer customers per table.

Faced with this crisis, Haidilao launched the “啄木鸟计划” (zhuómùniǎo jìhuà – Woodpecker Project) in November 2021.¹⁰ This initiative, led by then-Executive Director and Deputy CEO Yang Lijuan, aimed to systematically address the problems caused by overexpansion. The most visible part of this plan was the gradual closure of approximately 300 underperforming stores by December 31, 2021.¹⁰ These closures weren’t limited to specific regions but spanned first-to-fifth-tier cities in China as well as some overseas locations.¹⁰

Crucially, Haidilao made a public commitment that these widespread closures would involve no layoffs. Affected employees and management were to be properly relocated within the group or offered other development opportunities.¹⁰ This decision was widely praised in the media and by the public as a responsible and humane approach, especially considering the potential for 30,000 job losses.¹¹ This no-layoff policy, despite the immense financial pressure, was a strategic masterstroke in preserving Haidilao’s most valuable intangible asset: its employee-centric culture and the public goodwill it had cultivated. Mass layoffs would have decimated morale and severely damaged its image. By absorbing these labor costs, Haidilao signaled a long-term commitment to its people.

The financial fallout from the miscalculated expansion and subsequent closures was severe. Haidilao reported a staggering net loss of 4.161 billion RMB for the full year of 2021, a figure that nearly wiped out all the profits it had accumulated from 2018 to 2020.⁴ The “other losses” category in its financial statements, primarily related to provisions for store closures, skyrocketed from 245 million RMB in 2020 to 3.707 billion RMB in 2021.⁴ The company’s stock price reflected this turmoil, plummeting from a peak of 85.78 Hong Kong dollars per share in February 2021 to around 13 HKD by May 2022.⁴ Zhang Yong’s admission of being “blindly confident” ¹⁰ underscores a potential overconfidence born from years of success, a common pitfall for market leaders who may extrapolate past triumphs without adequately stress-testing against unforeseen disruptions.

The situation has since shown signs of stabilization and recovery. For its China domestic operations, Haidilao reported revenue of approximately 41.45 billion RMB and a net profit of around 4.49 billion RMB in 2023. The average table turnover rate recovered to 3.8 times/day, and the average customer spend was about 99.1 RMB.⁸ Its international arm, Super Hi International Holding Ltd., also saw revenue growth of 13.4% to $778.3 million USD in 2024, with table turnover increasing from 3.5 to 3.8 times/day, though net profit was impacted by exchange rate fluctuations. The number of international stores grew from 115 to 122.¹³

To illustrate the dramatic shifts in Haidilao’s domestic performance, consider the following:

Table 1: Haidilao’s Rollercoaster Ride – Key Metrics (China Domestic)

Year	Approx. Number of Stores (Mainland China)	Revenue (Billion RMB)	Net Profit/Loss (Billion RMB)	Table Turnover Rate (times/day)	Avg. Customer Spend (RMB)
2018	466 (year-end)	16.97	1.65	5.0	101.1
2019	768 (year-end)	26.56	2.34	4.8	105.2
2020	1298 (year-end)	28.61	0.31	3.5	110.1
2021	~1300+ (before major closures)	34.6 (adjusted later)	-4.16	3.0	102.7 (approx.)
2022	~1371 (year-end)	34.74	1.37	3.0	104.9
2023	~1382 (year-end)	41.45	4.50	3.8	99.1

Sources: Derived from data in 4 and general financial reporting knowledge. Exact store counts and revenue/profit figures can vary slightly based on reporting dates and adjustments.

Note: The table aims to show trends. 2021 revenue and store counts reflect the situation before the full impact of the “Woodpecker Project” closures were realized in end-of-year numbers.

This quantitative overview powerfully illustrates the scale of its rise, the severity of its challenges (especially in 2021), and the initial signs of its attempted recovery, adding factual grounding to the narrative.

D. Food for Thought: Whispers of Quality and Safety Lapses

While service was Haidilao’s main claim to fame, food quality and safety are non-negotiable in the restaurant business. With the incredibly rapid expansion, maintaining consistent food quality across hundreds, then over a thousand, new outlets became an immense challenge. Some customers began to note variations in taste or ingredient freshness from one branch to another.

