Eliza Wong
Executive Summary
– Xi Bei faces significant brand damage and daily revenue losses of 1-3 million yuan following Luo Yonghao’s pre-made dishes controversy
– The company’s aggressive response strategy backfired, exposing operational vulnerabilities during critical IPO preparation phase
– Comparative analysis reveals Xi Bei’s 5% profit margin trails competitors like Lao Xiang Ji (老乡鸡) and Xiao Cai Yuan (小菜园)
– Consumer backlash against premium pricing combined with pre-made dishes allegations creates perfect storm for brand erosion
– IPO timeline at risk as 2023-2025 financial performance window coincides with current crisis
The Pre-Made Dishes Controversy That Shook Xi Bei’s Foundation
The September 10th social media commentary from influencer Luo Yonghao regarding Xi Bei’s alleged use of pre-made dishes has triggered a chain reaction that threatens the company’s fundamental market position. What began as a single critical comment rapidly evolved into a full-scale brand crisis, exposing deeper operational and strategic vulnerabilities at the heart of this aspiring IPO candidate.
The Escalation Sequence
Xi Bei’s initial response to Luo Yonghao’s comments followed a concerning pattern of escalation. Rather than employing measured crisis management protocols, founder Jia Guolong (贾国龙) personally engaged in confrontational tactics including legal threats and operational transparency maneuvers that ultimately backfired. The decision to open kitchen facilities to the public resulted in photographic evidence of packaged soups, frozen fish products, and extended-shelf-life vegetables that contradicted the company’s fresh preparation claims.
Brand Damage Assessment
The immediate financial impact has been quantifiable and severe. According to Jia Guolong’s statements to China Entrepreneur magazine, daily revenue declined by approximately 1 million yuan on September 10th and 11th, with projections indicating 2-3 million yuan in daily losses by September 12th. More significantly, the brand perception damage may have longer-term consequences for customer retention and premium pricing power.
Capital Market Pressures and IPO Timeline Constraints
Beneath the surface of this public relations crisis lies a more fundamental challenge: Xi Bei’s ambitious capital market timeline. The company has publicly committed to achieving IPO status by 2026, creating immense pressure to maintain flawless operational performance throughout the critical 2023-2025 evaluation period.
Investment Infrastructure Development
Xi Bei has made substantial investments in preparation for its public market debut. The development of what Jia Guolong describes as China’s largest single-unit central kitchen facility in Inner Mongolia represents both operational scaling and symbolic commitment to standardization—a key requirement for public market investors. Additionally, the company has implemented employee stock ownership platforms and completed two rounds of institutional funding in 2021 and 2025.
Competitive Landscape Intensification
The contrast with competitor Lao Xiang Ji (老乡鸡) highlights Xi Bei’s challenging position. While Xi Bei struggles with controversy, Lao Xiang Ji submitted its Hong Kong IPO application in July, reporting impressive financial metrics including revenue growth from 4.53 billion yuan in 2022 to 6.29 billion yuan in 2024, with profits increasing from 252 million to 409 million yuan during the same period. This competitive pressure amplifies the urgency of Xi Bei’s situation.
Operational and Financial Vulnerabilities Exposed
The pre-made dishes controversy has illuminated underlying operational challenges that extend beyond public relations. Financial performance indicators suggest structural issues that may complicate the company’s public market aspirations regardless of the current crisis resolution.
Profit Margin Compression
Xi Bei’s reported 5% average profit margin presents concerning comparatives within the sector. Competitors including Lü Cha Can Ting (绿茶餐厅) at 10.95% and Xiao Cai Yuan (小菜园) at 14.09% demonstrate significantly stronger profitability profiles. This margin pressure reflects both operational inefficiencies and the company’s substantial marketing expenditures, which reached 200 million yuan in 2020 alone according to Pan Ke (潘轲) of Shunzhi Strategic Positioning Consulting.
Strategic Instability and Brand Dilution
Perhaps most damaging to investor confidence is Xi Bei’s history of strategic pivots and failed brand extensions. Over the past decade, the company has launched eleven separate concepts including Yan Mai Gong Fang (燕麦工坊), Mai Xiang Cun (麦香村), and Chao Ji Rou Jia Mo (超级肉夹馍), with total investments exceeding 500 million yuan according to author Li Xiang’s analysis. This pattern of experimentation without consolidation suggests deeper strategic challenges beyond the current crisis.
Consumer Market Dynamics and Premium Pricing Challenges
The pre-made dishes controversy intersects dangerously with existing consumer sentiment regarding Xi Bei’s premium pricing strategy. In an economic environment increasingly focused on value perception, the combination of high prices and prepared ingredients creates a particularly vulnerable market position.
