Financial Report Interpretation | Concentration Accelerates the Expansion of Baijiu Club with 30 Billion Yuan, but Liquor Merchants Are Waiting for Future Market

As Wuliangye (000858. SZ) announced its first quarterly report of 2023 and 2024 on the evening of the 28th, the performance of major listed companies of Baijiu has been announced. Although the Baijiu industry is still in a period of deep adjustment, the performance of mainstream Baijiu listed companies will maintain rapid growth in 2023, especially the second echelon Baijiu shares, which is also a reflection of the highly centralized industry. During the recent market visit, the reporter noticed that the game between Baijiu manufacturers was still ongoing, and some liquor producers reported that the sales in the off-season after the Spring Festival were not as good as the same period last year, and they were also worried about the future market performance.

Baijiu heads up, and the waves catch up

From the overall financial report of Baijiu industry in 2023, after the performance of the top Baijiu enterprises has increased year after year, the growth rate of last year is still unchanged. According to Wuliangye’s financial report, in 2023, it achieved a revenue of 83.27 billion yuan, a year-on-year increase of 12.6%, and a net profit attributable to shareholders of 30.21 billion yuan, a year-on-year increase of 13.2%.

In addition to Maotai and Wuliangye, several leading liquor companies achieved sales exceeding 30 billion yuan and net profits exceeding 10 billion yuan in 2023. Among them, Yanghe Group (002304, SZ) had a revenue of 33.13 billion yuan in 2023, a year-on-year increase of 10%, and achieved a net profit attributable to shareholders of 10.02 billion yuan, a year-on-year increase of 6.8%; Shanxi Fenjiu (600809. SH) achieved a revenue of 31.93 billion yuan in 2023, a year-on-year increase of 21.8%; The net profit attributable to the parent company was 10.44 billion yuan, a year-on-year increase of 28.9%; Luzhou Laojiao (000568. SZ) has a revenue of 30.23 billion yuan, a year-on-year increase of 20.3%, and a net profit attributable to the parent company of 13.25 billion yuan, a year-on-year increase of 27.8%. Gujing Gongjiu (000596. SZ) achieved a revenue of 20.25 billion yuan in 2023, a year-on-year increase of 21.2%, and a net profit attributable to shareholders of 4.59 billion yuan, a year-on-year increase of 46%

The overall growth rate among top liquor companies is also showing a trend of “catching up with the front waves”. Among them, the revenue and net profit growth rate of famous liquor companies in the second tier, such as Shanxi Fenjiu, Luzhou Laojiao, and Gujing Gongjiu, is faster, while the growth rate of the traditional top three “Maowuyang” has slowed down compared to this.

Cai Xuefei, General Manager of Zhiqu Consulting, told First Financial reporters that Mao Wuyang has already completed nationalization and has a huge stock market. At the same time, it is limited by the expansion of core product production capacity and needs to maintain a balance between core product sales and prices. Therefore, the strategy has shifted to seeking progress while maintaining stability.

In 2020, the production and sales volume of Wuliangye series products were 26000 tons and 28000 tons respectively. In 2023, the above data were 40000 tons and 39000 tons, a cumulative increase of 39.3%. During the same period, the sales revenue of Wuliangye products increased by 42.7%, which is partly due to increment and partly due to product structure upgrading.

Cai Xuefei stated that Fenjiu and Gujing belong to pan national liquor enterprises and are actively exploring the national market. With the filling of blank markets, they have also achieved significant growth, and emerging markets are growing rapidly. Luzhou Laojiao stands out in the national cellar series, which has boosted the overall revenue and profit of the cellar. In addition, the performance of Yanghe shares also reflects the fierce market competition among Baijiu companies. As a major province in eastern China with a large alcohol consumption and developed economy, Jiangsu is also one of the markets that major liquor companies have focused on in recent years.


Among regional liquor companies, although the growth situation of each liquor company has differentiated, the more dominant regional liquor companies have also maintained a relatively fast growth rate.

According to the performance data previously released by Jinshiyuan, it is expected to achieve a total operating revenue of about 10.05 billion yuan in 2023, a year-on-year increase of about 27.4%; Shede Liquor Industry achieved a revenue of 7.08 billion yuan, a year-on-year increase of 16.9%.

From the perspective of the industry, the performance growth of Baijiu shares is driven by the high-end on the one hand, and by the promotion of centralization on the other hand.

From the perspective of product structure, medium and high-grade liquor is still the main force for the growth of Baijiu enterprises. According to the financial report of Wuliangye, the sales of Wuliangye products reached 62.8 billion yuan in 2023, a year-on-year increase of 13.5%; Luzhou Laojiao’s revenue from high-end alcoholic beverages reached 26.84 billion yuan, accounting for 88.8% of the revenue, a year-on-year increase of 21.3%. The core high-end product of Gujing Gongjiu, the annual pulp series, generated a revenue of 15.42 billion yuan, a year-on-year increase of 27.3%, and the gross profit margin also increased by 1.14 percentage points compared to the same period last year.

Cai Xuefei told China Business News that behind the success of Baijiu listed companies is the change of highly centralized Baijiu market. The revenue of the second tier of liquor enterprises continues to expand. The revenue scale of 20 billion to 30 billion has been several times that of some small and medium-sized regional liquor enterprises, which also reflects that the market share of Baijiu’s leading enterprises is further increasing.