More damaging were the occasional food safety incidents that, despite Haidilao’s scale, would invariably make headlines:

• 2017 Beijing Incidents: Two Beijing stores were exposed for having rodents in the kitchen and for kitchen staff using serving ladles to clear sewage blockages. Haidilao swiftly admitted fault, issued a public apology, closed the affected stores for rectification, and initiated broader changes, including the “明厨亮灶” (míngchú liàngzào – bright kitchen, transparent kitchen) project, allowing customers to view kitchen operations via monitors.¹
• 2020 Hangzhou Chopsticks Incident: Health inspections at a Haidilao outlet in Hangzhou found chopsticks testing positive for “大肠菌群” (dàcháng jūnqún – coliform bacteria), an indicator of potential fecal contamination.¹⁴ Haidilao apologized, stating the issue likely stemmed from improper chopstick storage and pledged to optimize cleaning processes.¹⁴
• 2025 “Urinal Gate” (小便门 – xiǎobiàn mén): A particularly unsavory incident gained widespread attention when a video circulated showing customers urinating into a hot pot at a Haidilao restaurant. While this was the egregious act of customers, not a direct failing of Haidilao’s food preparation, it inevitably raised public concerns about supervision, hygiene standards within private rooms, and the overall dining environment.¹⁵ Haidilao responded robustly: it reported the incident to the police, condemned the behavior, replaced all锅具 (guōjù – pots and pans) and餐具 (cānjù – tableware) in the affected Shanghai store, conducted a “moving-day style” deep clean, and offered full refunds plus a 10x cash compensation to all 4,109 groups of customers who had dined at that specific outlet between February 24 and March 8. The company also initiated civil litigation against the perpetrators.¹

Haidilao has consistently stated that food safety is an inviolable “red line”.¹⁶ Founder Zhang Yong himself has been quoted saying that while management issues might lead to a slow decline, a food safety crisis could shutter Haidilao overnight.¹⁶ The company has invested in comprehensive food safety management systems, including detailed staff training from onboarding (the “dual safety” certification) and the use of electronic monitoring for 343 assessment points across 23 functional areas in the kitchen.¹⁶

Despite these efforts and generally prompt, responsible responses to incidents, repeated food safety scares – even if isolated or caused by third parties – can significantly erode consumer trust. This is especially true in China, where the public remains highly sensitive to food safety due to a history of broader scandals in the food industry. Each incident, regardless of Haidilao’s culpability or scale, gets amplified by media and social networks, tapping into this underlying consumer anxiety. The generous compensation for the “Urinal Gate,” for instance, while aiming to restore faith, also led to secondary problems like scalpers attempting to fraudulently claim the compensation money.¹⁵ The shift towards “transparent kitchens” is a necessary defensive strategy becoming an industry standard, but it also subtly shifts some of the monitoring burden to the consumer and may not fully address systemic issues if not coupled with unwavering internal controls.

The Hot Pot Battlefield: New Contenders and Changing Appetites

Haidilao’s internal challenges did not occur in a vacuum. The Chinese hot pot market, while enormous, has become increasingly crowded and competitive. As Haidilao grappled with its own issues, a host of rivals were sharpening their knives, eager to carve out a larger slice of the pie.

A. The Rise of the Rivals: Not Just a One-Pot Show Anymore

The sheer popularity of hot pot in China means that Haidilao, despite its long-standing dominance, faces relentless pressure from a multitude of players, ranging from other large chains to nimble, niche upstarts.⁴ These competitors are increasingly differentiating themselves, moving beyond simply trying to emulate Haidilao’s service model.

