Sat, July 13

In Hot Water: the Decline of China’s Beloved Hot Pot Industry

Introduction

Once a bustling centrepiece of community dining, the Chinese hot pot industry is experiencing a significant downturn. The warm, inviting steam of hot pots that used to fill busy restaurants is dissipating, as many establishments struggle to keep their doors open. In 2023, the startling reality emerged: for every new hot pot restaurant that opened, two others were forced to shut down.

To better understand this shift, we delve into the stories of those at the heart of the industry—the owners and patrons—and the changing dynamics that challenge the tradition of communal hot pot dining.

Historical Profitability and Recent Decline

There was a time when launching a hot pot restaurant was akin to striking gold. Owners could see profits rolling in within just a few months of opening, with even modest eateries earning up to 1 million RMB per year. The scene was vibrant, with hot pot chains rapidly expanding and new locations popping up in every neighbourhood.

However, this once-thriving landscape has dramatically changed. The economic certainties of the past have given way to a precarious present, where even well-established chains struggle to maintain their profitability. This decline reflects broader economic pressures and a shift in consumer behaviour, which together spell trouble for the future of hot pot dining.

Statistical Overview of Industry Shifts

The statistics are stark: Qichacha reported that in 2023, while 75,000 new hot pot businesses were registered, a worrying 36,000 were deregistered or revoked. This unsettling ratio of closures to openings highlights the instability now characteristic of the hot pot market, making it a challenging environment for both new and established entrepreneurs.

This trend not only affects business owners but also reshapes the cultural fabric of dining out, turning what was once a lucrative business model into a gamble with high stakes and uncertain outcomes.

Investment and Operational Costs

For many aspiring restaurateurs, the dream of opening a hot pot restaurant is marred by high startup costs. The aesthetic and functional expectations for these establishments mean that initial expenses often range between 300,000 to 500,000 yuan. Added to this are the franchising fees that can escalate initial outlays even further.

Once operational, these restaurants face the grim reality of sparse patronage—many averaging just five or six customers daily. With over a dozen staff on payroll, the math doesn’t work out, and losses begin to mount. This financial drain quickly turns dreams into nightmares, pushing many to the brink of closure.

Consumer Trends and Market Adaptation

Post-pandemic, the economic landscape has transformed. Consumers are tightening their belts, opting to save rather than spend. This newfound frugality has hit restaurants hard, particularly those like hot pot establishments, which traditionally rely on group dining and repeat customers.

In response, even industry giants such as Haidilao have shifted strategies, introducing more economical menu options to lure back budget-conscious diners. These changes are essential as the industry tries to align itself with the new economic realities and consumer expectations.

Competition and Price Wars

In a bustling commercial district in Beijing, the competition among nearly 30 hot pot restaurants is fierce. Each one is slashing prices in a desperate bid to attract diners. These price wars, while attracting immediate customer traffic, are unsustainable in the long run. They erode profits and undermine the very survival of the businesses involved.

This desperate environment has created a no-win scenario for many. A restaurant manager in Guangzhou shared his story of continuous losses, which eventually led him to close his doors for good. He remarked, “We just couldn’t sustain the business any longer.” His story is not unique but is a stark reminder of the harsh realities facing the industry.

Survival Strategies and Industry Outlook

Against this backdrop of intense competition and economic pressure, hot pot restaurants are increasingly turning to creative innovations to differentiate themselves. New dining concepts, like the visually striking “hanging pot” style, are examples of how businesses are striving to offer unique experiences that go beyond just eating.

Yet, for many, these innovations might still not be enough. The industry’s future will likely depend on how well hot pot restaurants can navigate the complex interplay of economic challenges, shifting consumer preferences, and fierce competition. As the market continues to evolve, survival may hinge on each restaurant’s ability to reinvent itself and reconnect with a changing customer base.