Looking at the 5-year span, taking Luzhou Laojiao as an example, its revenue in 2019 was 15.8 billion yuan, almost doubling in 2023. However, during the same period, regional liquor company Laobaigan Liquor (600559. SH) had a revenue of 5.26 billion yuan, an increase of 30.5% compared to 2019, while Yilite (600197. SH) had a revenue of 2.23 billion yuan in 2023, which is still less than the same period in 2019.

It is worth noting that since 2023, the Baijiu industry has entered into a deep adjustment, and the market has experienced a slowdown in the dynamic sales of Baijiu and price inversion. From January to December 2023, the output of Baijiu produced by domestic enterprises above designated size will be 4.492 million kiloliters, a year-on-year decrease of 2.8%, only half of that in 2018. The Baijiu industry tends to concentrate on advantageous production areas, enterprises and brands.

At the recently held Chinese Baijiu T9 Summit, Zeng Congqin, secretary of the Party Committee and chairman of Wuliangye Group (Co., Ltd.) in Yibin, Sichuan, said that in the past year, the development of Baijiu industry was faced with the pressure of multiple factors, from the macro-economy to the consumer market to the industrial adjustment. The uncertainty and instability of the development environment and the significant changes in the industrial competition pattern were unprecedented.

Wine merchants remain cautious about the future market

According to the first quarter report of 2024 released by Baijiu shares in the same period, the performance of the top Baijiu listed companies such as Wuliangye and Luzhou Laojiao has made a good start as usual, and the performance growth rate is mostly similar to that of 2023. However, during recent market visits, some of the interviewed liquor companies still keep a wait-and-see attitude towards the future market.

A number of interviewees revealed that the market did recover during the Spring Festival peak season in February this year, but then in March, it entered the traditional post festival beverage sales slack season. The price of Baijiu fell back to varying degrees, and the problem of price inversion of most brands intensified. In addition, the consumption of alcoholic beverages during the off-season this year has not improved significantly compared to the same period last year, and market sales remain sluggish. The second half of the year is the peak season for Baijiu sales, and liquor dealers also keep a wait-and-see attitude towards the future market.

Judging from the performance of downstream liquor circulating shares, life is not as easy as that of upstream Baijiu enterprises.

The financial report shows that in 2023, Huazhi Liquor Company (300755. SZ) will achieve a revenue of 10.12 billion yuan, up 16.2% year on year, of which 9.4 billion yuan is mainly from the sales of Baijiu, accounting for 92.8% of the total revenue of Huazhi Liquor Company. However, the gross profit margin of Baijiu is 9.24%, down 3.7 percentage points from the same period last year, and the annual net profit attributable to the parent company is 240 million yuan, down 35.8% year on year.

As for the decrease of gross profit margin, the management of Huazhi Liquor Company revealed at the performance meeting that in 2023, most products in the Baijiu market will be under pressure. Huazhi Liquor Company will comply with the market demand, actively adjust the product structure, and increase the proportion of famous liquor sales year on year; However, due to changes in market demand, the gross profit of some famous wines has decreased, which is in line with the overall trend of the market; At the same time, it is also related to the continuous increase in investment in the premium liquor market by Huazhi Winery, which has led to a decrease in the profit contribution rate of premium liquor.

In the first quarter of 2024, Huazhi Liquor Company’s revenue was 4.13 billion yuan, a year-on-year increase of 10.4%, and its net profit attributable to the parent company was 130 million yuan, a year-on-year increase of 28.2%. The sales and management expense ratio declined slightly, but the gross profit margin did not change significantly.

For a long time, the domestic liquor industry has shown a situation of strong factories and weak merchants. Downstream distributors play the role of channel sponges, absorbing the production capacity of upstream distilleries and becoming industry buffers. However, in 2023, as the industry undergoes deep adjustments and the performance of upstream liquor companies continues to grow, downstream liquor companies are under pressure. However, the resources of famous liquor companies are scarce and difficult to obtain, so distributors are not willing to give up easily. During the 2024 Spring Sugar and Wine Fair, many parties in the industry also called on strong Baijiu manufacturers to “reduce the burden” of downstream channels.

Xiao Zhuqing, a Baijiu expert, told China Business News that the current lack of social purchasing power is a common problem facing China’s liquor industry. The consumption scene of medium and high-end Baijiu has decreased. The reason why famous liquor distilleries rely on their strong market position to sell goods to channels has also become one of the reasons for the high growth of the performance of major liquor brands. However, the large inventory of channel partners at all levels has led to oversupply in the market, which has also led to product price inversion – the actual transaction price of the product is lower than the manufacturer’s suggested retail price or even lower than the factory price, but this is also related to the annual performance evaluation of the management of listed liquor companies.

In Xiao Zhuqing’s opinion, besides Maotai liquor, all famous liquors of the same grade have strong substitutability at present, so the current market performance is also a game between strong Baijiu brands, because dealers’ funds are limited, and behind the growth of Baijiu performance is that liquor enterprises are seizing the resources of dealers, and also seizing the market share. Therefore, the channel risk of Baijiu is still accumulating, and the subsequent market situation needs further observation.