Stabilizing volume and controlling prices, the liquor industry will continue to "suffer through" the cycle in 2025

The year 2024 has passed, and the liquor industry is still struggling in a cyclical dilemma.

As the traditional sales peak season for liquor, the Spring Festival was expected to help reduce inventory at the channel end. However, many well-known liquor brands did not see a price increase for the New Year.

Data from the third-party platform "Today's Liquor Price" shows that as of February 4, 2025, the bulk price of Feitian Moutai in 2024 was 2,230 yuan per bottle, a slight increase of 10 yuan compared to the beginning of the year. The prices of major products such as Pu'er 5 (eighth generation), Qinghua 30, and Crystal Sword remained the same as on New Year's Day.

Research data from Founder Securities indicates that the actual sales decline during the 2025 Spring Festival improved compared to the Mid-Autumn Festival and National Day, with an overall expected decline of about 10%. The turnover of terminal products accelerated starting from a week before the festival, and the sales window became more concentrated.

From market feedback, the "chill" in the liquor industry has not dissipated, with high inventory and price inversion still present, and the industry continues to face challenges in regulating the relationship between quantity and price.

Smaller companies are under even greater pressure. Among the liquor companies that disclosed performance forecasts before the New Year, Hainan Yedao (600238.SH) and Lanzhou Yellow River (000929.SZ) are expected to incur losses in 2024, with revenues of less than 300 million yuan.

According to the revised delisting regulations of the Shanghai and Shenzhen Stock Exchanges in 2024, these two companies will be subject to delisting risk warnings (*ST) after the final annual report is released.

Data from Wind shows that as of December 31, 2024, the total market capitalization of 19 listed liquor companies was 33,635 billion yuan, a decrease of over 500 billion yuan compared to the beginning of the year.

Under the expectation of declining performance growth, listed companies have placed greater emphasis on cash dividends, intending to boost market confidence in their market value.

Statistics show that since 2024, a total of 16 listed liquor companies have implemented dividends for the 2023 fiscal year, with some having implemented or disclosed mid-term dividend plans for 2024. In 2024 alone, the total amount of dividends implemented or disclosed has exceeded 130 billion yuan.

In January 2025, WLY (000858.SZ), Shanxi Fenjiu (600809.SH), Luzhou Laojiao (000568.SZ), and Gujing Gongjiu (000596.SZ) successively announced that they would implement mid-term dividends before the Spring Festival. Among them, WLY's dividend amount was nearly 10 billion yuan, while Luzhou Laojiao and Shanxi Fenjiu's dividend amounts reached 2 billion yuan and 3 billion yuan, respectively.

With weak industry growth and performance growth falling short of expectations, it is inevitable that there will be many speculations regarding personnel changes.

In 2024, over 20 liquor companies publicly disclosed executive replacements, with Moutai, WLY, Fenjiu Group, and Xijiu Group all experiencing personnel changes at the chairman and general manager levels.

As the consensus among liquor companies shifts towards slowing down, stabilizing volume, and controlling prices, what kind of self-rescue path will the industry take?

Liquor Prices Fluctuate Downward

Price fluctuations often reflect changes in market supply and demand.

In 2024, the wholesale price of liquor overall trended downward.

Data from the third-party platform "Today's Liquor Price" shows that as of February 4, 2025, the bulk price of Feitian Moutai in 2024 was quoted at 2,230 yuan per bottle, a drop of about 16.8% from the 2,680 yuan per bottle price at the beginning of 2024.

The price of Moutai serves as a barometer for the entire liquor market. When the price of Feitian Moutai cannot be sustained, other brands find it difficult to have room for price increases At the beginning of 2024, a group of famous liquor companies represented by WLY, Shede, Jinshiyuan, and Jian'nanchun raised their prices, hoping to seize channel resources and maintain market order.

However, the terminal retail prices of the aforementioned brands did not show significant changes, and even the high-end and sub-high-end price segments they targeted became severely affected by price inversion.

The "2024 China Baijiu Mid-term Research Report" released by the China Alcoholic Drinks Association shows that over 40% of distributors and terminal retailers reported an increase in the degree of price inversion, with the top three price ranges for inversion being 800-1500 yuan, 500-800 yuan, and 300-500 yuan.

Alcohol industry analyst Xiao Zhuqing believes that, apart from Moutai, major brands of the same tier do not have irreplaceable competitive advantages. The collective price increase by companies forces distributors to align and make payments, which is essentially due to the current insufficient purchasing power in society, leading to a shrinking overall market.

