The white liquor industry in 2026 failed to deliver the anticipated recovery, instead sinking deeper into a zero-sum competitive landscape. As the leader in the light-aroma baijiu segment, Shanxi Xinghuacun Fen Wine Factory Co.,Ltd. (600809.SH) has released a half-year report that has sent a chill through the market.
According to the company's 2026 interim report, total operating revenue reached RMB 21.044 billion, down 12.18% year-on-year, while net profit attributable to shareholders stood at RMB 6.439 billion, a decline of 24.29%. Looking at the second quarter alone, revenue came in at RMB 6.121 billion, down 17.74%, and net profit was merely RMB 1.057 billion, nearly halved with a sharp drop of 43.11%. This marks the first time since 2016 that the company has experienced simultaneous declines in both interim revenue and profit. Prior to this, the company had maintained positive annual growth for 11 consecutive years, racing from a regional distillery to the industry's top tier and establishing what was dubbed the "Fen Wine Speed" in the baijiu sector.
Now that the growth narrative has paused, market debate has intensified. Is this disappointing set of results a strategic retreat driven by proactive inventory control and channel destocking, or a fundamental inflection point triggered by a combination of industry headwinds and internal weaknesses?
Half-Year Dual Declines Mark Worst Performance in Years, Dragged Down by Qinghua 30 Series
According to Tianyancha, Shanxi Xinghuacun Fen Wine Factory Co.,Ltd. has a long history, having been established in 1985. In the first half of this year, by product category, the Fen Wine series generated revenue of RMB 20.62 billion, accounting for approximately 98.5% of total liquor revenue, down 11.84% year-on-year. Other liquor products, including Zhuyeqing and Xinghuacun wines, contributed RMB 314 million, representing less than 1.5% of liquor revenue, a decline of 35.08%. Combined, total liquor revenue reached approximately RMB 20.934 billion, down 12.32% year-on-year.
In its interim report, the company stated that the white liquor industry is entering a new phase of intensifying competition. Competitive pressures among production regions, enterprises, and brands continue to escalate, with the industry's "Matthew Effect" becoming increasingly pronounced. The company said it will closely monitor market trends, focus on enhancing product quality and brand influence, continuously optimize its product structure, innovate marketing strategies, and expand through diversified channels to strengthen core competitiveness and improve market share.
Guohai Securities noted that the decline in the main Fen Wine brand was still smaller than that of other liquor categories. According to channel feedback, the Qinghua series saw revenue decline by a low double-digit percentage in the first half, primarily dragged down by a high double-digit drop in Qinghua 30 and above products. Qinghua 20/25 performed well, with revenue flat to slightly up, benefiting from pricing advantages and solid momentum in markets outside Shanxi. Panama products declined slightly, while Laobaifen and Bofen both saw double-digit declines, indicating some pressure on mid-to-low-end products.
Looking at second-quarter data from 2021 to 2025, the deceleration trajectory of Shanxi Xinghuacun Fen Wine Factory Co.,Ltd. becomes strikingly clear. Over those five years, quarterly revenue was RMB 4.787 billion, RMB 4.803 billion, RMB 6.329 billion, RMB 7.408 billion, and RMB 7.441 billion respectively, with year-on-year growth of 73.23%, 0.35%, 31.75%, 17.06%, and 0.45%. Net profit attributable to shareholders was RMB 1.362 billion, RMB 1.303 billion, RMB 1.948 billion, RMB 2.147 billion, and RMB 1.857 billion, representing year-on-year changes of +239.43%, -4.33%, +49.57%, +10.23%, and -13.50% respectively.
Entering the second quarter of 2026, the company further intensified its inventory control and destocking efforts. The effects of channel adjustments were released in a concentrated manner, causing single-quarter performance pressure to intensify sharply. From a broader perspective, from 2021 to 2025, the company's annual revenue was RMB 19.97 billion, RMB 26.21 billion, RMB 31.93 billion, RMB 36.01 billion, and RMB 38.72 billion, with year-on-year growth of 42.75%, 31.26%, 21.80%, 12.79%, and 7.52%. Net profit attributable to shareholders was RMB 5.314 billion, RMB 8.096 billion, RMB 10.44 billion, RMB 12.24 billion, and RMB 12.25 billion, with growth rates of 72.56%, 52.36%, 28.93%, 17.29%, and 0.03%.
