Eliza Wong
Executive Summary
Key takeaways from Xibei’s ongoing crisis:
– Founder Jia Guolong’s (贾国龙) personal attacks on critic Luo Yonghao (罗永浩) escalated a simple customer complaint into a full-blown corporate crisis
– Xibei’s kitchen直播 backfired, revealing extensive use of frozen ingredients with shelf lives up to 24 months despite claims of fresh preparation
– The controversy highlights China’s lack of clear regulatory standards for pre-made food (预制菜) labeling and disclosure requirements
– Incident occurs during critical IPO preparation period for Xibei, potentially jeopardizing its 2026 listing plans
– Industry-wide implications for how Chinese餐饮 brands handle consumer transparency in the pre-made food era
The Pre-Made Food Controversy Escalates
What began as a simple customer complaint has escalated into one of China’s most watched corporate crises in recent memory. Luo Yonghao (罗永浩), the celebrity entrepreneur and consumer advocate, initially criticized Xibei餐饮 (西贝餐饮) for serving what he called expensive pre-made food that delivered poor dining experience. His September tweet about five people eating fifteen dishes that all tasted like pre-made food might have faded quickly had Xibei founder Jia Guolong (贾国龙) not responded with surprising aggression.
The situation deteriorated when Jia characterized Luo as a “network black mouth” (网络黑嘴) and “network black society” (网络黑社会) – terms that carry significant negative weight in Chinese business context. This personal attack transformed what could have been a manageable customer service issue into a full-blown public relations disaster for the restaurant chain.
From Complaint to Corporate Crisis
Luo’s initial criticism focused specifically on the disconnect between Xibei’s premium pricing and the apparent use of pre-made ingredients. The company’s response strategy backfired spectacularly at every turn. First, they threatened legal action against Luo. Then they launched a “Luo Yonghao套餐” apparently mocking their critic. Most disastrously, they organized kitchen直播 to prove their food wasn’t pre-made – which instead revealed extensive use of frozen, pre-prepared ingredients.
The kitchen直播 exposed several problematic practices: chicken wings with 9-month shelf life, broccoli lasting 24 months, pre-marinated frozen beef, and even招牌烤鱼 using frozen perch with 18-month expiration dates. Rather than proving their freshness claims, the直播 confirmed many of Luo’s original criticisms about pre-made food usage.
Financial and Operational Impact
The financial consequences have been immediate and severe. Xibei has experienced dramatic declines in both customer traffic and revenue since the controversy began. Daily revenue dropped by approximately 1 million yuan on September 10-11, with projected losses of 2-3 million yuan on September 12. This represents what Jia himself called “the biggest external crisis in Xibei’s history” – a significant statement for a company that has navigated China’s competitive餐饮 landscape for decades.
More concerning for investors is the timing: Xibei was actively preparing for a 2026 IPO with ambitions to become a publicly traded company worth over 100 billion yuan in market capitalization. This kind of public relations disaster occurring during the sensitive pre-IPO period could significantly impact valuation and investor confidence.
Employee and Operational Fallout
The crisis has extended beyond financial metrics to operational challenges. Multiple reports indicate Xibei employees facing online harassment and even daily abusive phone calls to various locations. The company was forced to suspend its kitchen直播 program after the initiative backfired, citing need to “ensure normal operations.” They also removed the controversial “Luo Yonghao套餐” from menus, though component items remain available for individual ordering.
In response to mounting pressure, Xibei announced 500 yuan subsidies for frontline employees and is reportedly discussing further compensation increases. While these measures might address immediate employee concerns, they don’t resolve the underlying issues regarding food transparency that started the crisis.
Industry-Wide Implications
The Xibei-Luo confrontation has sparked broader discussions about pre-made food usage throughout China’s餐饮 industry. New Hot Pot (新辣道) founder Li Jian (李剑) escalated the conversation by offering 200,000 yuan reward to any licensed chain restaurant that could prove they use no frozen ingredients or additives – essentially acknowledging that such establishments might not exist in modern Chinese餐饮.
Industry data supports this reality: according to the “2023 China Pre-Made Food Industry Development Report,” over 80% of chain restaurants utilize pre-made ingredients to some degree. Major chains including Haidilao (海底捞), KFC (肯德基), and McDonald’s (麦当劳) have built their business models around centralized kitchens and standardized pre-made components that ensure consistent taste across locations.
