Hotpot chain Haidilao apologizes for coronavirus-related price hikes

Haidilao, a popular Chinese hotpot chain known for its exceptional customer service, has drawn a great deal of attention and controversy after complaints about price increases surfaced on Chinese media. This happened as it reopened some of its stores last week following weeks of closure caused by the COVID-19 pandemic. The resistance to the price hikes has been so fierce that the company apologized to its customers on April 10, saying that it had lowered the prices for food back to where they were before the outbreak.

The price adjustment was brought to the public’s attention last week when a few customers who dined at Haidilao stores shared photos of their receipts on the internet. In one case, the bill showed that half of a regular size of potatoes was 13 yuan ($1.84), one serving of hotpot sauce was 10 yuan ($1.42), and a bowl of rice was 7 yuan ($1). The total cost of the meal was around 220 yuan per person, up more than 6 percent than usual.

In response to complaints about higher prices, Haidilao issued a statement (in Chinese) on April 10, saying that hiking up prices was a “wrong decision” made by the chain’s management team. “We apologize for harming consumers’ interest,” it said, adding it had restored food prices to previous standards before the coronavirus outbreak. In the statement, Haidilao also noted that different locations across the country had the right to come up with their own pricing plans based on the local cost of ingredients.

While Haidilao didn’t elaborate on the reasoning behind the price increases in the statement, the move was likely driven by its desire to offset the huge losses it suffered as the coronavirus swept across China in the past few months. In late January, Haidilao completely shuttered its operations in response to the pandemic. On February 15, the chain resumed takeout and delivery services. About a month later, as the outbreak began to ease, about 85 Haidilao stores reopened after China lifted restrictions on in-restaurant dining in most cities.

According to Vista magazine (in Chinese), some industry observers estimated that Haidilao lost nearly 1.1 billion yuan ($156 million) in revenue during roughly three weeks of shutdown, as it had to pay operating costs such as rent and employees’ salaries while revenues plummeted.

Haidilao is not the only restaurant dealing with the devastating effects of the pandemic, as well as customers unhappy about price increases after reopening. Xībèi 西贝, a popular Inner Mongolian food chain, also faced a similar backlash recently after customers found that it raised prices for most items on the menu after experiencing a severe blow from the coronavirus outbreak. In an interview published in February, Xibei’s CEO, Jiǎ Guólóng 贾国龙, said that the chain wouldn’t last three months if stores remained closed for the foreseeable future.  

After China saw a steady drop in new COVID-19 cases later last month, a number of cities and brands have unveiled various incentives to boost consumption in sectors hit hard by the outbreak. In Zhejiang, companies have been encouraged (in Chinese) to give employees an extra half day of paid leave once a week in the hope that they will have more free time to shop and spend. Meanwhile, the Nanjing government has issued (in Chinese) 50 million yuan ($7.1 million) worth of digital vouchers for residents to spend on items such as electronics and tourism activities.

With these measures being rolled out, news media began using the term “revenge spending” (报复性消费 bàofùxìng xiāofèi) to describe consumers rushing to open up their wallets when social distancing ends. But given recent news about price hikes, many consumers have expressed skepticism about how the theory would play out in reality. “Since I can’t afford to eat outside now, I’d better do some revenge saving,” one Weibo user said (in Chinese).