It is evident that since the high-growth period of 2021, both revenue and profit growth rates have decelerated for four consecutive years. By 2025, growth had essentially stalled, with profits nearly flat. This suggests that the first-half 2026 decline is not a black swan event but rather the inevitable outcome of a sustained erosion of high-growth momentum.
Pressure in Both Domestic and External Markets, Industry Challenges in the Sub-Premium Price Band
For a regional baijiu leader, the home market serves as a core shield against industry cycles. However, this shield has now failed for Fen Wine. In the first half of 2026, revenue from the Shanxi provincial market was RMB 7.938 billion, down 9.09% year-on-year. The second quarter was even more severe, with single-quarter revenue in the province falling by over 30%, becoming the primary drag on overall performance.
This stands in stark contrast to the trends of the previous two years. In the first halves of 2024 and 2025, the provincial market had been a "safety cushion" for Fen Wine against industry volatility. In the first half of 2024, provincial revenue was RMB 8.394 billion, growing steadily to RMB 8.732 billion in the first half of 2025, maintaining positive growth of 4.04%. Even as the industry faced pressure, the home base remained stable and progressive. By 2026, however, this safety cushion has completely failed, transforming from a "ballast stone" into a drag.
The core reasons for the provincial decline are twofold. On one hand, the company proactively controlled shipments and reduced inventory by significantly cutting supplies to distributors, directly compressing revenue. On the other hand, weak local consumption, sluggish terminal sell-through, and severe channel inventory build-up have greatly reduced distributors' willingness to stock up. Additionally, internal channel reforms and the elimination of small and medium-sized distributors have caused temporary disruption in the provincial channel system.
Meanwhile, revenue from markets outside Shanxi reached RMB 12.997 billion in the first half, down 14.17% year-on-year. Second-quarter revenue from external markets was RMB 4.202 billion, down 11.46%. Compared with the sharp drop in provincial second-quarter revenue, the decline in external markets was notably smaller, demonstrating stronger resilience.
The Qinghua series is the profit core of Shanxi Xinghuacun Fen Wine Factory Co.,Ltd. and the cornerstone of its brand value. However, over the past two years, competition in the RMB 300-800 sub-premium price band has become fierce, and growth in Fen Wine's sub-premium products has stalled. From a profitability structure perspective, the company's gross margin has remained around 75%. In the first half of 2026, overall gross margin was 75.40%, down only 1.25 percentage points year-on-year, indicating that the profitability of its products has not collapsed. However, declining sales volume, channel disruption, and high expenses have directly undermined net profit. The first-half net margin was approximately 30.6%, down nearly 5 percentage points from approximately 35.5% in the same period last year. The decline far exceeded the gross margin drop, with the gap primarily absorbed by rising selling expense ratios and the dilution of fixed costs amid declining revenue.
Price inversion is not a new phenomenon in 2026 but has worsened from partial to systemic. From 2023 to 2024, the wholesale price of Qinghua 30 Fuxing Edition began to soften and entered a downward channel. In February 2025, the company suspended supply of Qinghua 20 and Laobaifen in multiple regions, planning to upgrade to "Five-in-One" new versions—essentially using supply suspension to buy breathing room for price stability. By November 2025, the wholesale price of the Fuxing Edition had dropped to around RMB 730, while Qinghua 20 was around RMB 340.
Entering 2026, price inversion has become normalized. As of July, the wholesale price of Qinghua 20 was approximately RMB 355, higher than the ex-factory price of RMB 320-330, but the terminal retail price was around RMB 373, well below the official reference price of RMB 588-628, compressing channel profit margins at the terminal level. The wholesale price of Qinghua 30 Fuxing Edition was around RMB 860, already below the ex-factory price of over RMB 900, meaning distributors incur losses upon stocking. Channel confidence has consequently been undermined.
