Haidilao International Holding Ltd. (6862.HK): SWOT Analysis [Dec-2025 Updated]

Haidilao sits at a pivotal crossroads: a dominant, highly efficient hot‑pot leader with exceptional brand loyalty and strong margins, yet squeezed by rising labor costs, slowing domestic store growth and execution challenges-so its aggressive Pomegranate multi‑brand push, new franchise model, premium positioning, AI-driven digitalisation and booming delivery channel are make‑or‑break opportunities as intensified competition, macro headwinds, food‑safety scrutiny and wage inflation threaten to erode the very advantages that built its empire.

Haidilao International Holding Ltd. (6862.HK) - SWOT Analysis: Strengths

Haidilao holds a dominant market position in the Chinese hot pot sector, recording total revenue of RMB 42.75 billion for the full year 2024 and operating 1,363 restaurants as of June 30, 2025, primarily in mainland China. Market capitalization was approximately HK$80.86 billion in late December 2025, reflecting scale and investor confidence. Despite a 3.7% revenue dip to RMB 20.70 billion in 1H2025, the company remains the market leader in a fragmented industry, supported by core operating profit of RMB 6.23 billion for 2024 and net profit of RMB 4.70 billion for the same period.

Operational efficiency is a key strength: average table turnover reached 4.1 times per day in 2024, with 3.8 times per day sustained across self-operated restaurants in 1H2025. High turnover produced 189.8 million guest visits in 1H2025 and supported an 11.6% core operating margin for the period. These metrics demonstrate scalable, high-density operations across an extensive store network.

Haidilao's customer loyalty and brand equity are substantial. Recent surveys report ~95% customer satisfaction. The loyalty program drives more than 80% of revenue historically, with repeat-customer proportion at 45% versus an industry average of 27%. Brand Finance named Haidilao the 'World's Strongest Restaurant Brand' for 2024. Average spending per guest remained stable at RMB 97.9 as of mid-2025.

• Customer satisfaction: ~95%
• Members' share of revenue: >80%
• Repeat customer rate: 45%
• Industry repeat rate: 27%
• Average spend per guest: RMB 97.9 (mid-2025)
• Brand recognition: 'World's Strongest Restaurant Brand' 2024

Vertical integration via the Shuhai supply chain delivers procurement advantages. Raw material costs were reduced an estimated 12%-15% versus peers. In 2024, raw materials and consumables decreased to 37.9% of revenue from 40.9% in the prior year. Gross margin held at 60.2% in 1H2025 despite some cost pressures, reflecting centralized kitchens, efficient procurement, and standardized quality controls across the network.

Financially, Haidilao shows robust shareholder returns and balance-sheet health. Debt-to-equity ratio was 20.8% at end-2024. The company paid an interim dividend of HK$0.338 per share for 1H2025, implying a payout ratio of 96.6% and a trailing twelve-month dividend yield exceeding 6%. Net profit growth of 4.6% in FY2024 provides cash flow to support dividends and strategic initiatives under the 'Pomegranate Plan.'

Haidilao International Holding Ltd. (6862.HK) - SWOT Analysis: Weaknesses

Rising labor costs have materially compressed margins. Staff costs as a percentage of revenue increased to 33.0% in 2024, up from 31.5% in 2023, and rose a further 0.5 percentage points year‑on‑year in H1 2025. Total staff costs for 2024 amounted to RMB 14.11 billion, an 8.2% increase that outpaced revenue growth. These higher personnel expenses contributed to a 14% decline in core operating profit in H1 2025. The company's "high welfare" model-including above‑market pay, extensive training and service incentives-raises fixed and semi‑fixed labor commitments that are difficult to scale back without degrading service quality.

Declining average spending per guest is pressuring top‑line recovery. Average spending per guest fell from RMB 99.1 in 2023 to RMB 97.5 in 2024 and remained under pressure into 2025 as Chinese consumers exhibit greater price sensitivity and "rational consumption." Changes in dish mix toward lower‑priced items have weighed on per‑capita checks. Management has acknowledged a "trading price for volume" approach to regain traffic, but lower average spending reduces the company's ability to absorb higher operating costs through menu price increases.

• Average spending per guest: RMB 99.1 (2023) → RMB 97.5 (2024).
• Pressure ongoing in 2025 driven by consumption mix and price sensitivity.
• Limits ability to offset rising staff and occupancy costs.

