Anhui Kouzi Distillery Co., Ltd. (603589) is drawing attention for its unusually high spending amid declining performance. According to the 2025 financial report, the company's revenue last year was 3.991 billion yuan, a decrease of 33.65% year-on-year, while its net profit after non-recurring items plummeted by 59.27% to 656 million yuan.
The performance can be described as dismal. Revenue hit its lowest level since 2018, and net profit fell to its lowest since 2016, both recording the largest declines since the company went public in 2015.
More strikingly, despite a slight reduction in total employee numbers, the company's "office, travel, and entertainment expenses" under administrative costs surged by 74.3% year-on-year—jumping from 27.28 million yuan in 2024 to 47.53 million yuan.
As the industry faces a downturn and operational pressures mount, cost-cutting would be expected. Why, then, has Anhui Kouzi Distillery increased this expenditure instead of reducing it?
This is not the first time the company's office, travel, and entertainment expenses have been questioned. Two years ago, investors raised concerns about the mismatch between the growth rate of these expenses and the concurrent revenue growth. In 2022, Anhui Kouzi Distillery's revenue was 5.135 billion yuan, with office, travel, and entertainment expenses totaling only 9.88 million yuan. By 2023, revenue had increased slightly by 16.1% to 5.962 billion yuan, yet these expenses skyrocketed by 144% to 24.13 million yuan.
At that time, the company simply responded that the significant increase in expenses was normal. Since revenue was still growing and the workforce had expanded by nearly 200 employees compared to 2022, the market could somewhat accept the explanation.
However, with no staff expansion now and performance sharply declining, the continued rise in office, travel, and entertainment expenses is puzzling.
Anhui Kouzi Distillery began to perplex outsiders in 2022. That year, it announced a high-profile collaboration with the international consulting firm McKinsey & Company, setting a goal to become a top player in Anhui's liquor industry within five years. The previous year, the company's revenue had surpassed 50 billion yuan for the first time, which it described as a critical milestone toward reaching 100 billion yuan.
To achieve these goals, Anhui Kouzi Distillery stated that McKinsey would provide comprehensive, hands-on consulting services. This partnership came at a high cost: consulting fees increased by 328% year-on-year to 12.8887 million yuan in 2022. Over the next two years, fees reached 38.2691 million yuan in 2023 and 30.0746 million yuan in 2024. Even in 2025, amid a significant performance decline, consulting expenses still amounted to 23.33 million yuan.
In just four years, Anhui Kouzi Distillery spent over 100 million yuan on consulting services. However, the actual results have been disappointing. Over the past four years, the company not only lost its long-held position as the second-largest liquor producer in Anhui but also saw its once-confident goal of 100 billion yuan in revenue become increasingly distant.
The Anhui liquor market is dominated by three other key players: Gujing Distillery (000596), Yingjia Distillery (603198), and Jinzhao Seed Distillery (600199). For a long time, Gujing Distillery has held the top position, while Anhui Kouzi Distillery and Yingjia Distillery vied for second and third place.
As early as 2017, Anhui Kouzi Distillery's revenue and net profit were both higher than Yingjia Distillery's, with its net profit gap with Gujing Distillery less than 40 million yuan. However, since 2022, the landscape has completely reversed. Anhui Kouzi Distillery can no longer compete with Gujing Distillery and has even been overtaken by Yingjia Distillery.
Over the past four years, the revenue gap between Anhui Kouzi Distillery and Yingjia Distillery has widened significantly: 370 million yuan, 758 million yuan, 1.329 billion yuan, and in 2025, the gap expanded to 2.028 billion yuan. The erosion of industry influence has become an unavoidable reality for Anhui Kouzi Distillery.
Consequently, the market has consistently criticized the company for not allocating funds effectively. Some have pointed out that if Anhui Kouzi Distillery genuinely wants to reform its marketing strategy, it could learn from successful companies like Luzhou Laojiao, Jiangsu-based distilleries, or other top performers in Anhui, which might be more efficient.
Regarding the company's current difficulties, some analysts suggest the core issue lies in its key products being positioned in the 100-130 yuan price range, while the mainstream consumer market in Anhui has shifted to the 200-400 yuan range. This has left Anhui Kouzi Distillery stuck in an awkward position—unable to compete in either the high-end or low-end segments.
Others argue that the company is facing a comprehensive crisis, where the benefits of its old business model have been exhausted, and it has failed to adapt to new consumer trends, necessitating a thorough transformation.
Meanwhile, Liu Ansheng, one of the actual controllers of Anhui Kouzi Distillery, appears to have already assessed the situation. Since September 2024, he has reduced his holdings by 16.5 million shares through block trades, cashing out approximately 516 million yuan. Including减持 from 2018 to 2020, Liu has withdrawn over 1 billion yuan in total.
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