At the end of the year and the beginning of the new year, the hottest term in the baijiu industry is undoubtedly “billion.”
Recently, Zhang Zheng, Chairman of Shaanxi Xifeng Liquor Co., Ltd., announced that in 2023, Xifeng Liquor achieved sales revenue of 10.34 billion yuan, a year-on-year increase of 23%. Prior to this, King’s Luck (Jinshiyuan) released its main operating data for 2023, stating that the company’s expected total revenue for 2023 is 10.05 billion yuan, a year-on-year increase of 27.41%.
With the addition of Xifeng and King’s Luck, the lineup of billion-dollar baijiu has once again expanded.
In fact, reviewing the journey to billion-dollar revenue for Xifeng and King’s Luck reveals many similarities. Both have focused on building a core flagship product around their product systems, undergone significant organizational restructuring, and successfully created rich product matrices and enhanced brand images in the wave of high-end development. These commonalities may provide some development experience for newcomers in the industry.
At the same time, the China Business News noted that in the “post-billion era,” both Xifeng and King’s Luck have set new development goals and created new strategic plans. The new billion-dollar members have embarked on a new journey.
Looking back at the billion-dollar journey
It is worth noting that the billion-dollar journey for Xifeng and King’s Luck has not been smooth sailing.
Xifeng’s billion-dollar goal was set in 2020 when Chairman Zhang Zheng explicitly stated at the distributor conference that starting from 2020, they would embark on a new journey of billion-dollar development and strive to enter the billion-dollar club after three years of effort.
However, this goal was not achieved as planned, and in 2022, Xifeng Liquor’s sales revenue remained at 8.4 billion yuan.
King’s Luck, on the other hand, disclosed its “Five-Year Strategic Plan Outline” in 2021, proposing to strive for revenue exceeding 10 billion yuan by 2025.
But as soon as the plan was disclosed, it received an inquiry letter from the Shanghai Stock Exchange, stating that the company did not provide sufficient, objective factual basis and predictive basis when disclosing the above predictive information, and requested the company to supplement the basis for the predictive information and fully disclose the risks. This led to varying degrees of skepticism about King’s Luck’s billion-yuan revenue target from the outside.
Subsequently, King’s Luck elaborated on the specific realization path of its billion-yuan goal from the dimensions of brand and product, region, and channel.
The China Business News found that these “new recruits” to the billion-dollar lineup, after facing questioning and setbacks, both see 2023 as a crucial year for sprinting towards their goals.
According to Zhang Zheng, “2023 is the decisive year for Xifeng to launch an offensive towards established strategic goals after several historic leaps, laying the foundation for Xifeng’s development position in the industry in the next few years.” King’s Luck Chairman Gu Xiangyue also mentioned that 2023 is a crucial year for King’s Luck to lock in the billion-dollar target.
There is a saying in the baijiu industry: survive in the 3 billion yuan region, dominate in the 5 billion yuan region, and run nationwide in the billion yuan region. To achieve the billion-dollar goal, both sides have similar focal points. Xifeng is implementing a development strategy of “high-end, nationwide,” while King’s Luck is implementing a strategy of “differentiation, high-end, nationwide.”
From the results, these development strategies have had a certain effect. However, Xifeng’s revenue data from outside the province is not yet known, but King’s Luck’s expansion in markets outside the province evidently still requires continuous effort. According to the financial report, in the first half of 2023, King’s Luck’s revenue share in Jiangsu Province was as high as 92.6%, with only 7.4% from outside the province. In comparison, Jiangsu-based Yanghe shares had already reached 55% in external revenue in 2022.
Another common point is that both have focused on creating their own core flagship products and have used these flagship products to elevate their brand image, building a product structure that suits their own development around the core flagship product.
