In the current deep adjustment cycle of the baijiu (white spirits) industry, most liquor enterprises are facing multiple pressures from the market, channels, and consumers. Every move and development of these enterprises have become the focal points of industry attention.
Recently, two liquor enterprises successively announced their entry into the “billion-yuan revenue club,” bringing a hint of warmth to the industry. Zhang Zheng, Chairman of Shaanxi Xifeng Liquor Co., Ltd., stated that Xifeng Liquor achieved a revenue of 10.34 billion yuan in 2023, a year-on-year increase of 23%. Data released by Jiushiyuan (Jiuxianyuan) showed that the company is expected to achieve a total operating income of around 10.05 billion yuan in 2023, a year-on-year increase of approximately 27.41%.
With the addition of these two “newcomers,” the number of baijiu enterprises in the billion-yuan revenue camp has reached 14.
Expansion of the Billion-Yuan Club
The billion-yuan revenue scale is a watershed for leading liquor enterprises and reflects the direct embodiment of brand, quality, scale, and consumer influence in the era of famous liquors.
“The achievement of billion-yuan revenue by Jiushiyuan and Xifeng Liquor is a manifestation of their famous liquor values in terms of market sales, indicating a further increase in industry concentration. The trend of oligopoly in the liquor industry is constantly highlighted, to some extent, as a result of regionalization, diversification, and diversified consumption,” said Cai Xuefei, a baijiu industry analyst and general manager of Zhiqu Consultancy, to Securities Daily.
According to reports, in the journey to achieve billion-yuan revenue, Jiushiyuan implemented a strategy of differentiation, high-end positioning, and nationalization, while Xifeng Liquor pursued a development strategy of high-end positioning and nationalization. At the same time, both companies chose to focus on their product systems, emphasizing the development of core flagship products.
Xifeng Liquor reshaped its strategic core products around the “Hong Xifeng” (Red Xifeng) series. In 2023, sales of the Hong Xifeng series products increased by 102% year-on-year, and sales of products priced above 100 yuan increased by 38%. Jiushiyuan, on the other hand, focuses on the Guoyuan and Jiushiyuan two major mid-to-high-end baijiu brands. In the first three quarters of 2023, the proportion of Class A+ and Class A products represented by Guoyuan and Jiushiyuan in total operating income was 93.1%.
At the same time, in the “post-billion-yuan era,” Xifeng Liquor and Jiushiyuan are creating new strategic path planning.
“Nationwide expansion is undoubtedly a strategic proposition that the company must challenge and overcome in the ‘post-billion-yuan era,’ and it is also the space for the company’s future growth and development,” said Hu Yuewu, Deputy General Manager of Jiushiyuan Liquor Industry. In 2024, Jiushiyuan Liquor Industry will kick off the “post-billion-yuan” era and embrace the “double-billion” era. The company will implement a development strategy of “multi-brand, single focus, nationalization,” challenging a 150 billion yuan revenue target in 2025, and accelerating entry into the “double-billion era” during the 15th Five-Year Plan period.
Zhang Zheng revealed that Xifeng Liquor will take five years to achieve a strategic breakthrough in the 14th Five-Year Plan by 2028. After five years of continuous efforts, by 2032, it aims to become a nationally renowned liquor enterprise with excellent products and a remarkable brand.
Industry Focus on Brand and Quality
In recent years, competition in the baijiu industry has become increasingly fierce, and the trend of overall consumption concentrating on brands and quality is becoming clearer.
“Considering the sales target planning or guidance of liquor enterprises for 2024, the competitive landscape is expected to continue to concentrate on leading enterprises. The baijiu industry will continue its trend of weak recovery. Popular consumer price range real estate liquor is expected to continue its positive trend, high-end liquor is relatively stable, and the pricing strategy is more composed. Mid-to-high-end liquor is quietly waiting for recovery amid differentiation,” according to a research report from Guotai Junan.
According to Securities Daily, based on Choice data, there are currently seven listed liquor enterprises in the billion-yuan revenue club, including Guizhou Maotai, Wuliangye, Yanghe Share, Shanxi Fenjiu, Luzhou Laojiao, Gujing Gongjiu, and Shunxin Agriculture. Unlisted companies include Langjiu, Jincang, Jiannanchun, Guizhou Guotai, and Guizhou Xijiu, making a total of 14 billion-yuan revenue liquor enterprises with the addition of the two “newcomers.”
From an industry perspective, the revenue threshold for leading liquor enterprises is constantly rising, and the “Matthew Effect” is very evident. Based on the third-quarter revenue calculation for 2023, the top five liquor enterprises have raised the revenue threshold for the third quarter to 21 billion yuan.
Xiao Zhuqing, Chairman of Wuhan Jingkui Technology Co., Ltd., and a baijiu marketing expert, said to Securities Daily, “The nationalized liquor brand landscape has solidified. Maotai, Wuliangye, Yanghe, Luzhou Laojiao, and Fenjiu have formed a nationalized baijiu pattern, raising the performance of the baijiu sector. It will be challenging for new brands to compete for national market share.”
In 2023, the performance of leading liquor enterprises reached new highs. Guizhou Maotai’s 2023 annual production and operation data show that the company is expected to achieve a total operating income of about 149.5 billion yuan and a net profit of about 73.5 billion yuan, both with a year-on-year growth rate of over 17%. Wuliangye’s senior management revealed at a distributor conference that the company successfully completed its annual marketing target in 2023.
At the beginning of the year, major liquor enterprises actively prepared for the “New Year,” continuously increased consumer-side investment, launched various market strategies such as scan code red envelopes, full gifts, tasting events, etc., and helped distributors reduce inventory.
In the view of Xiao Zhuqing, due to the ineffective digestion of channel inventory and insufficient social purchasing power, coupled with various promotional activities, liquor companies’ performance in 2024 remains uncertain.
“China’s economy will continue its long-term positive trend despite crossing cycles, and the intrinsic driving force for the high-quality development of China’s baijiu industry is abundant. Although the industry needs to be prepared with a sense of crisis, there is no need to be too anxious. Liquor enterprises need to cultivate their internal strength and improve their capabilities,” Hu Yuewu expressed.
Huachuang Securities research reports suggest that the baijiu industry will gradually recover in 2024. The first quarter is likely to achieve a “New Year
” success and become a turning point for the baijiu industry. From the perspective of inventory, the current mainstream product inventory is in a “healthy” range, and it is expected that the distributor inventory of main selling products will be stable and reasonable during the Spring Festival this year, with relatively low terminal inventory. From the demand side, during the 2024 Spring Festival, there will be a stronger demand for festive gatherings and gifting.