• Banu Maodu Hotpot (巴奴毛肚火锅): Emerging as a significant challenger, Banu has built its brand on a philosophy of “产品主义” (chǎnpǐn zhǔyì – productism). This means an almost obsessive focus on high-quality, authentic ingredients, with a particular emphasis on its signature “毛肚” (máodù – beef tripe).¹⁸ Banu explicitly rejects industrially processed ingredients like lye-treated tripe, opting for natural methods like papaya protease tenderization, and highlights items like naturally grown well water soybean sprouts.¹⁸ It positions itself as a more premium, ingredient-focused alternative to Haidilao. For instance, Banu has always charged for its soup bases, asserting their superior quality, a stark contrast to Haidilao’s past flexibility with free clear water pots.¹⁸ This ingredient-first approach directly appeals to consumers who prioritize food quality and authenticity above all else.
• Coucou Hotpot · Tea Break (湊湊火锅·茶憩): A brand under the Xiabuxiabu group, Coucou targets the mid-to-high-end market with an innovative “火锅+茶憩” (huǒguō + chájì – hot pot + tea lounge) concept.⁴ It combines Taiwanese-style hot pot (known for rich, flavorful broths like its popular spicy version, and unlimited refills of duck blood and tofu) with a trendy offering of authentic Taiwanese hand-shaken teas, most notably its Da Hong Pao bubble tea.²¹ With its “New Oriental” design aesthetic creating modern, shareable spaces (“one store, one scene”), Coucou offers a different ambiance and a multi-layered value proposition, attracting diners looking for a fashionable, integrated food and beverage experience.
• Xiabuxiabu (呷哺呷哺): A veteran in the market, Xiabuxiabu carved out its niche with an individual, bar-style, budget-friendly hot pot model, essentially a “fast-food hot pot”.⁴ It operates multiple brands under its umbrella, including Coucou, to target different market segments.²⁰ Xiabuxiabu also boasts its own supply chain advantages ²⁰ and has recently been undergoing its own strategic transformations, including a greater focus on developing a paid membership model to drive loyalty and recurring revenue.²³
• Other Emerging Brands: Beyond these major players, countless smaller, regional, or highly specialized hot pot restaurants are gaining traction. Some focus on hyper-local flavors, others on unique culinary concepts (like beef offal hot pot or coconut chicken hot pot), and many compete aggressively on price, particularly in lower-tier cities.¹⁷

These competitors are chipping away at Haidilao’s market share by offering clear points of differentiation. Whether it’s superior or unique ingredients (Banu), an innovative dining concept and ambiance (Coucou), or a more accessible price point (Xiabuxiabu and various budget brands), they cater to a diversifying range of consumer preferences that Haidilao’s more standardized, service-heavy model might no longer fully address. The success of rivals focusing on product or experience innovation suggests that Haidilao’s service-centric model, while revolutionary, may have inadvertently created market openings for those who chose to compete on different, and increasingly valued, dimensions. As the market matures, consumers are seeking more than just a generic “good hot pot experience”; they are looking for specific value propositions that align with their individual preferences – be they ingredient purists, experience seekers, or budget-conscious diners.

To better understand this competitive dynamic:

Table 2: Haidilao vs. The Hot Pot Contenders

Brand	Primary USP	Target Market	Typical Price Point	Key Differentiator from Haidilao
Haidilao	Extreme, attentive service; consistent quality	Mid-to-High End Families, Groups	−$	Historically, unparalleled service levels.
Banu Maodu Hotpot	“Productism” – superior, authentic ingredients	Mid-to-High End, Foodies	$$$	Focus on ingredient quality/uniqueness over elaborate service.
Coucou Hotpot·Tea	“Hot Pot + Tea” concept; Taiwanese style; trendy	Mid-to-High End, Younger, Social	−$	Integrated beverage program, different cuisine style, modern ambiance.
Xiabuxiabu	Individual, fast-casual, budget-friendly	Mass Market, Solo Diners	$	Lower price point, quick service, individual pots.

Price Points: $ = Budget, =Mid−Range,$ = Premium. Based on general market perception and data from.¹

This table clearly illustrates the varied strategic positioning within the hot pot market, highlighting how Haidilao is no longer the only premium option and faces challenges from multiple angles.

B. The Evolving Chinese Palate and Diner: What Do They Want Now?

Compounding the pressure from direct competitors are the broader shifts in Chinese consumer behavior and dining trends, particularly in the post-pandemic era.

• Value Consciousness Reigns: Perhaps the most significant trend is a heightened price sensitivity among Chinese consumers. The era of unrestrained spending has given way to more considered purchasing. Across the dining sector, per-customer spending has been generally declining.²⁵ According to Hongcan Big Data, the national average dining expenditure per person in China dropped to just 39.8 RMB in 2024, a 6.6% year-on-year decrease.²⁵ This frugality means restaurants must work harder to demonstrate clear value for money.
• Experience Still Matters, but Its Definition is Broadening: While exceptional service of the Haidilao variety was once the pinnacle of “experience,” today’s consumers, especially younger ones, seek a wider range of experiential elements. Unique ambiances, novel culinary concepts, immersive themed environments, and highly “Instagrammable” or shareable moments on social media are increasingly valued.
• Health and Quality Focus: There’s a growing consciousness around health and wellness, translating into greater attention to ingredient quality, sourcing transparency, healthier cooking methods, and, as always, stringent food safety standards.
• Digital Integration is a Given: Seamless digital experiences are no longer a novelty but an expectation. This includes easy online ordering for dine-in or delivery, integrated digital payment systems, and sophisticated loyalty programs.
• The Ascendance of Chain Restaurants: Paradoxically, alongside a desire for uniqueness, there’s also a trend towards trusting established chain restaurants. The chain restaurant penetration rate in China has steadily increased, from 15% in 2020 to an estimated 22% in 2024, and is projected to reach around 24% in 2025.²⁵ Consumers often perceive chains as offering more reliable quality, standardized safety protocols, and better value due to economies of scale.
• Growth in Lower-Tier Cities: Significant growth potential for dining brands continues to exist in China’s smaller, lower-tier cities as disposable incomes rise and consumers there seek more diverse dining options.¹⁷

