In 2025, the average transaction price will be lowered across the board, with net profit increasing by 23%. Will Xiaocaiyuan's online expansion and "community ready-to-eat small shops" become the new trend in the mass dining industry?

Ask AI · How can Xiaocaipuyuan achieve net profit growth against the trend through cost control?

Reporter: Zheng Xinwei Editor: Chen Junjie

On March 25, Xiaocaipuyuan (HK00999), the “first Chinese-style full-service dining” company, released its annual performance announcement for the year ended December 31, 2025. The data show that Xiaocaipuyuan’s full-year operating revenue was RMB 5.345 billion, up 2.6% year on year; net profit was RMB 715 million, up 23.16% year on year. The company’s gross margin increased to 70.4%, and its net profit margin reached 13.4%.

Image source: Xiaocaipuyuan annual performance announcement

As of December 31, 2025, the total number of outlets under the “Xiaocaipuyuan” brand was 807, covering 14 provinces nationwide. Adding other brands under its umbrella, the group had a total of 819 outlets, all operating under a direct-operated model.

Against the backdrop of generally pressured profitability across the catering industry, Xiaocaipuyuan’s growth against the trend has become a focal point in the sector. On March 26, Wang Hongdong, head of the Canyun Dian Research Institute, said in an interview with reporters from The Economic Daily News that Xiaocaipuyuan’s profit performance is at a relatively strong level in the catering industry, reflecting the company’s strong cost-management capabilities. However, future expansion will still need to further consider how to address the “category ceiling” problem for Huicai.

Dine-in average spend falls to RMB 56.1, with net profit not only not decreasing but increasing

In terms of revenue structure, the dine-in and delivery businesses work together to drive core revenue support. The performance announcement shows that in 2025, Xiaocaipuyuan’s dine-in business revenue was RMB 3.261 billion, accounting for 61.0% of total revenue and up 2.2% year on year; delivery business revenue was RMB 2.065 billion, accounting for 38.6% of total revenue and up 3.0% year on year.

The company attributes the growth in its dine-in business to the continued expansion of outlet numbers. In 2025, it added a net 146 outlets, bringing the total number of outlets to 819.

Notably, more than 800 outlets under Xiaocaipuyuan are all direct-operated. Xiaocaipuyuan’s chairman, Wang Shugao, said in an interview with reporters from The Economic Daily News at the end of 2023 that Xiaocaipuyuan would not adopt a franchise model. “We pursue a slow-heated approach to development—no advertising, no marketing, and we win on reputation. (Reputation) depends on frontline staff such as chefs.”

Image source: Xiaocaipuyuan annual performance announcement

From its outlet layout, lower-tier markets remain an important growth engine for Xiaocaipuyuan. In 2025, among the 807 brand outlets of Xiaocaipuyuan, the outlet shares in third-tier-and-below cities, new first-tier cities, and second-tier cities, as well as first-tier cities were 42.5%, 40.5%, and 17%, respectively. These contributed 39.8%, 41.9%, and 18.3% of total revenue, respectively.

In terms of average spend per customer, in 2025, dine-in average spend further declined to RMB 56.1. All tiers of cities saw varying degrees of decline: first-tier cities fell from RMB 61.1 to RMB 57.0; new first-tier cities fell from RMB 59.1 to RMB 55.6; second-tier cities fell from RMB 59.9 to RMB 57.0; and third-tier-and-below cities fell from RMB 58.4 to RMB 55.7.

Xiaocaipuyuan said this is not a passive price cut, but an active adjustment of its pricing strategy for dishes, seeking stronger customer stickiness and repeat purchase rates with higher value for money.

For the growth in its delivery business, the company believes it stems from an increase in the number of outlets providing delivery services and improved attractiveness of Xiaocaipuyuan on delivery platforms. In 2025, Xiaocaipuyuan’s delivery order volume increased from 29 million orders to 34.3 million orders, directly driving growth in delivery revenue.

