CHINA- According to business analytics firm S&P Global, weak catering demand will dampen revenue growth for casual hot pot restaurant chain Haidilao International Holding Limited.
The firm’s analysis forecasts slower revenue growth for the casual hot pot restaurant chain in H2 2024, following a 13.8% year on year (YoY) increase in H1 2024.
The analysis has revised downwards Haidilao’s revenue growth forecast to 9% in 2024 and 4% in 2025, compared to 12% and 8% previously.
This revised forecast is due to a softer growth outlook for China’s catering market as customers seek cheaper eating options.
S&P Global revealed catering demand in China is showing signs of weakness after 18 consecutive months of strong spending. The business analytics firm revealed that dining is seeing lower spending per meal.
This market shift is evident in the hot pot restaurant chain’s performance in H1 2024, with average spending per customer declining by 5.3%.
S&P Global also forecasted the chain’s earnings before interest, taxes, depreciation, and amortization (EBITDA) to increase by 3% to RMB 8.2 billion (US$1.15 billion) in 2024, compared to RMB7.9 billion (US$1.11 billion) recorded in 2023.
The firm also forecasted EBITDA margin to decline to 18% in 2024 and 17% in 2025 compared to 19% in 2023. However, it reiterates better staff compensation and increased staff headcount could have an impact on margins.
The business analytics firm said, “Haidilao International Holding Ltd.’s ability to maintain and grow table turnover will be crucial for its revenue expansion. This is as consumers are looking at lower-cost eating options.”
Restaurant chains in China have responded to the current market dynamics by pushing for small-store models and expanding into lower-tier cities to broaden their customer base.
These small store models offer pre-packed food combinations, perfect for on-the-go customers. McDonald’s, for example, has aggressively set up food carts and kiosks on the streets, subway stations, and parks in such cities.
Haidilao has responded to this changing market dynamic with similar small-store formats. The company has set up 200 such stores across low-tier mainland cities, recording a 15% increase in same-store sales in Q2 2024, aided by a 20% increase in foot traffic.
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