A crucial demographic driving many of these changes is Gen Z (Z世代 – Z shídài), roughly those born between the mid-1990s and early 2010s. Their preferences are shaping the future of consumption in China:

• Pragmatic and Extremely Price-Savvy: Gen Z are “digital natives” who research extensively online before making purchases. They are adept at comparing prices, hunting for discounts, and understanding marketing tactics.²⁷ A remarkable 50% of Chinese Gen Z consumers report that they always look for discounts before buying, a rate 10 percentage points higher than Millennials.²⁷ They are often described as “策略性消费者” (cèlüè xìng xiāofèizhě – strategic consumers).²⁸
• Value Authenticity, Personalization, and Unique Narratives: This generation is less impressed by generic luxury or overt displays of wealth. They are drawn to brands that tell unique stories, offer personalized experiences, and allow for self-expression.²⁷ They are often more interested in niche brands or those that resonate with their specific “圈层文化” (quān céng wénhuà – circle culture, referring to subcultures and interest-based communities).²⁸
• Seek Quality but are Skeptical of Hype: While they won’t sacrifice quality for a lower price, they don’t automatically equate big, established brands with superior quality.²⁷ They form their own judgments.
• Digitally Native and Socially Influenced, Yet Wary: Gen Z is heavily influenced by online reviews, Key Opinion Leaders (KOLs), and video content, especially on platforms like Douyin (China’s TikTok) and Bilibili.²⁷ However, they are also more conscious of their digital footprint, concerned about over-sharing personal data, and may carefully curate their online personas.²⁷
• Experience-Driven, but Less into “Forced Fun”: They value unique and memorable experiences but, as discussed with the “社恐” phenomenon, may shy away from overly intrusive, embarrassing, or seemingly scripted public service displays. They seek emotional engagement and a sense of group identity within their chosen experiences.²⁸

For Haidilao, these evolving consumer preferences present distinct challenges. The convergence of declining per-customer spend across the market and Gen Z’s acute price-savviness creates a difficult environment for a brand traditionally positioned at a premium. If Haidilao maintains its higher price points, it risks alienating these increasingly value-conscious segments. If it significantly lowers prices, it risks diluting its premium image and entering direct competition with budget brands, a battle its high service-overhead model might not be best equipped to win. Furthermore, Gen Z’s preference for authenticity and unique, personalized experiences directly challenges Haidilao’s historically standardized, albeit elaborate, service model. The well-known noodle dance or birthday song, however well-executed, might feel less personal or authentic to this cohort than a restaurant with a quirky, evolving theme or highly customizable options that allow for genuine self-expression.

Finally, there’s the undeniable factor of “品牌老化” (pǐnpái lǎohuà – brand aging).⁴ Haidilao, founded in 1994, is now a mature, almost venerable brand in China’s fast-paced consumer landscape. For younger consumers constantly seeking novelty and the “next big thing,” Haidilao might be perceived as “their parents’ hot pot place” or simply less exciting than newer, trendier options. Its past innovations are now common knowledge, less of a “discovery.” In China’s dynamic market, relevance requires constant reinvention.

Stirring the Pot Anew: Can Haidilao Reclaim Its Crown?

Faced with these multifaceted challenges, Haidilao has not stood idly by. The company has initiated a series of strategies aimed at revitalizing its appeal, improving operational efficiency, and capturing new market segments.

