China’s major liquor company Luzhou Laojiao’s market value has plummeted to around 160 billion yuan as of September 6. This marks a nearly 300 billion yuan evaporation of its market value over the past three years.
Public data indicates that Luzhou Laojiao is a well-known Chinese liquor brand, known as the “originator of strong aroma, a leader in the world of liquor.” Its flagship product, Guojiao 1573, is praised as “brewed living cultural relics” and a “standard-grade liquor for Chinese liquor appreciation.”
However, in 2024, Luzhou Laojiao has become one of the hardest-hit top liquor brands. According to Chinese media outlet “Kan Caijing” on September 8, Luzhou Laojiao’s stock price has plummeted over 36% year-to-date, far surpassing the declines of Moutai, Wuliangye, and Fenjiu, reaching a new low for the year on September 5. Its market value has dropped from over 450 billion yuan three years ago to around 160 billion yuan currently. The fundamental reason behind all of this is a significant slowdown in performance.
“Kan Caijing” indicated that although Luzhou Laojiao’s net profit attributable to shareholders grew by 13.22% year-on-year in the first half of 2024, which may seem decent on the surface, the growth rate has significantly slowed down compared to previous years. This has disappointed investors who had hoped for Luzhou Laojiao to continue its high growth trajectory.
From 2020 to 2023, Luzhou Laojiao’s profit growth rate reached over 20% and 30% annually. Even in the slowest year of growth, which was 2023 with a year-on-year growth rate of 27.79%, the first half of 2024 saw a growth rate of just over 13%, a decrease of over half compared to previous years.
It’s not just Luzhou Laojiao; the entire Chinese liquor sector is on a downward trend.
Leading Chinese liquor company Moutai’s prices continued to decline on September 5. According to the latest wholesale reference prices disclosed by Today’s Liquor Prices, the wholesale price for a 2024 Feitian Moutai original box was reported at 2610 yuan/bottle, down 10 yuan from the previous day. The bulk price was at 2365 yuan/bottle, remaining unchanged from the previous day.
As the traditional sales peak season approaches with the Mid-Autumn Festival in China, the demand for traditional liquor hasn’t significantly picked up the liquor market. According to Chinese media New Yellow River, since entering August, as the traditional liquor sales peak season “Golden September and Silver October” draws near, the market prices of renowned liquors represented by Moutai’s major products have not seen the usual price increases and demand surges. Instead, channel prices have been fluctuating recently, and market demand has not shown a clear rebound. A distributor mentioned, “The market prices for premium liquors this Mid-Autumn Festival season are arguably the coldest in nearly a decade.”
Several liquor industry analysts believe that the main issue facing the entire liquor industry is inadequate purchasing power within society. With the continuous increase in supplies of premium liquors, their scarcity diminishes. If demand growth lags behind, price pressure will further increase.
Due to sluggish sales in the market, the Chinese liquor industry is contracting. According to Kan Caijing, in 2023, China’s total liquor production capacity was 6.29 million tons, only 46.31% of the capacity in 2016. From 2019 to 2023, China’s liquor production capacity decreased by about 20%. Meanwhile, in 2022 and 2023, the total inventory of 20 listed liquor companies on the A-share market reached 132.8 billion yuan and 149.1 billion yuan, respectively, while in 2019, this number was only 90.6 billion yuan. Kan Caijing believes that the decline in production and the high inventory levels indicate that the actual market consumption is more severe than the decline in production.
A user on Tencent, 6179428, commented, “These branded liquors are not for the common people. Even if the common people buy these liquors, they are not for drinking. The consumption group is the elite. How much can they drink? No matter how much promotion is done, a decline in sales is normal. A bottle of liquor costing less than 500 yuan wouldn’t give you a headache. The bulk liquor that the common people drink, even at ten yuan per kilo, is better than these liquors. How can their sales grow? How many people are buying these bottled liquors for regular banquets or daily use?”
Another internet user, “15054046279,” stated, “They were never worth the high market price to begin with. It’s just liquor; the liquor itself costs just a few yuan, the rest is all markup. Remove all the added costs, and the price returns to normal levels, just a few yuan.”
“Guarding Mount Bai Lu,” expressed, “Why is the capital market abandoning Luzhou Laojiao? It’s simply because of a significant slowdown in performance. It’s the big players cashing out.”
As of 10:52 Beijing time on September 9, Luzhou Laojiao was trading at 107.53 yuan per share, with a market value of 158.4 billion.