Image source: Xiaocaipuyuan annual performance announcement

A reporter noted that in 2025, Xiaocaipuyuan’s net profit reached RMB 715 million, up 23.2% from RMB 581 million in 2024. Gross margin was maintained at a high level of 70.4%, and net profit margin reached 13.4%, both increasing by 2.3 percentage points.

The company said that the profit growth rate significantly higher than the revenue growth rate is inseparable from improvements in supply chain optimization and cost control capabilities. The performance announcement mentions that in 2025, Xiaocaipuyuan’s expenditures on raw materials and consumables declined by 4.7% year on year, and the proportion of revenue fell from 31.9% in 2024 to 29.6%. This was mainly attributable to economies of scale brought by centralized procurement, which reduced the unit costs of core ingredients. At the same time, improvements in store management efficiency drove optimization of labor costs: in 2025, employee costs declined by 3.4% year on year, and the proportion of revenue fell from 27.3% to 25.7%.

Planning for online channels and “community ready-to-eat mini-stores,” still needs to address the “category ceiling”

Looking ahead, Xiaocaipuyuan has made clear that it will make efforts in areas such as putting the central factory into operation, diversified operations, and going global.

In the performance announcement, Xiaocaipuyuan’s chairman, Wang Shugao, said that the central factory in Ma’anshan, Anhui is expected to begin production and use in the first half of 2026. It will cover the entire value chain—procurement, production, warehousing, logistics, and quality control—so as to further strengthen cost advantages and quality stability, and provide production capacity support for future outlet expansion.

In terms of diversified operations, the company will actively explore new retail models, expand consumption scenarios, and enhance resilience across economic cycles by diversifying revenue sources, enabling coordinated development across multiple industries.

A reporter noted that on January 13 this year, the Xiaocaipuyuan Group had issued an announcement stating that through its wholly owned subsidiary Xiaocaipuyuan Catering, it jointly established a joint venture with Deng Gaoke, founder of a new consumption fashion brand, and Tian ChunYong, Xiaocaipuyuan’s executive director and deputy general manager, to develop businesses such as an online mall and “community ready-to-eat mini-stores.”

The announcement said that the joint venture will integrate high-quality supply chain resources, build a new food consumption platform that combines an online mall, community retail, and instant catering, enhance brand value and market share, support the realization of the group’s overall strategic objectives, and further strengthen the group’s market competitiveness. This move shows that Xiaocaipuyuan has indeed begun planning for new retail.

Wang Shugao also said that, based on advantages in the domestic market, the company will steadily advance international expansion. In the initial stage, it will choose Hong Kong as the first stop for overseas expansion. In fact, this plan was already disclosed at the 2024 performance briefing held at the end of March 2025, but it has not yet been implemented in 2025. Whether Xiaocaipuyuan can open up overseas markets in 2026 is worth watching.

Regarding outlet expansion, the company announced a short-term goal of breaking through 1,000 outlets, with a medium- to long-term target of moving toward 3,000 outlets. In an interview analyzing the situation, Wang Hongdong, head of the Canyun Dian Research Institute, said that if it maintains its current store-opening pace, the likelihood of achieving the 1,000-outlet goal is relatively high, but achieving the medium- to long-term target still requires breaking through the category ceiling. “Huicai’s level of recognition and acceptance nationwide is not as good as Sichuan and Hunan cuisines.” He suggested that Xiaocaipuyuan could draw on the integrated-cuisine positioning of “Green Tea” restaurants, blending regional characteristics into Huicai to overcome limitations of the category.

In addition, Wang Hongdong pointed out that compared with “Green Tea,” whose more than 600 stores cover about 30 provinces nationwide, Xiaocaipuyuan currently covers 14 provinces, which are mainly distributed in East China and are relatively concentrated. “This level of concentration is related to its self-built and controlled supply chain. Through the central kitchen and regional warehouses radiating to surrounding stores, it can effectively control costs and ensure quality control. But this format may face challenges in cross-regional expansion, and entering blank markets in the future will impose higher requirements on supply chain development.”

The Economic Daily News