The “Red Pomegranate Plan” (红石榴计划 – hóng shíliú jìhuà) & Multi-Brand Diversification:

Officially announced in its August 2024 interim report 29, though sub-brand exploration has been an ongoing effort for several years 30, the “Red Pomegranate Plan” signals a more formalized commitment to multi-brand diversification. The strategy aims to incubate and develop new catering brands by leveraging Haidilao’s considerable resources, including its sophisticated supply chain, deep consumer insights, established talent training systems, and extensive store operation management experience. The evocative name suggests the goal is for these new ventures to flourish, becoming “red and plump like pomegranate seeds,” collectively driving the Haidilao Group’s expansion.29

Examples of these sub-brands, targeting various price points and dining categories, include:

• Budget-Friendly Hot Pot:

• “Xiaohai Hotpot” (小嗨火锅): Originally launched as “Hailao Hotpot” (嗨捞火锅), this brand is positioned as a more affordable version of the classic Haidilao experience. It offers simpler service (no manicures or elaborate birthday rituals) and significantly lower prices – for example, a 鸳鸯 (yuānyang – split) soup base for as little as 9.9 RMB, and an average per-person spend around 60 RMB. As of late 2024, there were about 7 Xiaohai Hotpot stores.³⁰
• “Fiepai Zhenxian Xiaohuoguo” (沸派·甄鲜小火锅): This brand features a rotating self-service model for individual hotpots, with an even lower target per-person spend of around 30+ RMB. Its first outlet opened in late 2024.³⁰
• Exploring Other Culinary Categories:

• “Yanqing Kaoroupuzi” (焰请烤肉铺子): A barbecue (烤肉 – kǎoròu) brand with a per-person spend of around 100-110 RMB, similar to Haidilao’s main brand. Interestingly, Yanqing has inherited some of Haidilao’s signature service touches, such as offering free hair washing services to diners. It has seen rapid expansion, with nearly 10 stores opened, and some locations, like a new one in Hangzhou, quickly became “网红店” (wǎnghóng diàn – internet-famous stores) with high table turnover.³⁰
• “Huoyanguan BarBecue” (火焰官BarBecue): Another foray into barbecue, this brand also incorporates alcoholic beverages and a social atmosphere, with a per-person cost around 91 RMB.³⁰
• “Miaoshixiong Xiangguo” (苗师兄香锅): Originally “Miaoshixiong Xianchaoji” (苗师兄鲜炒鸡 – a stir-fried chicken concept), this brand has pivoted to “香锅” (xiāngguō – spicy dry pot) and is one of the few surviving and steadily expanding ventures from Haidilao’s earlier wave of fast-food sub-brand experiments.³⁰

It’s important to note that Haidilao’s journey with sub-brands has been marked by both attempts and setbacks. Past ventures like “Uding Maocai” (a maocai chain), “Qiaoqiao’s Fen” (noodles), and acquired brands like “Han She Chinese Cuisine” and “Hao Noodle” have had limited success or have faded away.³⁰ This history underscores the challenge of diversification. The multi-brand strategy is an attempt to de-risk the business from over-reliance on a single, maturing brand and to capture diverse, often more price-sensitive, consumer segments it was previously missing. However, it’s a high-stakes gamble that requires achieving excellence in multiple new categories, a very different challenge from perfecting one.

Renewed Focus on Food Quality, Innovation, and Value:

Haidilao is also making efforts to address core concerns about its main brand:

• “Price for Volume” (以价换量 – yǐ jià huàn liàng) Strategy: The company has consciously worked to lower its average customer spend in an effort to attract more customers and improve traffic. The average per-customer spend for Haidilao (overall, likely including China operations) reportedly dropped to 97.5 RMB in 2024.⁸ This is a direct response to the growing value consciousness among consumers. However, this strategy, while potentially increasing customer traffic, may inadvertently accelerate the commoditization of the Haidilao brand if not carefully managed, making it harder to justify any premium aspects, especially if cost-cutting measures become noticeable and are perceived as “service degradation”.³⁰
• Product Innovation and Quality Enhancement: There’s a stated emphasis on improving food quality, enhancing sourcing practices, and developing new, appealing dishes to keep the menu fresh and exciting.³²
• Addressing Portion and Pricing Complaints: In response to feedback, some Haidilao stores piloted a system where ordering a “full portion” of a dish would result in it being served as two separate half-portions, theoretically making it easier for diners to share and try more items. However, other reports from different times or locations suggested a move away from offering half-portion options altogether.³³ This indicates ongoing experimentation and perhaps a lack of consistent strategy in tackling these specific complaints.