The company has attempted to fill the gap with Qinghua 25. According to channel feedback, sales of 53° Qinghua 25 surged approximately 360% year-on-year in the first half, while 42° Qinghua 25 grew by over 20% and 42° Qinghua 30 by about 10%. However, the base for Qinghua 25 is extremely low, and its growth is primarily driven by channel expense and rebate policy incentives rather than natural sell-through. The absolute increment is limited and cannot offset the sales decline of the two major hundred-billion-level products, Qinghua 20 and Qinghua 30.
Meanwhile, selling expenses have continued to rise. In the first half of 2026, selling expenses reached RMB 2.62 billion, up nearly 10% year-on-year, with the selling expense ratio climbing to 12.45%, an increase of 2.5 percentage points. From the first half of 2021 to the first half of 2025, selling expenses were RMB 2.028 billion, RMB 1.939 billion, RMB 1.709 billion, RMB 2.0 billion, and RMB 2.382 billion respectively, with expense ratios of 16.74%, 12.64%, 8.99%, 8.79%, and 9.94%. Declining revenue coupled with rising expenses has become the most awkward aspect of Fen Wine's current operations. Significant marketing investments have failed to drive terminal sales, serving only to stabilize channels and maintain pricing structures, resulting in a sharp deterioration in return on investment.
Regarding the two most debated issues—sub-premium pressure and the provincial market slowdown—Liu Hongzeng, founder of Jiani.com and an industry observer, stated that current market concerns about Fen Wine contain a degree of emotional amplification. The essence of both issues should be viewed through the dual lens of industry cycles and corporate strategic adjustments.
On the overall weakness in the sub-premium price band, Liu believes this is first and foremost an industry-wide issue. "In the first half of 2026, the entire sub-premium price band contracted by approximately 8%, with over 86% of baijiu companies seeing profit declines. Wholesale price pressure and slowing sell-through are cyclical realities facing the entire industry, not something any single company can escape." In his view, the difference lies in how companies respond. "Some companies in the industry continue to rely on channel stuffing to maintain reported growth, but Fen Wine has chosen proactive inventory control rather than forcing targets. As a result, the wholesale price of Qinghua 20 has remained stable, sales of Qinghua 25 and 42° Qinghua 30 have grown against the trend, and channel inventory in many regions has fallen back to a healthy level of 2-3 months. This is an approach that converts cyclical pressure into a window for proactive adjustment. Short-term performance may suffer, but long-term, it is building momentum for the next cyclical upswing."
As for the decline in the home provincial market, Liu believes the core trigger is proactive channel restructuring rather than a weakening of the fundamental base. "In the first half, Fen Wine pushed forward with distributor structure optimization within the province. Starting in the second quarter, sales targets were no longer enforced. The amplified decline in provincial second-quarter performance is a concentrated reflection of the reform 'squeezing out the water'."
Share Price Down 40% Over the Past Year, Cash Flow and Contract Liabilities Weaken
Compared with book revenue and profits, cash flow and advance receipts more accurately reflect the temperature of a baijiu company's channels. In the first half of 2026, net cash flow from operating activities was RMB 6.652 billion, up 11.23% year-on-year. However, in the second quarter alone, operating cash flow was negative RMB 1.602 billion, with net outflows expanding by approximately RMB 556 million year-on-year and turning sharply negative quarter-on-quarter—a rare single-quarter cash outflow in recent years. The weakening second-quarter cash flow was primarily due to the company's proactive relaxation of payment collection requirements and pragmatic inventory clearance.
