The year 2023 marks a pivotal moment for the Chinese baijiu industry, as it undergoes significant structural adjustmentsA variety of challenges have emerged, including price mismatches, excess inventory, and slowing growth ratesNotably, out of the twenty listed baijiu companies in the A-share market, nineteen reported a deceleration in revenue growth during the first three quartersThe market's landscape is shifting, with large corporations solidifying their dominance while smaller firms grapple with declining sales and profitability.

As the clock ticks down on 2023, the question arises: can these companies capitalize on the final push towards year-end sales? With a closer examination, one can see how a select few players are managing to navigate this tumultuous market while others contend with steep declines in both revenue and net profit.

Six Players Capturing Over 90% of Profits

The trend of increasing disparity among baijiu enterprises has grown prominently in response to market contraction

The “Matthew Effect,” which suggests that the rich get richer while the poor get poorer, has never been more evidentIn the first three quarters of 2023, the twenty listed baijiu firms collectively registered revenues of around 340 billion yuan, with only thirteen experiencing positive growth.

Leading the charge is Kweichow Moutai, which continues to maintain its firm standing in the industry, raking in over 123 billion yuan this year, thus accounting for approximately 36% of the industry's total revenueBesides Moutai, Wuliangye, Shanxi Fenjiu, Yanghe Brewery, Luzhou Laojiao, and Gujing Gongjiu each surpassed the one billion yuan revenue threshold, amassing a combined revenue of around 293.3 billion yuanThese six companies alone represent more than 86% of the total revenue generated by the twenty baijiu companies.

While some of the larger companies navigate the economic pressures with relative ease, frontline sales personnel indicate that high-end baijiu brands have experienced minimal disruption

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Profitability metrics reveal that the leading enterprises have widened the gap between themselves and their mid-tier and smaller counterpartsCollectively, the top six firms achieved a staggering net profit of approximately 122 billion yuan, which constitutes an astounding 92.7% share of the industry’s total net profit of 131.7 billion yuan.

In stark contrast, the smaller enterprises, particularly those with less than 6 billion yuan in revenue as recorded last year, are experiencing a mixed bag of outcomesOnly Jinhui Liquor managed to achieve double-digit growth this year, while four other firms have faced significant declines in performance.

Among the companies struggling, Rock Liquor posted merely 231 million yuan in revenue, representing an 83% year-on-year dropSimilar disparagement in performance was observed among several other firms including Jiuguijiu and Jinzhongzi, which suffered varying levels of downturn.

The intensifying competition means that the challenges facing smaller companies not only involve diminishing revenues but also heighten the risks of operational losses

Jinzhongzi and Rock Liquor reported net losses of approximately 100 million yuan and 80 million yuan, respectively, for the first three quarters.

Gujing's Rapid Growth vsFenjiu's Promising Returns

Twelve out of the twenty A-share listed baijiu firms have disclosed their annual performance targets, with ten providing clear guidance on anticipated revenue growth ratesAs the year draws to a close, a disparity emerges in achieving these objectives.

Fenjiu, Jianshiyuan, Gujing Gongjiu, and Yingjia Gongjiu have each set ambitious revenue growth targets of 20% or higher this yearOf these, Fenjiu is leading with an impressive completion rate of 81.87%. Having aimed for a revenue target of about 383 billion yuan, Fenjiu's actual revenue in the first three quarters was around 313.6 billion yuan, reflecting a 17.25% year-on-year growth.

Jianshiyuan set a revenue goal of 122 billion yuan this year, aiming for a 20.8% increase after surpassing the 100 billion mark for the first time last year

Its performance thus far shows significant promise, with revenues of 99.4 billion yuan and a year-on-year increase of 18.85%.

Gujing Gongjiu, on the other hand, is achieving the highest actual revenue growth, reaching 190.69 billion yuan in the first three quarters—a 19.53% growth rateTheir goal is to hit 244.5 billion yuan in revenue, which translates to a completion rate of 77.99%, placing them fourth among their peers.

Yingjia Gongjiu, although smaller in scale, has set an ambitious target of 80.64 billion yuanThis represents a challenging growth path ahead, as their performance currently reflects a completion rate of only 68.37%, translating to the need for at least 25.51 billion yuan in revenue over the last quarter to meet their annual goal.

Despite the challenges, the overall environment in which major players operate signals cautious optimism, particularly for Kweichow Moutai and Wuliangye

Other companies are aiming for stable, albeit lower, growth rates rather than aggressive expansion.

Moutai and Luzhou Laojiao have each set their targets at a conservative 15%, while Yanghe aims for a modest growth range of 5% to 10%. Wuliangye is less specific, focusing instead on maintaining stable, double-digit growth.

As for Moutai, having exceeded 150.6 billion yuan in revenue last year, it continues to see robust growth with revenues totaling 123.1 billion yuan year-to-date, a remarkable 16.91% increase year-on-yearGiven their 15% annual growth target, they seem poised to meet it without difficulty, especially with the fourth quarter typically yielding around 30% of their annual sales.

Wuliangye, having achieved 832.7 billion yuan last year, must generate a minimum of 916 billion yuan in revenue this year for a growth target of 10%. So far, they’ve recorded 679.16 billion yuan in the first three quarters but will need a strong fourth quarter to meet their objectives.

Yanghe's revenue completion rate stands at 79.3%, attributed to its conservative targets; it currently has recorded 275.16 billion yuan in revenue against a goal set for approximately 347–364 billion yuan

For the final quarter, they will need to secure about 72 billion yuan, which could prove challenging given historical sales patterns.

It's noteworthy to mention that, amid Shanxi Fenjiu’s vigorous pursuit, a reconfiguration of the industry hierarchy appears imminentWhile Moutai and Wuliangye solidify their positions at the top, the rankings of the third to fifth spots are increasingly volatile.

Last year, the top five companies in terms of revenue included Yanghe, Shanxi Fenjiu, and Luzhou Laojiao, with revenues closely trailing one anotherHowever, as we approach the year-end, Shanxi Fenjiu has accelerated its output and overtaken Yanghe to take the third spot.

Meanwhile, Luzhou Laojiao aims to surpass a 15% growth metric, needing at least 348 billion yuan this year, but has only achieved 243.04 billion yuan so far—a completion rate of under 70%. Luzhou must realize about 105 billion yuan in the upcoming quarter to meet its objectives, further underlining the competitiveness and volatility of the market.

As the year reaches its conclusion, many companies are kicking off dealer conferences designed to boost morale and refresh strategic plans for the upcoming year