Shede Spirits Co.,Ltd. (600702.SH) released its 2025 annual results report on March 20, amidst a period of deep industry-wide adjustment for the baijiu sector, characterized by rational consumption, price segmentation, and intensified competition for market share. As a sub-premium producer with "aged liquor" as its core competitive advantage, the company reported a challenging year.
According to the annual report data, Shede Spirits achieved operating revenue of 4.419 billion yuan in 2025, a year-on-year decrease of 17.51%. Operating profit was 300 million yuan, down 47.05% year-on-year. Net profit attributable to shareholders of the listed company was 223 million yuan, a decrease of 35.51% compared to the previous year. After deducting non-recurring gains and losses, net profit attributable to the parent company saw a significant decline of 50.31% to 199 million yuan.
Within the broader context of an industry downturn, the rate of decline in Shede's 2025 revenue and profit narrowed significantly compared to 2024, indicating a gradual recovery in its fundamental operations. Bright spots for the year included growth in its mass-market liquor segment and a strong breakout performance in e-commerce sales. However, the company continues to face multiple challenges, including profit margin pressure, tight cash flow, product mix differentiation, and the need to enhance channel efficiency, indicating that its overall transformation and adjustment process is still ongoing.
Annual performance cooled quarter by quarter. As one of the "Six Golden Flowers" of Sichuan liquor, Shede Spirits still faced substantial performance pressure in 2025. Following record highs in both revenue and net profit in 2023, exceeding 7 billion yuan and 1.7 billion yuan respectively, the company has now experienced declines in both metrics for two consecutive years. Compared to the deep adjustment in 2024, which saw revenue fall 24.41% and net profit plummet 80.46%, the 2025 declines in revenue and net profit were less severe, narrowing to 17.51% and 35.51% respectively.
Quarterly performance showed a pattern of starting high and finishing low. The first quarter achieved revenue of 1.576 billion yuan and net profit attributable to the parent of 346 million yuan, marking the peak for the year. Performance gradually declined in the second and third quarters, with net profits of 97 million yuan and 29 million yuan respectively. The fourth quarter recorded a single-quarter loss of 249 million yuan, dragged down by the industry's off-season, channel inventory clearance, and expense provisions, which directly impacted the full-year profitability.
Mass-market liquor emerged as the sole growth segment, while e-commerce broke through. From a product perspective, Shede's product structure showed clear differentiation in 2025, with sub-premium products declining while the mass-market segment provided a cushion against the downturn. Annual report data showed that revenue from mid-to-high-end liquor was 3.12 billion yuan, down 23.83% year-on-year, primarily impacted by weak demand in the sub-premium segment. Revenue from ordinary liquor was 733 million yuan, up 5.75% year-on-year, making it the only segment with positive growth. Revenue from glass bottle products was 470 million yuan, a slight decrease of 3.5% year-on-year.
Analyzed by price band, the average price per ton for mid-to-high-end liquor and ordinary liquor in 2025 was 213,800 yuan/ton and 44,600 yuan/ton, down 12.3% and 8.3% year-on-year, respectively. Core consumption scenarios such as business entertainment and banquets remained under pressure throughout the year. The flagship "Shede" series, positioned in the sub-premium price segment, remained in a deep adjustment phase. In contrast, the mass-market famous brand "Tuopai" series performed steadily, supported by major products like the T68, with increased sales volume driving revenue growth and partially offsetting the decline in sub-premium products.
In its annual report, Shede stated that sub-premium baijiu in the 300-700 yuan range is currently in an adjustment period. Long-term, with the growth of the middle class, this segment still has opportunities for expansion. The mass-market baijiu segment below 300 yuan is vast, with the market share of famous and high-quality baijiu steadily increasing. Consequently, the company will adhere to its strategy focusing on "aged liquor, a multi-brand portfolio, youthification, and internationalization." It will concentrate on the mid-to-high-end baijiu market, continuously expand its high-end share, and actively explore the ultra-premium market above 1,000 yuan. The goal is to establish "Shede" as the leading brand in the sub-premium segment and the top brand in the aged liquor category, focusing on strategic products like the Shede Collection 10 Years, Taste of Shede, Shede Free, and Shede Dao. The "Tuopai" brand will be developed into the most cost-effective mass-market famous liquor, focusing on strategic products such as Tuopai Qujiu, Tuopai Tequ, and Tuopai Super Grade T68, aiming to quickly restore its influence in the mass-market baijiu segment.
In 2025, Shede's channels and regional markets also entered an adjustment period, with a clear divergence between online and offline performance. Revenue from liquor business within its home province was 1.206 billion yuan, down 20.19% year-on-year, while revenue from outside the province was 2.647 billion yuan, down 19.25%, indicating simultaneous pressure in both domestic and external markets. By channel, the wholesale and distribution channel generated revenue of 3.249 billion yuan, a decrease of 25.19%, as traditional distribution channels underwent a deep inventory reduction phase. In contrast, the e-commerce channel achieved revenue of 604 million yuan, a significant increase of 35.46% year-on-year, with a gross margin of 74.35%, becoming a standout growth driver. At the distributor level, the company added 378 new distributors throughout the year but saw 516 exit. The total number of distributors at year-end was 2,525, a net decrease of 138 from the end of 2024.
Cultivating new growth drivers. Amid the industry downturn, Shede Spirits is not passively enduring pressure but is actively driving change across multiple dimensions—including channel innovation, precise cost control, and product structure adjustment—to cultivate new growth momentum. The company stated that its sales model is primarily based on regional agents, supplemented by self-operated e-commerce. With thousands of distributors, it has established a relatively flat, regionally and product-line segmented traditional agent sales model. Building on this, the company has developed a self-operated e-commerce model.