Some distributors told Xinfeng (ID: TradeWind01) that the sales of the baijiu market in 2024 fell short of expectations, with almost no significant sales peak after the Spring Festival, and the banquet consumption scenario has shrunk significantly.

Ping An Securities' research report analysis suggests that the rhythm of baijiu consumption throughout the year is basically in line with social retail. In the first quarter of 2024, baijiu sales exceeded expectations, but weakened in the second quarter. The Mid-Autumn Festival may represent a temporary bottom, and although there is still pressure after the National Day, the decline is narrowing.

However, during the two rounds of e-commerce promotions, "618" and "Double 11," the sales prices of premium liquors experienced sharp declines.

In June 2024, the price of bulk Feitian Moutai fell below 2100 yuan/bottle. The official released several policies to regulate prices, including: suspending the synthetic exercise of Xunfeng World 375ml Feitian Moutai, canceling the release of large boxes of Feitian Moutai, and suspending direct sales channels for purchasing at fair prices.

This only temporarily curbed the downward trend. During "Double 11," the online subsidized price of Feitian Moutai once fell below 2000 yuan.

At the same time, the eighth generation of WLY and Guojiao 1573 saw their prices drop to 817 yuan/bottle and 816 yuan/bottle, respectively, after receiving billions in subsidies on the Taobao platform.

Reports indicate that the products participating in the low-price promotions did not come from official flagship stores but were sourced by the platform itself from the market. As a result, companies lost control over e-commerce platforms.

After the sharp decline of Moutai online, channels worried that the prices of other high-end baijiu would be affected, leading them to join the ranks of selling off, causing further price declines.

Some industry insiders believe that the circulation volume through e-commerce channels has limited impact on the overall sales of baijiu. The fundamental reason for the collapse of baijiu prices due to the billions in subsidies in 2024 still lies in the excessively high inventory accumulated by channels.

Distributors' Silent Struggles

With high channel inventory and price inversion, it has become a silent struggle for baijiu distributors. Over the past year, distributors who "sell more, lose more" are under greater pressure than the distilleries.

In 2024, frequent incidents of major liquor companies collapsing occurred, with the "largest holder of old liquor inventory in the country," GeDeYingXiang, being exposed for wage arrears, followed by the disappearance of the actual controller of JiuBianLi.

HuaZhi JiuHang (300755.SZ) achieved positive profitability, but it is estimated that its net profit in 2024 will decline by nearly 80% year-on-year For a long time, in anticipation of rising liquor prices, distributors were willing to act as a reservoir for companies. However, when sales stagnated and price inversions occurred, the balance was disrupted, and distributors close to the front line faced direct impacts, risking a break in their cash flow.

The demand for performance growth in the liquor industry and the massive inventory "dam" in the channels represent the fundamental contradiction between the two parties.

A liquor distributor from Jiangxi Province told Xinfeng (ID: TradeWind01) that the company's payment schedule, which used to be three times a year, has slowly been compressed to twice a year. "Even within those two times, apart from a little payment during the Spring Festival, we can hardly make any payments during the Mid-Autumn Festival."

The cash flow crisis in the channels continued until the end of the year. The traditional "New Year Red" policy that encourages distributors to make payments received a very bleak response.

Liquor industry analyst Xiao Zhuqing learned that the current domestic liquor market has excessive inventory, and distributors are running out of circulating funds. After assessing the channels, many liquor factories found that distributors were willing to participate in the "New Year Red" activities but lacked the capacity to do so.

To alleviate the cyclical dilemma in the industry, many large liquor companies have begun to adopt a stock control and price support model.

At the year-end meetings of liquor factories held at the end of 2024, several leading companies proposed to "maintain reasonable growth," "reduce the burden on distributors," and "ensure reasonable profits for distributors" for 2025.

As the year-end approaches, there are reports that Xijiu has canceled the "New Year Red" policy. Some liquor companies have offered flexible payment methods such as quarterly payments, shifting to smaller-scale and more frequent purchases.

While reconstructing manufacturer-distributor relationships has become the mainstream narrative, structural changes in the channels are also taking place.

As the liquor market enters a stock market phase, upstream manufacturers generally choose to streamline and optimize channels to directly reach core consumers. Some distributors have been reduced to "liquor movers" providing delivery services for manufacturers.