Pricing Structure Analysis
Luo Yonghao’s specific price comparisons highlighted the extreme nature of Xi Bei’s pricing strategy. The observation that Xi Bei’s 21 yuan traditional steamed馒头 exceeded the pricing of Black Pearl-rated establishments while approaching Michelin-starred restaurant pricing underscores the premium positioning. Additional examples including 108 yuan for five lamb chops and 59 yuan for tomato oat noodles further illustrate the pricing structure that consumers are increasingly questioning.
Market Context Deterioration
Broader market conditions amplify these challenges. Municipal data from Beijing and Shanghai show restaurant revenue declining by 3.6% and 2.9% respectively during the first seven months of 2025, contrasting with national growth of 3.8%. This urban consumption softness particularly affects premium dining concepts like Xi Bei that depend on discretionary spending from metropolitan consumers.
Leadership Response and Crisis Management Evaluation
The handling of the pre-made dishes controversy raises significant questions about corporate governance and crisis preparedness at the senior leadership level. Founder Jia Guolong’s personal involvement in the response strategy demonstrates both the importance of the situation and potential governance vulnerabilities.
Communication Strategy Assessment
The sequence of communication missteps—from initial denial through kitchen transparency efforts to the problematic apology letter—suggests insufficient crisis management infrastructure. The company’s failure to acknowledge Luo Yonghao specifically while attempting to address concerns created additional backlash from the influential commentator, extending the news cycle and deepening brand damage.
Governance Implications
Jia Guolong’s decision to reassume the CEO role in September 2024, just before this crisis emerged, indicates recognition of operational challenges but may also reflect over-centralization of decision-making. For public market investors, founder-dominated governance structures often raise concerns about risk management and succession planning.
Path Forward: Recovery Strategies and Market Implications
The resolution of this crisis will require multi-dimensional strategy addressing immediate revenue concerns, medium-term brand rehabilitation, and long-term investor confidence restoration. The company’s approach to these challenges will likely determine its capital market future.
Immediate Operational adjustments
Xi Bei’s commitment to transition several core menu items including children’s meals, roasted lamb skewers, and hand-shredded peppercorn chicken from central kitchen preparation to restaurant-level execution represents a substantive operational shift. The implementation timeline and cost implications of this change will be closely watched by industry observers and financial analysts.
Investor Relations Rehabilitation
For institutional investors particularly those involved in the 2021 and 2025 funding rounds, the company must demonstrate both crisis containment and strategic clarity. The potential activation of valuation adjustment mechanisms (对赌条款) in investment agreements adds financial pressure beyond the immediate revenue impact, potentially requiring share or cash compensation if performance benchmarks are not achieved.
Broader Industry Implications and Investment Considerations
The Xi Bei pre-made dishes controversy extends beyond a single company’s challenges, reflecting broader industry dynamics and investment considerations for the Chinese restaurant sector. Investors and industry participants should consider several structural factors emerging from this situation.
Supply Chain Transparency Demands
The increasing consumer and regulatory focus on food sourcing and preparation methods suggests that operational transparency will become increasingly important for restaurant valuation. Companies with clearly documented supply chains and preparation standards may command valuation premiums compared to those with opaque operations.
Premium Pricing Sustainability
The challenging consumer economic environment raises questions about the sustainability of premium pricing strategies across the restaurant sector. Companies must demonstrate clear value proposition differentiation to maintain pricing power, particularly as consumers become more value-conscious.
Founder-Led Company Risks
The concentration of decision-making and personal brand association in founder-led companies like Xi Bei creates both strengths and vulnerabilities. Investors should carefully evaluate governance structures and succession planning when assessing restaurant investments, particularly as companies transition from private to public ownership.
Strategic Recommendations for Market Participants
For investors, competitors, and industry observers, the Xi Bei situation offers several actionable insights regarding Chinese restaurant sector investment and operational strategy.
First, operational transparency and supply chain management deserve increased attention in investment due diligence processes. Companies that can demonstrate control over ingredient sourcing and preparation methods may prove more resilient during periods of increased consumer scrutiny.
Second, premium pricing strategies require corresponding premium experiences and quality demonstrations. Simply positioning at the high end of market pricing without clear differentiation creates vulnerability during economic softening or competitive intensification.
Finally, crisis management capabilities represent an undervalued aspect of restaurant operations. Companies with established protocols and trained response teams may navigate challenges more effectively than those relying on ad hoc leadership reactions.
For ongoing monitoring of this developing situation, investors should track Xi Bei’s monthly revenue recovery, competitor market share shifts, and potential regulatory developments regarding food preparation disclosure requirements. The company’s ability to navigate this challenge will provide important insights into the broader restaurant sector’s adaptation to increasing consumer awareness and expectations.