In 2025, Shede's sales model experienced a structural reversal, with traditional wholesale revenue declining while online e-commerce channels surged against the trend. Through innovative methods such as live-stream e-commerce, cultural and creative products, seasonal limited editions, and youth-focused marketing, the company is breaking its reliance on traditional channels, connecting directly with end consumers. The results of its digital marketing and youthification strategy are notable.
Shede indicated that it will continue to strengthen its internet marketing channels and increase investment in distribution network development. The aim is to enable more consumers to access and purchase Shede and Tuopai series products through various online platforms. The company will continue to optimize its product structure, build an internet marketing product matrix, and launch more high-traffic, popular single products, striving to make Shede the most beloved aged liquor brand in online marketing channels.
Simultaneously, the company achieved rigid cost reductions, leading to continuous improvement in operational efficiency. In 2025, selling expenses were 1.14 billion yuan, down 10.68% year-on-year; administrative expenses were 478 million yuan, down 12.39%; and R&D expenses were 82 million yuan, down 13.89%. Financial expenses turned positive from negative, mainly due to decreased interest income, but overall financial risk remains controllable.
In terms of product innovation, on August 30, 2025, Shede launched its first low-alcohol, easy-drinking aged liquor, "Shede Free," promoting "light burden, high flavor" characteristics. This product precisely meets contemporary consumer demand for lower alcohol content and smoother taste, particularly suited for emerging consumption scenarios like casual business socialization. The annual report mentioned the company is actively expanding the consumption boundaries of aged liquor, exploring youthification and trendiness through innovative products like the low-alcohol "Shede Free" and the blind-box mini-liquor "Immediate Shede."
Multiple challenges persist. Behind the marginal operational improvements, Shede still faces several issues, including negative cash flow, profit pressure, structural imbalances, and channel challenges. Regarding cash flow, the net cash flow from operating activities for the full year 2025 was -523 million yuan. Although this represented a 26.08% improvement year-on-year, it had not yet returned to positive territory. As a key indicator of healthy operation in the baijiu industry, persistently negative operating cash flow directly reflects weaker collection capabilities and high levels of inventory and channel receivables. This situation can impact the sustainability of dividends, capital expenditure capacity, and risk resilience. Subsequent efforts need to focus on optimizing accounts receivable management, strictly controlling inventory size, and improving collection efficiency across all channels.
Furthermore, contract liabilities stood at 147 million yuan, down 11% year-on-year, indicating relatively low willingness among downstream distributors to make advance payments for inventory and suggesting that market confidence still requires restoration.
On the profitability front, the core business's profit-generating ability weakened significantly. The 2025 net profit attributable to shareholders fell 35.51%, while the non-GAAP net profit nearly halved. The net profit margin was only 4.78%, with the profit decline outpacing the revenue decline. The core reasons include the decline in revenue from high-margin mid-to-high-end liquor and promotional discounts at the terminal level putting pressure on gross margins. The overall gross margin for the liquor business in 2025 was 67.67%, down 3.26 percentage points year-on-year. Coupled with the weakened scale effect due to shrinking revenue, the fragility on the profit side reflects that the company's pricing power and product competitiveness still need repair.
Regarding products, the structure requires further optimization. In 2025, mid-to-high-end liquor contributed over 80% of revenue, meaning fluctuations in sub-premium demand directly dictate overall performance. Although ordinary liquor grew against the trend, its total revenue base was only 733 million yuan, offering limited offsetting effect against the overall performance decline. Competition in the sub-premium segment is intensifying, with pressure from rivals. The current product structure still shows a gap compared to the strategic goal of a "multi-brand, full-price-band" portfolio.
In terms of channels, the pains of adjusting traditional channels are intensifying, and the transformation remains a long-term task. Wholesale and distribution channel revenue fell over 25% in 2025. Distributors face challenges such as high inventory, slow sell-through, and thin profit margins, leading to some distributor attrition in certain regions. Although e-commerce growth is impressive, its revenue contribution was less than 20% in 2025, not yet forming an effective replacement for traditional channels. The pressure of channel transformation remains substantial.
Additionally, amid industry volatility, the company's management has experienced successive personnel changes. On March 3, 2026, Shede announced that Vice President Wang Yong had resigned from his position due to work reasons and would no longer hold any position in the company. Wang Yong, born in the 1980s, was appointed Vice President in January 2023, with his original term scheduled to end on September 20, 2026. Prior to this, in March 2025, Vice President and Chief Financial Officer Zou Qingli resigned due to personal career planning.
Currently, the baijiu industry is in a phase of deep adjustment, with demand gradually returning to rationality. While Shede Spirits' 2025 performance decline narrowed, leading indicators such as cash flow and contract liabilities show that distributor confidence and market demand are still in a recovery phase. A broad-based industry recovery still requires time. Shede stated in its annual report that current baijiu demand is falling short of short-term expectations, as consumption enters a more rational era with clear price differentiation trends. Squeezing competition for existing market share is intensifying, with market concentration accelerating towards superior production regions, leading enterprises, and strong brands. Baijiu companies need to innovate across categories, brand building, marketing, and cultural communication to maintain vitality and advantage in the fierce competition.
For Shede Spirits, 2026 is likely to remain a year of recovery. The company will rely on its aged liquor strategy as an anchor, with mass-market liquor and e-commerce as new growth drivers, to continue promoting operational recovery. However, issues such as profit fragility, structural adjustments, and channel transition pains also reveal the transformation difficulties faced by sub-premium baijiu companies during the industry's consolidation process. Resolving these challenges will require time and persistence.
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