On September 12, the market value of Maotai in Guizhou evaporated more than 56.5 billion yuan in a single day, leading to a decline in the liquor sector. At the same time, over 6.4 billion yuan worth of Maotai shares were sold. This news has become a hot search on Baidu on September 13.
Maotai’s stock price closed at 1335.06 yuan per share on the 12th, a decrease of 3.26%.
The decline in Maotai’s stock price directly led to a downturn in the liquor sector, with Shanxi Fenjiu, Gujing Gong Jiu, and Luzhou Laojiao all falling by over 3%.
Analysts in the financial sector analyzed on September 12 that the decline of Maotai and the liquor sector is mainly due to the approaching peak season for Mid-Autumn Festival sales, leading to a continuous drop in the ex-factory price of Maotai.
Data shows that on February 4 earlier this year, the ex-factory price of 2024 Feitian Maotai (bulk) reached its highest at 2715 yuan per bottle and has been decreasing since then. In June, the ex-factory price of 2024 Feitian Maotai (bulk) almost touched the mark of 2000 yuan per bottle.
According to today’s liquor prices, on the 12th, the ex-factory price of 2024 Feitian Maotai was reported at 2550 yuan per bottle, a decrease of 30 yuan from the previous day.
Since the beginning of the year, Maotai’s stock price has been continuously declining. By the end of the 12th, Maotai’s cumulative decline exceeded 21%, with its market value falling below 1.7 trillion yuan, distancing itself further from the position of the former stock king.
It’s not just Maotai, according to the Caixin Media, Zhang Qiang, a senior executive of the Sichuan Liquor Distribution Association, stated that “during this period of Mid-Autumn Festival this year, it is expected that sales will generally decrease by 20%-30%.”
Traditionally, the Mid-Autumn Festival and National Day holidays have been the golden periods for liquor companies to destock, with sales often accounting for 20% to 30% of the annual total. However, this year the industry’s sales expectations are generally cautious.
While sales are sluggish, liquor companies are also facing high inventory levels.
The Chinese Liquor Association’s “2024 China Liquor Market Mid-term Research Report” shows that in the first half of 2024, compared with the same period last year, over 60% of distributors and retailers indicated an increase in inventory, over 30% faced cash flow pressures, over 40% noted an increase in the inversion level of actual sales prices, and over 50% mentioned a decrease in profit margins.
According to Choice data from Oriental Fortune, in the first half of this year, the total inventory of 21 listed liquor companies in both A-shares and H-shares markets increased by 10.29% year-on-year, reaching 157.47 billion yuan. Among them, Guizhou Maotai, Yanghe Share, Wuliangye, Luzhou Laojiao, and Shanxi Fenjiu all had inventory exceeding 10 billion yuan, while another 8 had inventory ranging from 3 to 8 billion yuan.
The latest semi-annual reports of liquor companies show that in the first half of 2024, among the 21 listed companies primarily engaged in liquor, 15 achieved revenue growth while 6 experienced a decline in revenue or net profit. For example, Jiugui Liquor’s revenue in the first half was 994 million yuan, down 35.5% year-on-year, with a net profit attributable to shareholders of the listed company of 121 million yuan, down 71.32%. Yanshi Co. realized operating income of 191 million yuan in the first half, a 77.32% decrease year-on-year, and turned from profit to loss, with a net loss of 77.3776 million yuan.
According to Grong Hui news on September 12, Wanhui Securities stated that since the Chinese New Year this year, the liquor industry has been facing a situation where the peak season isn’t flourishing, and the off-peak season is even quieter, given that the Mid-Autumn Festival and National Day are traditionally peak sales seasons for liquor, it is expected that terminal sales will perform better than usual. However, a high selling status might be challenging to achieve, and the sales growth is expected to be lower than last year.
The Chinese Liquor Association believes that liquor consumption is entering a dual rationality era of “consumption rationality + price rationality.” In 2024, facing a period of transformation in the liquor consumption market, the liquor industry has also entered a period of calmness, with slightly weak consumption demand, and the problem of “high inventory” is becoming more prominent.
Famous fund manager Jiao Wei revealed to the financial sector that his fund has reduced its holdings of liquor stocks in the second quarter as well. He believes that China’s economy is currently at a new round of transformation, and past successful business models like high-end liquor including Maotai are facing challenges both externally and internally. To some extent, the higher profit margins and pricing power in the past are more vulnerable to the impacts and criticisms under the new economic model.
Regarding the future trend of the liquor market, Guotai Junan told Grong Hui that the characteristics of liquor consumption shifting away from real estate dependence and luxury would continue to be highlighted.
Guoyuan Securities believes that in the past, liquor prices were mainly driven by pricing logic and consumption upgrading logic. However, with changes in market consumption trends, consumers are now increasingly demanding cost-effectiveness, leading the logic behind liquor prices to shift towards a dual rationality of consumption and price. Liquor companies that can better meet consumer needs for cost-effectiveness in various aspects will undoubtedly benefit more.
Zhaoxin Securities stated that from the recent continuous adjustment in the capital market, there are already sufficiently pessimistic expectations formed. If the Double Festival (Mid-Autumn Festival and National Day period) can withstand pressure testing (with a stable pricing system in place), there is hope for a reversal in stock prices.
Netizen “175******95” commented, “Now the main consumers of white liquor are those born in the 1970s and 1980s, those born in the 1990s and 2000s probably don’t drink white liquor much, so the sales of white liquor will likely decline in the future, and the price of white liquor doesn’t seem worth it, purely speculation.”
Another netizen, “Rong Duo W3”, said, “Previously, Maotai was around 80 yuan per share. Fenjiu was around 7 yuan. The liquor is still the same liquor. Now that liquor stocks have risen multiple times, a decline is normal.”
Lastly, “Drinking Coke in Doutian Temple on a Sunny Day” believes, “Maotai is not meant to be purchased for personal consumption, and now that income has decreased, the number of people buying Maotai naturally decreases.”