Jiangsu Yanghe Distillery Co.,Ltd.'s former chairman Zhang Liandong has left his successor Gu Yu with significant challenges to address.
The company's latest half-year report reveals a dramatic 35.32% revenue decline and a 45.34% drop in net profit attributable to shareholders for the first half of the year.
This represents Yanghe's worst half-year performance in years, excluding 2020. For the traditionally stable liquor industry, such figures are particularly striking.
Notably, former chairman Zhang Liandong departed on July 1st, while new chairman Gu Yu assumed his role on July 21st.
While Yanghe attributes the significant decline to market conditions, the company's drop far exceeds industry averages.
**Leadership Transition Amid Declining Performance**
On the evening of July 1st, Jiangsu Yanghe Distillery announced that Chairman Zhang Liandong had resigned due to work adjustments.
Zhang Liandong had led Yanghe for approximately four and a half years since early 2021. During this period, the company's growth momentum significantly slowed.
In 2024, Yanghe's revenue fell to 28.876 billion yuan, showing little progress compared to 25.35 billion yuan in 2021. Net profit attributable to shareholders reached only 6.673 billion yuan, returning to 2017 levels.
The company's stock price also declined substantially. By June, before Zhang Liandong's departure, Yanghe's shares had fallen to around 60 yuan per share, representing nearly a 70% decline from early 2021 highs, with market capitalization briefly falling below the 100 billion yuan threshold.
The 2025 half-year results present an even more challenging picture. Revenue for the first half totaled approximately 14.8 billion yuan, down 35.32% year-on-year, while net profit attributable to shareholders reached 4.344 billion yuan, declining 45.34%. Operating cash flow net inflows dropped nearly 70% to 616 million yuan.
However, following the release of the interim results, the stock price surged over 5% the next trading day.
**New Leadership Faces Complex Challenges**
Zhang Liandong's departure was considered "sudden." Just one week before stepping down, he had appeared alongside Liu Qiangdong in a desert promotional event for the company's new products.
On July 21st, Jiangsu Yanghe Distillery announced Gu Yu's election as chairman. The 1978-born executive shares a similar background with Zhang Liandong, both having transitioned from government positions.
The new chairman faces a complex situation. While the sharp decline occurred before July, relieving him of direct responsibility for the poor performance, achieving a "fresh start" remains challenging given Yanghe's underperformance relative to industry leaders.
Detailed analysis of the interim report reveals:
①Wholesale distribution revenue, the company's primary sales model, declined 35.78% ②Regional sales showed out-of-province revenue falling 42.68% while in-province sales dropped 25.79% ③The number of out-of-province distributors decreased by 268, while in-province distributors increased by 11 ④Mid-to-high-end liquor revenue declined 36.52%, significantly exceeding the 27.24% drop in regular liquor sales
The data indicates Yanghe experienced a significant decline in both out-of-province markets and mid-to-high-end segments.
For liquor industry leaders like Yanghe, out-of-province markets are typically more crucial than domestic provincial markets.
In the first half of 2025, Yanghe's advertising and promotional expenses totaled 1.45 billion yuan, with 708 million yuan in direct advertising costs. Regional advertising accounted for only 265 million yuan (37.38%), while 62.62% of advertising investment targeted national markets.
The decline in mid-to-high-end markets is particularly concerning, as this segment represents one of the few growth areas in the liquor industry and a key driver for leaders like Moutai.
Yanghe's advertising and promotional expenses decreased 21.03% year-on-year, a smaller decline than revenue, suggesting diminishing advertising effectiveness.
**Fund Manager Reduces Holdings**
The company's decline has also concerned fund managers. Zhang Kun, a prominent public fund manager who previously showed strong confidence in Yanghe, significantly reduced his holdings in the first half of the year.
Zhang Kun's E Fund Blue Chip Selection had been heavily invested in Yanghe shares since Q3 2020. Despite the liquor sector's decline, Yanghe remained among his top ten holdings through 2024, with 36 million shares held at year-end.
However, Zhang Kun substantially reduced his position in the first half of 2025. Holdings fell to 25.5 million shares by Q1 end, and Yanghe was removed from the top ten holdings in the latest half-year report.
**Provincial Leadership Position Under Threat**
While Yanghe aspires to be more than just a provincial leader, the reality is that even its position as Jiangsu's leading liquor producer faces challenges.
Among A-share liquor companies with revenue exceeding 1 billion yuan, Yanghe recorded the largest revenue decline in the first half, and was the only company with a decline exceeding 20%.
Within Jiangsu province, Yanghe and Jinshiyuan represent the two leading liquor companies. While Yanghe previously held a clear advantage, this gap is rapidly narrowing.
In the first half of this year, Jinshiyuan achieved revenue of nearly 7 billion yuan, down only 4.84%, with net profit of 2.229 billion yuan, declining 9.46%.
Jinshiyuan's revenue now represents 47% of Yanghe's, while net profit accounts for 51%. In 2021, these figures were only 25% and 27% respectively.
Jinshiyuan's mid-to-high-end series surpassed 10 billion yuan in sales revenue last year, with first-half revenue exceeding 6.5 billion yuan, equivalent to 52% of Yanghe's mid-to-high-end sales.
Critically, Jinshiyuan's mid-to-high-end series achieved nearly 5% growth in out-of-province markets during the first half, contrasting sharply with Yanghe's significant provincial decline.
The industry downturn explains only part of Yanghe's revenue decline. The primary issues stem from internal challenges and management decisions of recent years.
In May, Yanghe acknowledged four key challenges during an earnings conference: declining brand momentum, narrowing channel profit margins, channel inventory pressures, and the need to accelerate marketing transformation.
Each of these issues presents significant resolution challenges. However, the market continues to anticipate that Yanghe, under new chairman Gu Yu's leadership, can return to a growth trajectory.
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