Chinese “Jiugui Liquor” predicts a 98% decrease in net profit attributable to shareholders by 2024.

China’s Jiugui Liquor Co., Ltd. (Jiugui Liquor) is expected to see a year-on-year decline of 97.26% to 98.17% in its net profit attributable to shareholders for 2024, with a corresponding drop of 99.07% to 98.61% in adjusted net profit. Industry insiders believe that Jiugui Liquor’s overly aggressive expansion in the past has led to severe overextension of its future prospects.

In its “2024 Performance Forecast,” Jiugui Liquor stated that for the period from January 1, 2024, to December 31, 2024, the company anticipates achieving an operating income of approximately 1.423 billion yuan, a decrease of 49.7% compared to the same period last year. The projected net profit attributable to shareholders is between 10 million and 15 million yuan, reflecting a decline of 97.26% to 98.17%, while adjusted net profit is estimated to be between 5 million and 7.5 million yuan, down by 99.07% to 98.61%.

The company cited reasons for the performance decline in 2024, including the ongoing deep adjustment cycle in the liquor industry, intensified competitive pressures, conservative business practices among channel partners, and cautious payment intentions from customers. Additionally, the impact of industry adjustments on the company’s high-end products has led to a decrease in revenue share from these products.

Financial commentator “Kan Jian Finance” analyzed on February 1 that Jiugui Liquor’s significant profit decline and current challenging situation are entirely self-inflicted. The company’s overly ambitious expansion plans have resulted in severe overextension of its future prospects. Therefore, the glory days of Jiugui Liquor may not have lasted long.

In early 2019, Jiugui Liquor set a goal to reclaim its position among the top players in the liquor industry, with sales targets of “30 billion in the short term, 50 billion in the medium term, and 100 billion in the long term.” However, in 2018, the company’s annual revenue was only 1.187 billion yuan. Even achieving the short-term goal of 30 billion would require nearly tripling its revenue.

To meet these targets, Jiugui Liquor adopted highly aggressive strategies, such as recruiting distributors nationwide without possessing the necessary capabilities for a nationwide presence. From 2020 to 2022, the company added a total of 1,246 new distributors, reaching 1,774 by the end of 2023.

Furthermore, in efforts to elevate the brand and transition to a high-end market, Jiugui Liquor raised prices five times in the first half of 2021, at one point surpassing the pricing of high-end brands like Feitian Maotai. Despite achieving revenues and net profits of 3.414 billion and 893.5 million yuan, respectively, in 2021, the aggressive strategies left significant challenges and began to surface in recent years.

With the white liquor market in China remaining lackluster in 2024, distributors and liquor companies had hoped for increased sales during last year’s Mid-Autumn Festival peak season. However, the results fell short of expectations. Chinese New Year traditionally sees the highest liquor sales, but this year’s volumes were significantly lower. Many distributors noted that sales during the New Year were similar to normal times, with profit considerations taking a back seat.

According to a source cited by Times Finance, a liquor store owner in Guangzhou said, “This year’s New Year business was not as good as previous years, so I didn’t take a break.” Li Wei, a regional manager for a liquor brand, also noted that this year’s Chinese New Year lacked its usual festive atmosphere: “In the past, liquor sales would notably increase during the Mid-Autumn Festival and Chinese New Year, but last year’s Mid-Autumn Festival and this year’s Chinese New Year were no different from regular times.” He mentioned that profits were uncertain this year, with a focus on maintaining current sales.

Many liquor factories have limited white liquor distribution to curb price declines. To stimulate sales, some have resorted to pricing wars, although the results have not met expectations.

A netizen named “Senior Fan” suggested, “With the overall downgrade in economic consumption, companies should focus on producing lower-end products. Products like beverages, home appliances, and liquor should target fourth and fifth-tier cities, as well as rural areas, rather than pursuing high-end markets. Liquor priced at a dozen or dozens of yuan may see better sales, as in today’s tough economy, fewer people dare to spend on items priced in hundreds or thousands of yuan. Therefore, the overall strategy should shift focus to cover lower-end markets and reach ordinary households in towns and villages.”

Another netizen, identified as “Rabbit,” expressed, “The most fearful situation for an industry is the youth losing interest. In the next five years, at least a third of the existing white liquor distilleries will likely close.”