Summer is traditionally the peak travel season, but as a player in the instant food sector, self-heating hotpot products are rarely seen at major tourist attractions this summer. Why has Zihaiguo, which once earned 1 billion yuan annually and vowed to replace instant noodles, lost its appeal?

At its inception, leveraging the popularity of concepts like the 'lazy economy' and 'single dining,' along with pervasive advertising, Zihaiguo quickly became a top new consumer brand. Its parent company, Jinlingyang, completed five rounds of financing in just two years, attracting prominent investors such as Matrix Partners China and China Growth Capital, with a valuation peaking at 7.5 billion yuan.

However, most internet-famous new consumer brands struggle to escape their fate: hype fades quickly. In recent years, the entire self-heating hotpot industry has cooled, and leading companies like Zihaiguo are mired in difficulties.

Financially, Zihaiguo's parent company reported revenues of 958 million yuan and 992 million yuan for 2020 and 2021, respectively, with losses of 152 million yuan and 318 million yuan in the same periods. In 2022, revenue fell to 820 million yuan, and although it turned profitable with a net profit of 19.9385 million yuan, this was attributed to reduced promotional expenses.

Today, Zihaiguo products are rarely seen in offline channels, and online buzz has hit rock bottom. From its former glory to current obscurity, what caused Zihaiguo's decline? Even if it can't emulate Master Kong, does it have no future?

Zihaiguo Can't Get Excited Anymore

Flashback to 2018: Zihaiguo was incredibly popular, with half the entertainment industry endorsing it, touted as a 'blessing for singles,' '15-minute single hotpot,' and 'targeting a 500 billion yuan market.' Yet, within a few years, this once-promising brand has fallen into obscurity.

In contrast, Master Kong, despite facing consumer boycotts over the 'old pickle' incident, continues to thrive and even recently hinted at price increases.

So, what are the reasons behind its fall from grace?

First and foremost, the fundamental issue lies in Zihaiguo's positioning. As an instant food, it isn't particularly convenient to carry or use. It's classified as flammable on airplanes, and on high-speed trains, it's considered a smoke alarm-sensitive item, making it impossible to consume normally. Including the heating materials, the product is bulky and heavy, making travel inconvenient.

This is why, during its peak, most consumers stocked up at home, using it as a last resort when unsure what to eat.

Secondly, price is a key factor influencing consumer decisions. According to a 2021 survey by iiMedia Research on why consumers don't choose self-heating hotpot, 51.6% cited high prices.

Image source: iiMedia Research

For instance, at launch, Zihaiguo's self-heating hotpot often cost over 30 yuan. Even after multiple price cuts, it's still around 20 yuan, nearly the same as ordering takeout.

At that price point, takeout offers better value.

Additionally, issues like stale ingredients, poor taste, and even the rice being exposed as synthetic (how else could it be ready in just 10 minutes?) have become major consumer complaints. In fact, Zihaiguo has never been associated with good taste or nutrition. Self-heating foods typically undergo high-temperature sterilization and preservative treatment, rarely using leafy vegetables, and have become synonymous with 'technology and harsh additives.'

On the Black Cat complaint platform, complaints about Zihaiguo have reached 750, mostly focusing on foreign objects, moldy ingredients, and spoiled sauce packets.

Image source: Black Cat complaint platform

To some extent, the popularity of pre-made dishes has dealt a heavy blow to Zihaiguo. As is well known, pre-made dishes also emphasize convenience, with pre-packaged ingredients and seasonings that only require heating. Now, they've even made it to the New Year's Eve dinner table, becoming a favorite among young people.

Zihaiguo's consumption scenarios have almost vanished, leaving only a stream of bad news. Since early 2024, its parent company Jinlingyang has been listed in the business operation exception list, faced court enforcement, and had equity freezes.

From Annual Revenue of 1 Billion to Obscurity

Zihaiguo's story began in 2015, initially sold through WeChat Moments. In 2018, after Haidilao launched its self-heating hotpot, the category took off. According to Huajing Industry Research Institute data, the market size for self-heating hotpot grew from 2.456 billion yuan in 2017 to 4.662 billion yuan in 2018.

Around 2018, Cai Hongliang, founder of the well-known snack brand Beicaowei, seized this opportunity and officially launched Zihaiguo.

A common marketing tactic for internet-famous brands is aggressive promotion. At its inception, Zihaiguo allocated 50 million of its 80 million yuan startup funds to advertising, including celebrity endorsements, social media promotion, live-stream sales, and product placement in TV dramas. The hit drama 'The Long Night' in 2020 sparked controversy for its blatant product placement of self-heating hotpot.

Image source: Zihaiguo official Weibo

Undeniably, the pervasive advertising yielded immediate sales growth.