Domestic store growth has slowed and signs of market saturation are emerging. The number of Haidilao brand stores slipped from 1,374 at end‑2023 to 1,368 at end‑2024. In H1 2025 the company opened 28 new restaurants but closed 33 underperforming outlets, yielding a net decline of 5 locations. While some market estimates place a domestic ceiling near 2,200 stores, Haidilao's management has prioritized store quality over rapid expansion, leading to stagnation in the core network and forcing pursuit of higher‑risk growth options beyond the core model. The ongoing "Woodpecker Plan" has resulted in necessary but growth‑limiting closures.

Dependency on the core hot pot segment leaves revenue concentration risk. Restaurant operations under the Haidilao brand accounted for 89.8% of total revenue in H1 2025. Despite rapid percentage growth in "other restaurant revenue" (+227%), that segment remains a small absolute share of total sales. The core Haidilao brand's revenue declined by 3.7% in H1 2025, underscoring vulnerability to any downward shift in hot pot demand or consumer preferences away from the category.

Management and execution deficiencies have hindered innovation and new concept scaling. Management acknowledged capability "deficiencies" after a 13.7% decline in net profit for H1 2025, partially attributed to early failures and adjustments in new dining scenarios. Rapid experimentation with concepts such as "camping hot pot" and "campus hot pot" produced inconsistent results and operational friction, contributing to a miss versus analyst profit estimates (analysts were ~20% higher than the reported RMB 1.76 billion net profit). Rolling out multiple new brands under the "Pomegranate Plan" requires different operational and managerial skillsets than those used to operate a standardized, high‑service chain, increasing execution risk and short‑term profitability pressure.

Haidilao International Holding Ltd. (6862.HK) - SWOT Analysis: Opportunities

Multi-brand diversification via the 'Pomegranate Plan' has become a material growth engine. The program has incubated 14 new catering brands (including 'Flame Requests Yakiniku Restaurant' and 'Xiaohi Ai Fried Food'), driving revenue from 'other restaurants' up 227% year-on-year to RMB 597 million in H1 2025. The Yakiniku concept opened 46 new stores in H1 2025, bringing its network to 70 locations. Management is accelerating a 'top-down' incubation approach into December 2025 to improve rollout efficiency and unit economics across diversified culinary categories and price points.

The new franchise model (introduced early 2024) provides a capital-light path to rapid expansion. As of June 30, 2025, Haidilao had established 41 franchised restaurants. Over 70% of franchise applications originate from lower-tier cities, representing substantial white-space opportunity for brand penetration while preserving capital.

• Franchise count (30-Jun-2025): 41
• Share of applications from lower-tier markets: >70%
• Hybrid rollout model: 'mature restaurant + new restaurant' to preserve operational standards

The premium hot pot segment presents upside: the premium market in China is estimated at RMB 80.5 billion in 2025 and is growing faster than the overall category. Haidilao's premium concepts-'Dapai' and 'Zhenxuan'-target higher average spend; Zhenxuan reports per-capita checks of ~RMB 700. The first Haidilao Dapai Hot Pot entered beta testing in Guangzhou in late 2025 with a 'fresh market' positioning. Capturing incremental share in this segment can reverse declines in average guest spending and lift overall ticket averages.

Digital transformation and AI integration offer operational leverage and margin improvement. Haidilao's AI feedback system processes ~3.4 million data points to drive service and management improvements. A dedicated Digital Operations Committee (established 2024) coordinates AI deployment for complex operations. Current digital tools (intelligent ordering, online reservations) have stabilized turnover; targeted AI in procurement and supply chain could compress raw material cost ratio (currently 37.9%) and enable personalized 'a thousand stores, one thousand faces' customer experiences.

• AI data processed: ~3.4 million records
• Raw material cost ratio (latest reported): 37.9%
• Organizational step: Digital Operations Committee (2024)

Delivery and takeaway present a fast-growing, margin-accretive channel. Delivery revenue rose 59.7% in H1 2025 and is now a significant growth pole; the 'hot pot dishes' one-person meal segment accounts for >55% of delivery revenue. Expanding delivery SKUs, optimizing packaging/fulfillment, and partnering with third-party platforms can improve off-peak utilization of kitchen capacity and capture higher-margin incremental sales outside dine-in hours.

