Chinese hotpot giant Haidilao has brought on a new independent non-executive director: Zhang Junjie, the founder of Chagee, a rapidly growing tea beverage brand. Announced in its midyear financial report, Haidilao disclosed that Zhang will be joining the board with an annual salary of RMB 1.2 million (USD 168,480), beginning August 27 for a three-year term.
In keeping with relevant listing rules, Zhang remains independent from Haidilao, ensuring no conflicts of interest with the company, its subsidiaries, or key personnel. Essentially, this appointment is not about financial ties but rather about bringing in an industry expert to offer valuable insights.
“He’s essentially in a consulting role,” a Haidilao insider told 36Kr. Zhang won’t be involved in day-to-day operations, but the rationale behind hiring such experts is that Haidilao believes they have something valuable to teach.
Haidilao, once a trailblazer that others struggled to emulate, is now looking outward to learn from others.
Zhang is the sixth independent non-executive director appointed by Haidilao, joining a diverse group that includes Cai Xinmin, Xu Tingfang, Qi Daqing, Ma Weihua, and Wu Xiaoguang—professionals from fields as varied as medicine, food science, and law. Zhang, however, stands out as the most knowledgeable in the tea beverage industry.
Haidilao is not known for frequently appointing independent non-executive directors. Over the past three years, while the board has seen changes, these have mostly involved executive directors, such as the addition of Zhou Zhaocheng, former chairman of Super Hi International Holding, and Gou Yiqun, chairman of Shuhai Supply Chain Solutions.
The last time Haidilao appointed independent non-executive directors was three years ago when financial expert Ma Weihua and e-commerce veteran Wu Xiaoguang joined the board.
Currently, Haidilao’s board comprises four committees, with Ma and Wu leading and participating in the corporate governance committee. Other independent non-executive directors hold roles in the audit, remuneration, and nomination committees. Zhang, however, has yet to be assigned a specific role.
The primary role of an independent non-executive director is to support decision-making. “You could say they offer suggestions rather than decisions,” an independent director of a listed company explained to 36Kr. Whether their advice is acted upon depends entirely on the management team. “Of course, opinions matter, but it all depends on the management’s receptivity.”
When asked why Zhang was appointed, Haidilao said that the board believes his professional background and industry experience will provide oversight and guidance that will benefit Haidilao’s development.
So, what does Haidilao see in Zhang?
The answer lies in the success of Chagee, the company Zhang founded. In 2023, Chagee’s gross merchandise value (GMV) reached RMB 10.8 billion (USD 1.5 billion), and it’s expected to exceed RMB 20 billion (USD 2.8 billion) in 2024—a figure that rivals Haidilao’s half-year revenue of RMB 21.491 billion (USD 3 billion). Yet, while Haidilao has been around for 30 years, Chagee has achieved this success in just seven.
Haidilao’s decision to bring Zhang on board isn’t a response to any crises. In fact, the company’s midyear performance was strong: both revenue and core operating profit saw year-on-year increases of around 13%, with net profit reaching RMB 2 billion (USD 280.8 million)—a notable achievement given the overall downturn in the dining industry.
“After bringing Zhang on board, [Haidilao] might incubate a tea beverage sub-brand,” a source close to Haidilao told 36Kr. Haidilao is particularly interested in Chagee’s expertise in standardization and franchising.
Although the restaurant and beverage industries are closely related, Haidilao is new to the tea beverage industry, where Chagee excels.
Haidilao has long pursued a multi-brand strategy. By the first half of 2024, it was running five entrepreneurial ventures, including Yanqing, a barbeque chain, Xiaohai, a hotpot brand, and Miaoshixiong, known for its fish and shrimp dishes. The company’s half-year report highlighted this approach, driven by newly appointed CEO Gou Yiqun and his top management team. Recently, they also rolled out a new fried chicken brand under the Xiaohai name.
To date, Haidilao’s multi-brand innovations have largely stayed within the realm of dining, leveraging its strengths in the hotpot supply chain. But now, it’s clear that Haidilao is eyeing the tea beverage market. Recently, the company launched a nationwide renovation of its drink bars, introducing tea bars within its Haidilao outlets. Reportedly, over 900,000 cups of tea have already been sold. The last successful competitor to do something similar was Xiabu Xiabu, which introduced the TeaMeTea brand, integrating it into Xiabu Xiabu and CouCou stores. With Zhang’s appointment, it’s possible that Haidilao might eventually spin off its tea beverage business into a separate entity.
There’s no doubt that Haidilao is the most successful chain brand in Chinese cuisine. As of the first half of the year, it operated 1,343 restaurants, with an average table turnover rate of 4.2 times—one of the highest in the industry. However, Haidilao’s success has largely been driven by direct operations, with its franchise model still in its early stages. Meanwhile, Chagee is the most successful homegrown tea beverage franchise brand.
Before this appointment, Haidilao had already started loosening its grip on franchising this year, planning to expand through franchises. “Haidilao’s management believes that it is now appropriate to introduce franchising—there is no internal disagreement on this point,” said Zhou Zhaocheng, vice chairman of Haidilao, in an interview with China Entrepreneur.
Haidilao’s move to open up franchising isn’t driven by a need for funds—the company has ample cash reserves. According to its financial report, Haidilao’s cash and cash equivalents increased from RMB 6.476 billion (USD 909.2 million) at the end of last year to RMB 8.425 billion (USD 1.2 billion) in the first half of this year.
The core consideration behind opening up franchising is to pave the way for expansion into lower-tier markets. According to 36Kr, when screening potential franchisees, Haidilao primarily looks at their physical assets. One key reason is that, especially in lower-tier markets, even a strong brand like Haidilao sometimes needs to navigate local power dynamics. For a company like Haidilao, known for its service, standardizing service in franchised stores will also be a significant challenge.
Clearly, Haidilao’s franchised stores won’t be something that can be rapidly replicated. “The proportion of franchised stores will be very, very small,” Zhou emphasized in the interview.
The tea beverage business, however, operates differently. Once a single-store model is proven successful, it can be rapidly scaled up through franchising.
Whether or not Zhang joins is unlikely to change Haidilao’s decision to delve into tea beverages, but his presence could very well influence how quickly Haidilao can establish itself in this market.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Yang Yafei for 36Kr.