In June 2021, our team started KrASIA Connection, a series of adapted articles originally published in China, in Chinese. Some of this information isn’t available in English-language outlets even though it is valuable, particularly for entrepreneurs and investors who are interested in the business and tech scene developments of the most populous country in the world.
Our latest entry in the series is about Haidilao, the famed hot pot chain. While it isn’t a tech company, there are lessons to be learned from the consequences of its aggressive, hypertrophic expansion. When the going was good—before the pandemic, basically—this business direction might have made sense. But now, the company’s share price on the Hong Kong Stock Exchange has lost most of its value from its peak. Renewed lockdowns in the country are surely adding salt to the company’s open wounds.
Even if conditions in China change soon, consumers’ disposable income is drying up, meaning they may be more conservative about excursions to dining establishments when lockdowns are lifted. Haidilao will likely pull through, but it is closing hundreds of restaurants and halting new openings.
The idea that a business needs to grow at all costs isn’t exclusive to tech firms that are loss-making enterprises until they figure out a way to turn red ink into black. It’s a strategy that has been taken up in other sectors. On the one hand, it fosters truly competitive environments. On the other, it cultivates a mindset that could put hundreds or thousands of people out of work overnight if things take an unexpected turn.
Check out the latest entry in KrASIA Connection, where our reporters unpack Haidilao’s recent developments.
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