Demand heats up in sizzling hotpot sector

Of all the hotpot restaurants, 57 percent are focused on cuisine from Sichuan province and Chongqing. The other leading versions are Beijing-style hotpot with a clear soup base, Hainan-style hotpot with a coconut and chicken soup base, and the Chaozhou, Shantou-style hotpot from Guangdong province, which comes with a soup base consisting of boiled beef balls.

The booming sector has allowed the fortunes of a large group of companies to shine.

Haidilao International Holding Ltd, a Sichuan-style hotpot chain and the undisputed leader of the hotpot industry in China, has put in an outstanding performance that has investors in the stock market in love with the stock as it trades near its 52-week peak.

Haidilao's 2019 interim financial report, which ended June 30 last year, showed that its revenue has grown 59.3 percent from 7.34 billion yuan to 11.7 billion yuan year-on-year. During the half year period of last year, the restaurant chain had an average table turnover rate of 4.8 times per day.

It has made its founder Zhang Yong a billionaire in the Forbes list last year, which is a phenomenal contrast from his early career as a welder in a tractor factory in Jianyang, Sichuan province.

Analysts attributed Haidilao's success to its high-quality service. The hotpot store is famous for customers raving about its good treatment. This ranges from free watermelon if a customer mentions that their food tasted good to getting offered hot ginger tea if they have a touch of the sniffles.

Other perks include manicures, pet care and mobile phone care services.

"The success of Haidilao reflects a broader trend that China is riding on the consumption wave where more consumers are paying for high-quality service and experiences," said Dai Jiaxian, an analyst from CITIC Securities.

A Mckinsey report estimated that the upper-middle-income population, defined as having an individual annual income of 106,000 to 229,000 yuan, will account for 54 percent of urban households by 2022.

This group of consumers are more picky in their tastes and loyal to brands. They tend to pay for restaurants that have higher-quality not only in taste but also in services and environment.

The hotpot chain has recently rolled out a new service dubbed" Do not disturb" so customers can enjoy more freedom and privacy during their dining experience.

The move seems to indicate changes where the hotpot chain restaurants are focusing more on their products and services, and not entirely relying on their waiters and waitresses.

The company has likewise added new intelligent elements to its chain, veering from its traditional emphasis on "customer satisfaction" and "employee efforts".

Intelligent robotic arms were put into three restaurants. There are also intelligent soup base preparation machines in another three restaurants and intelligent robot waiters in 179 restaurants.

Besides Haidilao, other private companies across China have also made their mark in the niche market, Dai pointed out.

"As the industry matures, consumers will tend to be more rational. Those hotpot restaurants that can accurately position themselves in a specific niche market will continue to benefit."

Xiabuxiabu Catering Management (China) Holdings Co Ltd understands this. The Beijing-based firm offers "one person, one pot" for those who eat alone. This tactic helped it quickly gain a large number of users and saw its share price triple as a result.

"While we continue to gain momentum, we are also developing and launching new products to suit 'trendy' consumers, especially those who are young," said Xiabuxiabu executive president Zhao Yi.

In the first half of 2019, Zhao said the company launched 15 new products at the same time. This included cheese mashed shrimp paste, which proved to be a hit among young customers.