Rat in hotpot costs Chinese restaurant chain at least US$200m
Shares of Xiabuxiabu declined by more than 10% after a dead rat was found in a hot pot ordered by a family at one of its restaurants
There is nothing as unwanted as a street rat in China. But that’s what one family ended up with when they went for a meal at a recently-listed hotpot restaurant.
And while the meal left a bad taste in the family’s mouths, the restaurant chain suffered pains to its bottom line, with more than 10% wiped off the company’s market capitalization.
For hotpot operator Xiabuxiabu Catering Management China Holdings, that added up to more than 1.5 billion yuan (US$218 million). Shares in Xiabuxiabu fell 12% this week after the dead rat was found in a hotpot dish last Thursday.
News about the dead rat went viral on social media after it was reported that a family found a five-centimeter-long rodent in a hotpot in a Xiabuxiabu outlet in Shandong province.
That news was bad enough for the recently-listed company, but then things went further downhill. While the restaurant offered to pay 5,000 yuan in compensation to the family served the dead rat, one of the restaurant’s attendants who was a pregnant then said she was worried that the dead rodent would affect her unborn baby.
So the restaurant offered to pay her a total of 20,000 yuan for an abortion – and generated more unwanted publicity.
Shares of Xiabuxiabu fell as much as 11%, following a 6.1% drop on Monday, because of the company’s inability to contain the damage from the rat incident. The shares showed a slight rebound on Wednesday morning and the company is now capitalized at about HK$11 billion (US$1.4 billion).
Shandong authorities have ordered the restaurant to suspend operations, according to a statement on their official WeChat account, which also said the restaurant faces penalties, without elaborating.
Xiabuxiabu said its own preliminary investigation ruled out the possibility the rat ended up in the meal due to restaurant hygiene or operational reasons.
The saga faced by Xiabuxiabu, which saw a 114% gain in its share price since listing in December 2014, highlighted how vulnerable a food company can be when it comes to hygiene in China.
Haidilao Hot Pot, China’s biggest restaurant and hot-pot chain franchise, is trying to raise HK$6.65 billion (US$850 million) from its global offering today.