"Theoretically, along the entire industry chain, the closer you are to the end consumer, the thicker the profit," a consultant familiar with the liquor industry told Xinfeng (ID: TradeWind01).

As the prices in liquor channels become increasingly transparent, the era of liquor merchants "lying down to earn money" is coming to an end, and distributors lacking consumer operation capabilities are beginning to face elimination risks. In recent years, the number of distributors for many listed liquor companies has shown a downward trend.

However, the aforementioned liquor industry insiders stated that this could also be an opportunity for the emergence of "service-oriented distributors."

Currently, some cities are experimenting with a "regional alliance" approach. Led by liquor companies, along with distributors and core terminals, an alliance is being established to achieve co-construction and sharing in the market, directly facing end consumers together.

Liquor Companies Shift Gears

Today's liquor companies are downplaying the goals of cash recovery and performance growth, instead focusing on actual sales and inventory reduction.

Wind data shows that in the third quarter of 2024, the total revenue of the liquor industry exceeded 340 billion yuan, a year-on-year increase of 10%; however, the balance of contract liabilities, which serves as a "reservoir" for future performance, has decreased by 6.5%.

Analysts at Dongfang Securities judge that the industry has overall entered the latter stage of a channel destocking cycle characterized by reduced inventory pressure, declining cash recovery, and falling revenues. The market has fully injected expectations of performance deceleration for liquor companies.

Guotai Junan Securities predicts that the revenue growth rates for Kweichow Moutai (600519.SH), WLY, Luzhou Laojiao, Shanxi Fenjiu, Yanghe (002304.SZ), Shuijingfang (600779.SH), Shede Liquor (600702.SH), Gujing Gongjiu, and Jinshiyuan (603369.SH) in 2025 will be 5%-10% 5%-8%, 0-5%, 5%-10%, flat, positive growth, strive for flat, over 10%, around 10%.

The above expectations are significantly lower than the target growth rate for 2024.

For the whole year of 2024, the production of Moutai liquor base liquor is expected to be about 56,300 tons, a year-on-year reduction of about 900 tons, marking the first capacity reduction for Moutai liquor in nearly a decade. Before the Spring Festival peak season in 2025, there were reports in the channels that WLY had suspended the supply of its core product, the eighth generation of WLY.

As the supply of core products shrinks, companies are increasingly focusing on optimizing the overall structure.

According to Moutai's market launch plan for 2025, the company will reduce the supply of 500ml ordinary Feitian Moutai and premium Moutai, while moderately increasing the supply of 1L Feitian and 100ml Feitian.

Moutai Sauce Aroma Liquor Company proposed a development direction of "one body and two wings," with Moutai 1935 as the main body and Moutai Prince Liquor and Hanjiang Liquor as the two wings, planning to take about two years to develop Moutai Prince Liquor into the second hundred billion big product.

WLY stated that it will strengthen the tactical synergy of 39-degree WLY, WLY 1618, and the eighth generation of WLY; Fenjiu plans to form four hundred billion big products in the next 2-3 years, including Glass Fen, Qinghua 20, Laobai Fen, and Qinghua 30.

In a weak cycle, competition for existing market share is more intense, and industry spending has increased. Wind data shows that in the first three quarters of 2024, the overall marketing expenditure of A-share listed liquor companies was 33.84 billion, an increase of 12.44% compared to the same period last year.

Among the two leading companies, Moutai plans to invest 675 million yuan in marketing activities in 2025, with a year-on-year increase of 83%. WLY also positions 2025 as the "year of marketing execution improvement."

The industry expects that under the new round of cyclical adjustments, the market share of liquor may further concentrate towards advantageous brands.

Ping An Securities' research report predicts that in a weak cycle, dealers have a strong willingness to recover funds and tend to pay for and sell faster-moving top brands.

Real estate liquor maintains resilience due to its strong channel network, with rigid demand for national famous liquors such as Moutai, WLY, and JianNan Chun, while sub-high-end brands that previously relied on recruitment and profit-driven strategies may still face pressure.

The aforementioned Jiangxi dealer told Xinfeng that he has mortgaged most of the company's assets to obtain cash flow through loans. Half a year ago, the company became a regional dealer for Moutai 1935.

"In 2014, we couldn't hold on and gave up the agency qualification for Feitian Moutai. The liquor industry has a ten-year cycle, and what we can do now is to try our best not to leave the table." the dealer admitted