Baijiu industry analyst Cai Xuefei, when evaluating King’s Luck’s achievement of over 10 billion yuan in revenue, mentioned that King’s Luck has formed a complete product matrix, especially in recent years, the rapidly developing Guoyuan, known as the “new generation of high-end Chinese baijiu,” has swiftly moved into the thousand-yuan price range with its “Guoyuan V9” light sauce-flavored liquor. This has not only significantly raised King’s Luck’s price ceiling but also driven the product price upgrade of King’s Luck’s liquor and high-pit liquor, providing favorable support for King’s Luck’s billion-yuan growth.
Alcohol industry analyst Ouyang Qianli also expressed that since Hong Xifeng returned, it has gradually grown into Xifeng’s “flagship work,” making the major product Hong Xifeng equivalent to Xifeng. This has propelled Xifeng’s rapid development. Looking at Xifeng’s mainstream activities in recent years, most of them revolve around Hong Xifeng, making Hong Xifeng the leader and flag bearer for Xifeng, thereby enhancing Xifeng’s reputation and discourse power in high-end liquor.
Clearly, the powerful drive brought by core flagship products has become an indispensable force for liquor companies aiming for the billion-dollar target.
Entering a new competitive zone
Cai Xuefei stated that in the Chinese liquor industry, a billion is a watershed for first and second-tier liquor companies. Breaking through a billion in revenue indicates entry into the ranks of top national liquors.
With the addition of King’s Luck and Xifeng, the billion-dollar legion in the baijiu industry now includes over ten companies such as Guizhou Maotai, Wuliangye, Yanghe, Luzhou Laojiao, Langjiu, Jincu, Jiannanchun, Shanxi Fenjiu, Gujing Gongjiu, Shunxin Agriculture, Guizhou Xijiu, and Guizhou Guotai.
It is clear that although they have achieved the milestone of a billion, King’s Luck and Xifeng have entered a new competitive zone.
Standing at a new starting point, both have new development goals. Gu Xiangyue stated, “We firmly challenge the goal of achieving revenue of 15 billion yuan by 2025 and resolutely advance into the ‘double billion’ era during the ’15th Five-Year Plan’ period.”
Xifeng has set the goal of creating the “Five Excellence,” namely an excellent market system, brand system, quality system, cultural system, and vendor system.
However, from the perspective of the entire industry, it is necessary to be clear that the revenue threshold for leading liquor companies is continuously increasing. The top five liquor companies have raised the revenue threshold to 25 billion yuan. On the other hand, the camp with a revenue of 20 billion yuan is also expanding. According to data publicly released by the China Alcoholic Drinks Association, in 2022, there were a total of 8 companies that surpassed the 20 billion yuan sales mark. In addition to listed companies, Xijiu, Langjiu, and Jiannanchun have also successfully stepped onto the 20 billion yuan stage.
Although Xifeng and King’s Luck have taken many similar measures on the road to breaking through a billion in revenue, due to factors such as their different locations, flavors, cultural heritage, etc., they also have their own characteristics regarding future development.
Ouyang Qianli believes that industry development always involves both opportunities and challenges. To stay steady and move far, Xifeng needs high-level support from national platforms such as Xinhua News Agency, People’s Daily, and CCTV. It also needs the support of national conferences such as the Sugar and Alcohol Expo, Import Expo, and Boao Forum to go further. It needs depth and requires support from well-known liquors such as Maotai, Fenjiu, and Luzhou Laojiao. It needs support from Shaanxi liquor merchants and even liquor merchants nationwide to move steadily. It needs breadth and requires interaction with leading companies in multiple industries such as automobiles, smartphones, minerals, finance, etc., to integrate more closely with mainstream consumer groups and move faster.
As for King’s Luck, Cai Xuefei believes that although King’s Luck will still face many challenges in the future, as long as King’s Luck can continue to cultivate the provincial market, make good use of Jiangsu’s economic hub radiation effect in the East China region, and achieve orderly development in markets outside the province, it should be said that the goal of challenging a revenue of 15 billion yuan in 2025 and entering the era of double billion is still worth looking forward to.