As one of the "Six Golden Flowers" of Anhui baijiu, Anhui Kouzi Distillery Co.,Ltd. may have delivered a report card far below market expectations.
Recently, Kouzi Distillery released an earnings forecast warning: its 2025 net profit is projected to be between 662 million yuan and 828 million yuan, representing a staggering year-on-year decline of 50% to 60%, the largest drop in nearly a decade. Back in 2021, when its revenue first surpassed 5 billion yuan, the company had described it as a "critical juncture for entering the 10-billion-yuan scale." However, with revenue for the first three quarters of last year reaching only 3.174 billion yuan, it falls far short of that ambition.
An internal source at Kouzi Distillery admitted that the company's performance is indeed unsatisfactory, noting that its current stronghold within the province is primarily Southern Anhui. "We just established a Hefei operations center last year, and more effort is needed to cultivate the market within the province," the source stated.
Furthermore, in search of new growth drivers, Kouzi Distillery launched a new business line—bulk liquor—at the end of last year. It is understood that this project is still in a pilot phase, with a second bulk liquor store having quietly opened. This store is led by a distributor and focuses on high-value bulk liquor priced under 100 yuan, but this new venture is still a long way from becoming a significant revenue pillar.
The net profit is expected to be "halved," marking the largest decline in nearly ten years. According to its profit warning announcement, the company expects its 2025 net profit to be between 662 million yuan and 828 million yuan, a year-on-year plunge of 50% to 60%, the steepest fall it has seen in almost ten years.
Kouzi Distillery provided reasons for this in the forecast: a sharp decline in sales volume of its core profit driver, high-end cellar-aged products, led to reduced operating revenue. Simultaneously, to ensure company operations and continued market investment, the decreases in administrative and selling expenses were smaller than the drop in revenue, resulting in a disproportionately large decline in total profit.
In fact, signs of Kouzi Distillery's weakness were evident earlier. As early as the second quarter of last year, its revenue suffered a major drop, reaching only 721 million yuan, a sharp 48.48% decrease year-on-year. By the third quarter, even from a lower base, the downward trend showed no significant reversal, with revenue of 643 million yuan, down 46.23% compared to the same period last year.
Consequently, the poor performance over these two consecutive quarters led to revenue of just 3.174 billion yuan for the first three quarters, a 27.24% year-on-year decrease. Net profit attributable to shareholders was 742 million yuan, down 43.39% year-on-year.
Although the baijiu industry is in a period of deep adjustment, with issues like inventory buildup, sluggish sales, and weak consumption being industry-wide challenges, the dual decline in both revenue and net profit for Kouzi Distillery necessitates a closer look at its own internal issues.
Mid-to-high-end struggles; internal source: New business not yet a pillar. From a product perspective, Kouzi Distillery's performance across different product tiers and in both intra-provincial and extra-provincial markets is lackluster. According to its operating data for the first three quarters, both its high-end and mid-range products faced challenges, with the former down 27.98% and the latter down 15.38% year-on-year.
A distributor revealed that Kouzi Distillery's sales declined last year. The Jian 8 product was heavily promoted initially due to high margins, but as margins later fell, so did its sales momentum. The Kouzi 10-year, due to low sales volume, no longer faces price competition and currently has stable pricing. Inventory is mainly concentrated in large distributors' warehouses, with minimal stock at the retail level.
Another industry insider confirmed that Kouzi Distillery's core products are still positioned in the 100-130 yuan price band, while the mainstream consumption level in Anhui province has already upgraded to the 200-400 yuan range. "The brand power of its upscale Jian series is insufficient to compete fiercely above 600 yuan, leaving it stuck in an awkward position—unable to reach high-end markets comfortably while becoming less competitive in the mid-range," the insider noted.
Within Anhui province, Kouzi Distillery's stronghold is rapidly shrinking, with revenue of only 2.587 billion yuan in the first three quarters, compared to 3.553 billion yuan in the same period of 2024. Outside the province, the overall decline is relatively smaller than within, primarily because its expansion efforts there have been limited.
The internal source at Kouzi Distillery candidly admitted that the company's performance is indeed not ideal, and its current advantage within the province is mainly concentrated in Southern Anhui. Regarding the major distributor system that was key to Kouzi Distillery's rise, its drawbacks have become apparent in recent years. As major distributors pursue short-term profits, they can become resistant when pushing new products. The company stated it is "progressively improving the distributor system, not relying solely on major distributors anymore."
To find new growth points, Kouzi Distillery launched its new bulk liquor business at the end of last year. The first "Kouzi Jiufang" store opened in Huaibei, displaying three core products—Suixi Daqu, Kouzi Jiu, and Kouzi Jiao—while also introducing "pure grain bulk liquor."
It was learned from internal sources that this project remains in the pilot stage. A second bulk liquor store has been discreetly opened, led by a distributor and focusing on high-value bulk liquor under 100 yuan. However, this business is still far from becoming a new pillar of revenue.
The 10-billion-yuan dream shattered, while the controlling shareholder cashes out over 1 billion in 7 years. It is widely believed in the baijiu industry that annual sales exceeding 10 billion yuan have become the threshold for entering the "first-tier" camp. In this context, an increasing number of regional leading distilleries or quasi-national brands are making early arrangements to join the "10-billion-yuan club," and Kouzi Distillery is no exception.
In 2019, during its 70th-anniversary celebration, Kouzi Distillery first proposed the goal of a "10-billion-yuan Kouzi." In 2021, when its revenue first broke through 5 billion yuan, the company described it as a "critical node for entering the 10-billion-yuan scale." Today, with revenue for the first three quarters at only 3.174 billion yuan, even adding the undisclosed fourth quarter, it is highly unlikely to come close to the "10-billion-yuan target."
It is noteworthy that while the company is urgently seeking new businesses to "put out the fire," its controlling shareholder has been reducing their stake. A few months ago, one of the controlling shareholders, Liu Ansheng, executed a large-scale share reduction amid ongoing performance pressure, selling 10 million shares through 15 block trades at an average price of 32.92 yuan per share, cashing out over 300 million yuan.
This was not his first reduction. As early as 2018, Liu Ansheng reduced his stake by approximately 2.4 million shares, cashing out about 93 million yuan. Between 2019 and 2020, he sold nearly 7.5 million shares, cashing out around 430 million yuan. In September 2024, he sold 6.5 million shares via block trades, cashing out approximately 216 million yuan. Including the latest reduction last year, Liu Ansheng's cumulative cash-outs exceed 1 billion yuan.
Xiao Zhuqing, an independent Chinese liquor industry commentator, stated that the fundamental reason for Kouzi Distillery's sales decline lies in its outdated traditional "plate-within-plate" marketing model. This model, which relies on venue buyouts and terminal interception to generate sales, is no longer effective in the current baijiu industry environment. The nearly 20% drop in Kouzi Distillery's high-end baijiu sales is not a cyclical fluctuation but the starting point of a structural decline. Within Anhui province, the brand's recognition is highly tied to "100-yuan mass-market liquor," lacking the mental foundation to pull itself into the high-end market.
He also pointed out that for a regional distillery to gain a foothold in the national market, it must have a strong "niche market" as a backup. The collapse of Kouzi Distillery's position in the local high-end market will deprive its nationalization strategy of its most crucial strategic pivot. "Kouzi Distillery is facing a comprehensive crisis of exhausted dividends from the old model combined with disconnection from the new consumer context, necessitating fundamental channel reform and brand reinvention."
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