According to Toubao data, during the 2017 Double 11, self-heating hotpot sold millions of units on Tmall. In 2018, online sales exceeded 4.5 million units, more than doubling year-on-year. From 2018 to 2020, Zihaiguo ranked first in the self-heating food category on Tmall and JD.com during the 618 shopping festival. In 2020, Zihaiguo achieved nearly 1 billion yuan in annual sales.

As Zihaiguo's popularity soared, so did its performance and valuation. Data shows that from 2019 to 2021, revenues were approximately 800 million, 958 million, and 992 million yuan, respectively. The company completed five funding rounds, with a peak valuation of 7.5 billion yuan.

Driven by Zihaiguo, numerous brands and capital flooded in, with 26 investment events in 2021 alone, fueling the self-heating hotpot sector.

When the tide goes out, you see who's swimming naked. The pseudo-demand or low-probability scenarios created by self-heating hotpot were exposed as the industry cooled, with growth slowing significantly by 2022.

For Zihaiguo, the turning point came in March 2023 when Lotus Health attempted to acquire a stake in its parent company, revealing its true condition. Despite nearly 1 billion yuan in revenue in 2021, Zihaiguo remained loss-making. Its 2022 net profit of nearly 20 million yuan was achieved by cutting marketing expenses by 216 million yuan.

Even Yihai International, behind Haidilao's self-heating hotpot, saw a significant slowdown in 2022, with H1 2023 revenue down 36.12% year-on-year.

Two subsequent public controversies toppled Zihaiguo from its pedestal.

Image source: Zihaiguo official Weibo

In April 2023, Zihaiguo was fined 800,000 yuan by the Shanghai market regulator for selling a '1.76 million yuan fortune clam noodle' product. This followed a case where a consumer died after eating the product, leading to a lawsuit seeking 1.76 million yuan in compensation.

In July of the same year, a passenger was stopped by train attendants for eating self-heating hotpot, which could trigger smoke alarms due to high-temperature steam.

Amid these events and trends, several well-known companies, including Uni-President and Weilong, voluntarily abandoned the self-heating hotpot business.

Can't Overthrow Instant Noodles

Zihaiguo has fallen from grace. Looking at the broader instant food sector, who are the players and how are they performing?

First, consider Akuan Foods, which has long aimed to become the 'first stock of new instant food.' From 2018 to 2020, its revenue grew from 422 million yuan to 1.11 billion yuan. In H1 2021, revenue was 593 million yuan, nearly matching the full-year 2019 figure. This growth was driven by its 'red oil noodle skin' product, which sold nearly 400 million yuan in 2020, with cumulative sales exceeding 100 million units.

Image source: Akuan Foods official Weibo

However, this OEM manufacturer behind internet-famous brands like Three Squirrels and Li Ziqi saw a significant sales decline starting in 2022. Its prospectus shows repeat buyers dropped from 873,800 in 2020 to 370,800 in 2022.

Similarly, Lamian Shuo showed clear signs of fatigue around the same time. Data shows that from 2018 to 2020, its annual sales rose from 80 million yuan to 900 million yuan, driven by internet buzz. During the 2021 618, Tmall sales were 34.02 million yuan, but in 2022, they plummeted to 13.54 million yuan.

Even Kongkong Pasta's parent company, Baoli Food, reported a revenue growth rate of only 1.9% in 2023, compared to 76.8% in 2022.

Objectively, Zihaiguo has sought self-rescue. Over the past year or two, its official WeChat account has frequently posted promotions, with many 200-gram products priced as low as 9.9 yuan. However, low prices are already pervasive in this low-barrier market, and the product's inherent flaws mean price cuts alone can't restore consumer trust.

Image source: Zihaiguo Tmall flagship store

Today, instant noodles still hold a dominant lead in the instant food market.

According to data from Mashangying for Q2 2024, instant noodles hold a 43.11% market share in the instant food category, the only typical category to see year-on-year growth. Even the popular Luosifen has only a 2.45% share and is slightly declining.

Clearly, even with more flavors and varieties, and continuous online and offline buzz, emerging brands can't shake instant noodles' dominance. Master Kong and Uni-President remain the absolute leaders.

From this perspective, Zihaiguo's road to recovery is long. Price wars have proven ineffective; the next step may be product upgrades through technology.

As consumers increasingly focus on healthy eating, self-heating hotpot brands like Zihaiguo should prioritize food safety, ingredient control, and taste improvement, genuinely enhancing product quality to at least match pre-made dishes and attract consumers.

Even if it can't overthrow instant noodles, there's still a chance to carve out a niche in the instant food sector with a 'small but beautiful' approach. Otherwise, it will inevitably meet the fate of internet-famous brands, ultimately failing even to sell itself.