The significant second-quarter cash flow decline signals slower terminal payments, reduced distributor willingness to remit funds, and sharply increased payment collection pressure for the company. Contract liabilities, which represent channel stocking intentions, showed an even more pronounced decline. As of the end of June 2026, contract liabilities stood at RMB 6.658 billion, down RMB 1.246 billion from RMB 7.904 billion at the end of March 2026, indicating a slowdown in channel payment collection. The consecutive decline in advance receipts directly indicates that distributors are not stocking up, not paying, and not replenishing—channels are broadly cautious about Fen Wine's near-term prospects.
As of the end of June 2026, the book value of inventory was RMB 14.784 billion, up 2.73% year-on-year, with inventory levels persistently at historical highs. Comparing historical data, inventory was RMB 12.376 billion at the end of 2023, RMB 14.391 billion at the end of 2024, and RMB 14.389 billion at the end of 2025, surpassing RMB 14.7 billion by mid-2026, with inventory continuing to climb. Although aged base liquor is considered a quality asset, persistently rising inventory combined with weakening sell-through means that inventory turnover efficiency is continuously declining. In the context of sluggish industry consumption and intensified sub-premium competition, high inventory is no longer a source of confidence but has become the heaviest burden dragging on performance and pressuring channels.
From an overall perspective of full-year data and current operations, the current performance decline of Shanxi Xinghuacun Fen Wine Factory Co.,Ltd. is not a short-term adjustment but a fundamental change in its growth logic. Over the past five years, Fen Wine relied on the triple dividends of external market expansion, channel stocking, and the sub-premium window to double its scale. Now, multiple pressures have converged: external market growth has peaked, sub-premium competition is intense, the provincial base has been lost, channel inventory is high, and marketing expenses are inefficient.
It is noteworthy that this performance decline is attributable not only to the broader industry environment but also to flaws in the company's own operational model. The inventory risks, pricing risks, and channel risks left behind by previous extensive expansion have all been exposed amid the current weak industry recovery.
Despite short-term performance pressure, securities firms still see signs of a cyclical bottom and support for long-term value. Soochow Securities recently noted that in the short term, the baijiu industry has entered a bottoming phase, with marginal improvement expected in the second half of 2026. For Fen Wine, the company has clearly planned to distribute no less than 65% of its annual net profit attributable to shareholders as dividends for each year from 2025 to 2027, and this high dividend policy further reinforces its safety margin. In the medium to long term, as the leader in light-aroma baijiu among head liquor companies with revenue exceeding RMB 20 billion, Fen Wine's growth potential remains prominent, supported by aroma-type differentiation, continued national penetration, and incremental contributions from its multi-price-point product matrix.
Guohai Securities has issued a "Buy" rating with the rationale that the light-aroma leader's operational resilience remains notable, channel adjustments and report pressure are gradually being released, and current valuation sits at a five-year low. The company has continued to strengthen the high-end positioning of the Qinghua series, deepen nationwide channel refinement, accelerate breakthroughs in markets south of the Yangtze River and key regions, with the Yangtze River Delta and Pearl River Delta strategic markets maintaining steady growth. With the current price stability of the Qinghua series and main brand, incremental potential in core national markets, and ongoing provincial channel repairs, the light-aroma leader's operational resilience remains relatively strong. With report pressure being progressively released and valuation at a five-year low, the company's projected revenue for 2026-2028 is RMB 31.3 billion, RMB 33.1 billion, and RMB 34.7 billion respectively, representing year-on-year changes of -19%, 6%, and 5%. Net profit attributable to shareholders is projected at RMB 9.8 billion, RMB 10.9 billion, and RMB 12 billion, with year-on-year changes of -20%, 11%, and 11%, corresponding to PE valuations of 15x, 13x, and 12x. The "Buy" rating is maintained.
In terms of capital market performance, from November 13, 2025, to September 15, 2026, the company's share price fell by more than 40% over the ten-month period. For Shanxi Xinghuacun Fen Wine Factory Co.,Ltd., the once-celebrated high-growth narrative has now come to a definitive end. For the foreseeable future, the company will bid farewell to rapid expansion and enter a painful adjustment period characterized by inventory destocking, price stabilization, channel repair, and structural optimization.
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