Regulatory Context and Future Standards
The controversy highlights China’s ongoing regulatory development around pre-made food standards. The National Health Commission (国家卫生健康委) has drafted “Pre-made Food Safety National Standards” that are expected to be released for public comment soon. These standards will likely address labeling requirements, safety protocols, and disclosure obligations for restaurants using pre-made ingredients.
Currently, the lack of clear regulations creates ambiguity about what constitutes “pre-made food” and what disclosure obligations restaurants have to customers. This regulatory gap allowed Xibei to claim they don’t serve pre-made food while extensively using frozen, pre-prepared ingredients – a position that became untenable once their kitchen operations were publicly exposed.
Leadership and Crisis Management Failures
Jia Guolong’s (贾国龙) handling of the crisis reveals significant leadership challenges. Rather than deploying standard crisis management protocols, he personalized the conflict and escalated tensions through inflammatory language. His subsequent attempt to apologize contained additional attacks in its second half, demonstrating either poor judgment or lack of crisis management oversight.
The situation contrasts sharply with how other companies have handled similar criticisms. When Luo previously targeted Siemens for product quality issues, the company eventually responded with a presidential apology after two months of sustained criticism. Xibei’s approach of immediate confrontation and gradual retreat has proven less effective and more damaging to brand reputation.
The胖东来 Comparison
Jia’s statement that Xibei would “thoroughly learn from胖东来” (庞东来) rings somewhat hollow given the execution. While Xibei has implemented some surface-level changes like switching to non-GMO cooking oil and increasing employee benefits, they’ve missed the core philosophy that makes胖东来 successful: genuine customer-centricity and transparency.
胖东来’s success stems from building authentic trust with consumers, not just implementing progressive HR policies. Xibei’s attempt to adopt the form without the substance of胖东来’s approach demonstrates a fundamental misunderstanding of what drives customer loyalty in modern Chinese retail and餐饮.
Investment Implications and Market Outlook
For investors and market observers, the Xibei situation offers several important lessons. First, the incident demonstrates growing consumer power in China’s domestic market – even individual critics can significantly impact major brands through social media amplification. Second, it highlights the increasing importance of transparency and authenticity in consumer-facing businesses, particularly in the food sector.
The pre-made food sector itself remains a compelling investment opportunity despite current controversies. China’s pre-made food market continues to show strong growth driven by urbanization, rising labor costs, and standardization needs in the餐饮 industry. However, companies that succeed will likely be those that embrace transparency rather than resisting it.
IPO Prospects and Valuation Considerations
Xibei’s planned 2026 IPO now faces significant headwinds. The company will need to demonstrate both financial recovery and rebuilt consumer trust before public market investors will confidence in their story. This likely means implementing robust transparency initiatives, potentially including detailed ingredient sourcing disclosures, clearer menu labeling, and possibly even third-party verification of food preparation claims.
Current market conditions suggest that investors are increasingly scrutinizing ESG (environmental, social, governance) factors and corporate transparency when evaluating restaurant IPOs. Companies that can demonstrate strong governance and customer trust commands premium valuations, while those with transparency issues face discounting or even failed listings.
Moving Forward: Lessons for China’s餐饮 Industry
The Xibei-Luo confrontation ultimately reflects broader tensions in China’s evolving consumer landscape. As customers become more sophisticated and empowered through social media, businesses must adapt their approaches to customer service and crisis management. The outdated model of dismissing criticism or attacking critics simply doesn’t work in today’s hyper-connected environment.
Successful餐饮 brands will need to embrace several key principles: transparency about ingredient sourcing and preparation methods, responsive customer service that addresses rather than dismisses complaints, and leadership that understands the new dynamics of brand reputation in social media era.
The resolution of this specific situation remains uncertain as Jia has not yet responded to Luo’s invitation for a public直播 debate. However, the incident has already created lasting impact on how Chinese餐饮 companies approach the pre-made food discussion and customer transparency issues.
For investors monitoring China’s consumer sector, the key takeaway is that brands embracing transparency and authentic customer relationships will likely outperform those resisting these trends. The pre-made food revolution in Chinese餐饮 is inevitable for economic reasons, but its acceptance will depend on honest communication and fair value proposition for consumers.
As China’s regulatory framework around pre-made food continues to develop, companies that proactively adopt higher transparency standards will position themselves favorably with both consumers and investors. The current crisis, while painful for Xibei, may ultimately accelerate positive industry-wide changes that benefit all stakeholders.