Digital Transformation and Operational Efficiency:

Haidilao is increasingly looking to technology to enhance both customer experience and back-end efficiency. This includes the use of intelligent ordering systems, online reservation platforms to reduce wait times 32, and the establishment of a dedicated Digital Operations Committee tasked with leveraging technologies like Artificial Intelligence (AI) to improve management efficiency and support complex operational models.29

Cautious Re-expansion and Exploring Franchising:

While the “Woodpecker Project” led to significant store closures, Haidilao hasn’t entirely sworn off expansion. However, the approach is now far more cautious. The company has stated that it will, in principle, not open new Haidilao branches on a large scale unless the average table turnover rate can consistently reach 4 times/day.10 Simultaneously, and perhaps more significantly, Haidilao is exploring restaurant franchise models.29 This represents a fundamental potential shift from its long-standing direct ownership and operation model. Franchising could allow for faster, more capital-light expansion, but it also carries significant risks in maintaining the stringent quality and service standards that are the bedrock of the Haidilao brand. The challenge of ensuring consistency through franchisees is one many brands have struggled with. Meanwhile, overseas expansion through its Super Hi International arm continues at a measured pace.13

Organizational Restructuring:

To steer these new strategies, Haidilao appointed Gou Yiqun as its new CEO in June 2024. Alongside this leadership change, two core committees were established: the aforementioned Digital Operations Committee and an Entrepreneurship and Innovation Committee, tasked with developing new innovative models and incentive mechanisms to guide Haidilao’s future development towards multi-level and multi-category operations.29 Founder Zhang Yong has emphasized a willingness to incur costs to encourage innovation and not fear failure.29

Early Signs and Ongoing Challenges:

The results of these turnaround efforts are still emerging. Some sub-brands, like the barbecue concept Yanqing, show early promise with strong initial demand.30 Others are too new to judge. The “price for volume” strategy may indeed boost customer traffic but could put pressure on profit margins if operational costs, particularly for raw materials and labor, remain high or continue to rise.4 A critical challenge will be managing brand perception: can Haidilao successfully operate as both a premium offering (with its main brand) and a budget-friendly option (through its sub-brands) without confusing consumers or diluting the cachet of the flagship Haidilao name?

Conclusion: The Haidilao Story – A Taste of Modern China’s Shifting Sands

The journey of Haidilao, from a small Sichuanese eatery to a global hot pot phenomenon and now a behemoth navigating choppy waters, is more than just a business case study. It’s a compelling narrative that offers a taste of the complexities and dynamism of modern China. Its waning “fire” in its home market isn’t due to a single misstep but a confluence of interconnected factors: the inevitable fatigue with even the most extraordinary service model, growing consumer concerns about price and value, the operational stumbles of overambitious expansion, the relentless pressure from a new generation of savvy competitors, and, crucially, the rapidly evolving tastes and expectations of Chinese consumers, particularly the influential Gen Z.

Haidilao’s story serves as a microcosm of what might be called the “New Normal” in China’s economy. The era of explosive, almost effortless growth for many consumer brands is giving way to a period that demands more nuanced strategies, unwavering operational excellence, and an acute ability to adapt to saturated markets and increasingly discerning, value-conscious consumers. Haidilao’s attempts at diversification, its drive for efficiency, and its efforts to cater to these evolving demands are reflective of the broader transformations underway in many Chinese industries.

Furthermore, the Haidilao narrative is a powerful lesson in the delicate balance between maintaining a brand’s core DNA and evolving with the market. Its legendary service culture is its essence. Yet, its current strategies involve modifying this (as seen with the “Please Do Not Disturb” signs ⁶) and venturing into new territories where this DNA might be less central or harder to replicate (such as budget-focused sub-brands or entirely different food categories ³⁰). Radical departures risk alienating loyal customers, while inertia in the face of change leads to irrelevance. The critical question for Haidilao’s future is whether it can successfully evolve its core offering and expand its horizons without losing the essence of what made it so special in the first place. This is a universal branding challenge, amplified manifold in China’s uniquely fast-paced and competitive environment.

For an American audience observing China, Haidilao’s saga can help demystify a market often viewed through simplistic lenses. It showcases that China is not a monolith but a complex, rapidly evolving landscape. It underscores the sophistication of Chinese consumers, who are driven by a nuanced blend of value-seeking, experience-hunger, and a desire for authenticity. It highlights the intensity of local competition, where domestic brands innovate and adapt at breathtaking speed.

Is Haidilao a cautionary tale of a fallen giant, or is it a story of resilience and potential resurgence? The company is undeniably making proactive efforts to change course, armed with new strategies, a willingness to experiment, and the formidable resources it has built over decades.²⁹ The “broth,” as it were, is still simmering. The final flavor of Haidilao’s next chapter is yet to be determined, but its ongoing journey will undoubtedly continue to offer rich insights into the ever-shifting sands of consumer culture in contemporary China.

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