Strategic levers to capitalize on these opportunities:

• Scale 'Pomegranate Plan' incubation with standardized playbooks to reduce time-to-profit for new brands.
• Accelerate franchise rollouts in lower-tier markets with rigorous training/quality controls to protect brand equity while lowering CAPEX.
• Expand premium store pilots and price-tier mix to lift average ticket and improve margin profile.
• Invest in AI-driven procurement and demand forecasting to reduce raw material ratio below 37.9%.
• Grow delivery SKU portfolio and logistics partnerships to increase utilization of existing kitchens and capture high-margin off-premise sales.

Haidilao International Holding Ltd. (6862.HK) - SWOT Analysis: Threats

Intensified competition in the catering market has pushed the Chinese hot pot segment into a 'stock competition' phase, with leading chains fighting for limited incremental demand. In H1 2025 the top 100 hot pot brands collectively captured only 16% of the market, underscoring severe fragmentation and commoditization. Competitors such as Banu Hot Pot plan to open 150 new stores by 2027, and numerous regional chains and fast-growth hybrid concepts are eroding Haidilao's premium positioning. Price competition has forced promotional pricing and discounting, contributing to a decline in consolidated net profit margin to 8.5% in mid-2025 (down from ~12-14% in 2020-2021). The proliferation of 'tea-beverage + hot pot' and other hybrid F&B models further dilutes Haidilao's traditional service and experience advantages.

Key market-competition indicators:

• Top 100 hot pot brands market share (H1 2025): 16%
• Haidilao net profit margin (mid-2025): 8.5%
• New store expansion by aggressive peers (e.g., Banu Hot Pot): 150 stores by 2027
• Average promotional discount frequency: elevated vs. 2019-2021 baseline

Macroeconomic headwinds and consumption downgrade are pressuring average ticket and frequency. S&P Global Ratings projects Haidilao revenue growth of ~4% in 2025, reflecting a softer catering market outlook. Consumer downgrading toward lower-priced dining options has pushed average spending per guest back to approximately RMB 97.5 (roughly 2017 levels). Persistent economic uncertainty raises the risk that management will cut discretionary service and non-core costs, which may lead to 'service degradation' and long-term brand value erosion. The mid-to-high-end pricing strategy becomes harder to sustain when customer willingness to pay declines.

Macroeconomic and customer metrics:

Stringent food safety and regulatory oversight present material operational and reputational risks. Incidents such as the 'pee door' event in June 2025 required public apology and legal responses, demonstrating how quickly brand trust can be impaired. Enhanced regulation in 2025 introduced stricter food traceability requirements and packaging sustainability mandates, increasing compliance complexity and costs-particularly for overseas operations where compliance expenses are estimated to rise 8%-12%. A major food-safety scandal could permanently damage Haidilao's ~95% historical satisfaction rating and trigger fines, forced closures, and accelerated regulatory scrutiny.

Regulatory and food-safety data points:

• Notable incident: 'pee door' (June 2025) - public apology and legal actions
• Estimated incremental operating cost for overseas stores due to new rules: +8% to +12%
• Brand satisfaction benchmark (pre-incident): ~95%
• Potential legal/recall costs in severe food-safety events: multi-million USD per incident

Geopolitical and currency risks complicate international operations and profitability. Although Super Hi International has been separated, Haidilao still faces indirect exposure via brand affiliation and overlapping shareholders. Foreign exchange volatility produced a net loss of US$11.6 million for the international arm in late 2024. Labor costs overseas can reach ~42% of revenue versus ~33% in mainland China, and geopolitical tensions may disrupt supply chains for specialty Sichuan ingredients and packaging. These factors can amplify margin pressure, increase working-capital needs, and slow profitable global expansion.

International financial and operational indicators:

Labor market shortages and wage inflation impose structural cost pressure. China's catering sector is experiencing a workforce deficit that has pushed Haidilao to materially raise compensation: employee costs increased by 24.0% in H1 2024 as the company boosted pay and benefits to retain service levels. With a workforce exceeding 137,000 employees, even a 5% incremental salary rise materially affects operating expenses. By late 2025 wage pressure remains high, and sustaining Haidilao's signature service model requires ongoing investment-limiting the company's ability to restore pre-2019 profit margins without productivity improvements or price increases.

Labor and cost statistics:

• Total employees: >137,000
• Employee cost increase (H1 2024): +24.0%
• Estimated sensitivity: 1% increase in average compensation ≈ significant multi-million RMB uplift in annual operating costs (company-level)
• Labor-driven margin constraint: prevents quick return to 2019 margin levels (~12-14%) without operational changes