Haidilao is know for a level of customer service that puts other chains to shame. / Bloomberg Haidilao is know for a level of customer service that puts other chains to shame. / Bloomberg
Food

China’s Fastest Growing Hotpot Chain Just Minted Two Billionaires

China’s insatiable demand for spicy hotpot is placing the founders of a restaurant chain atop one of the world’s fastest-growing fortunes, allowing them to outpace many of the wealthiest families globally.

As of Monday, Zhang Yong, chairman of Haidilao International Holding Ltd., and his wife Shu Ping, had grown $6 billion richer in 2019, a 79 percent jump in just over three months.

That pace is the fastest in Asia and globally only topped by Australian mining baron Andrew Forrest, who has doubled his fortune this year, according to the Bloomberg Billionaire’s Index, a ranking of the world’s 500 richest people.

Haidilao went public in September, and it’s been a lucrative time for China’s largest hotpot chain, popular for the spicy broths in which diners cook their meats and vegetables. The company is pushing to make its restaurants more efficient by creating automated kitchens. Perks like the free manicures it offers waiting customers have kept families coming in. And the brand is expanding overseas with new locations planned in New York and London.

Last year, revenue surged 60 percent to 17 billion yuan ($2.6 billion), and that’s helping to push the stock up more than 75 percent this year. At about $21 billion, the company’s market value is now higher than Chipotle Mexican Grill Inc.

“A good set of results has resulted in the stock rallying to new highs,” said Tristan D’Aboville, an analyst at William O’Neil & Co., pointing to increases in sales growth and new restaurants added in the second half of last year.

Another power couple behind Haidilao, co-founder and executive director Shi Yonghong and his wife Li Haiyan, have also grown 79 percent wealthier this year, based on Monday’s data. Their fortune is now worth $6.4 billion.

Still, the enthusiasm for Haidilao’s stock has made it increasingly expensive. Recently valued at about 47 times projected earnings for the next 12 months, it’s around four times more expensive than Hong Kong’s benchmark Hang Seng Index, according to data compiled by Bloomberg.

China’s increasingly competitive hotpot market is projected to grow at a compounded annual rate of more than 10 percent, with revenue topping 700 billion yuan by 2022, according to consultancy Frost & Sullivan.

Besides small, privately owned restaurants, there are other competing brands like the publicly listed Xiabuxiabu Catering Management China Holdings. Haidilao has a less than 3 percent share of the Chinese hotpot market, according to its September prospectus.

In an October interview, Haidilao’s chief strategy officer, Zhou Zhaocheng, said the company sees room to grow by offering customers diverse choices, better service and by creating new experiences for them.

So far it has kept Chinese consumers loyal by making their visits more fun. Its outlets provide free board games, shoe-polishing and manicure services for those waiting. Diners can watch a Sichuan Opera show or even a noodle dance where staffers twirl lengthy ribbons of noodle.

In October last year, one of Haidilao’s restaurants began introducing robots to take orders, and deliver raw meat and vegetables to customers to cook in the simmering pots of soups placed at their tables.

Zhang, a former welder at a tractor factory, founded Haidilao with friends in 1994. It went public last year.

He and his wife, both Singaporean citizens, now had a net worth of $13.6 billion as of Monday. That includes their holdings in Haidilao’s seasonings and sauce arm, Yihai International Holding Ltd., which has seen its shares rise more than 90 percent this year. The couple holds about 58 percent of Haidilao.

Now, Haidilao and other Chinese hotpot brands are attempting to expand overseas. Little Sheep, a hotpot chain owned by Yum China Holdings Inc., opened its first overseas branch in Los Angeles in 2003.

“With the rise in Chinese outbound tourism and growing appreciation for China’s hotpot culture, we are excited about accelerating the expansion of Little Sheep globally,” Joey Wat, the chief executive officer of Yum China, said in November.

Little Sheep now has over 60 restaurants worldwide. That gives it a greater overseas presence than Haidilao, which had 36 stores outside China at the end of last year.

“Haidilao was able to cut through the clutter of various Chinese hotpot operators through their exceptional service,” said Jack Chuang, a partner at OC&C Strategy Consultants. “Whether Western customers will embrace hotpot – it is a big open question.”

–With assistance from Pei Yi Mak and Michael Patterson.

©2019 Bloomberg L.P.

This article was written by Venus Feng from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

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