The Chinese baijiu market is facing a downturn with declining sales, putting many baijiu distributors under immense survival pressure and causing many to fall into distress.
According to mainland financial media outlet Harbor Business Observation, the leading A-share liquor distributor, Huazhi Jiu Xing, recorded a revenue of 7.832 billion yuan in the first three quarters of this year, a 5.10% year-on-year decrease. Its net profit attributable to shareholders fell by 27.36% to 168 million yuan, with a non-GAAP net profit of 149 million yuan, a 15.24% decrease. The net cash flow generated from operating activities was -393 million yuan, compared to 389 million yuan in the same period last year. The gross profit margin decreased by 0.98 percentage points to 10.02%.
By the end of the third quarter, Huazhi Jiu Xing’s total assets were 6.888 billion yuan, down by 5.01% year-on-year, with owner’s equity attributable to the listed company’s shareholders at 3.611 billion yuan, a 4.98% decline.
In the third quarter alone, the company generated revenue of 1.889 billion yuan, a 20.84% decline year-on-year, and its net profit attributable to shareholders plummeted by 84.17% to 12.67 million yuan, with a non-GAAP net profit of 11.86 million yuan, a decrease of 64.64%.
Reports from HuXiu App on December 24th highlighted the challenges faced by other top-tier baijiu distributors. Ge De Ying Xiang got embroiled in a wage arrears scandal, while the controlling shareholder of Jiu Bian Li disappeared and is under investigation… Smaller distributors are finding it even more difficult, with 49% of distributors in the Henan market experiencing a sales decline of over 30%.
On December 22nd, the Chinese financial commentator “Cai Jing Lao Yang” revealed that a liquor distributor in Guangzhou stated that in previous years, there would be a surge in orders in the third quarter, keeping them busy until the Chinese New Year. However, last year and this year, the order volume did not pick up, reflecting a general softness in market demand.
HuXiu App indicated that nearly half of the listed liquor companies experienced a negative growth in revenue in the third quarter, with baijiu consumption declining. Distributors, as the buffer between liquor companies and consumers, are the first to feel the squeeze and are on the verge of collapse. The chairman of Jiuxian.com, Hao Hongfeng, warned that “distributor inventories have reached a critical point,” and the allure and threats from liquor companies to distributors are no longer effective.
“Cai Jing Lao Yang” believes that in the face of market saturation, distributors face an intensified risk of a breakdown in the financial chain due to high inventory tying up funds and slow sales turnover. Once the financial chain breaks, enterprises will struggle to continue. Additionally, there is an increased risk of the collapse of the baijiu pricing system. To clear inventory, distributors may sell at lower prices, leading to market price inversions, disrupting the entire pricing system and affecting the industry’s stable development.
In response, netizen “An An Yong An” expressed: “The main reason is consumer downgrading. In the past, when everyone earned more, products like baijiu with added value were affordable. Now that incomes have decreased, people naturally can’t afford it anymore. The decline in baijiu sales is mainly in the high-end market above 400 yuan, while popular brands like Kouliang Jiu remain in high demand.”