Amid the ongoing deep adjustment cycle in the baijiu industry, Anhui Kouzi Distillery Co.,Ltd. (603589.SH) has delivered a half-year report that offers little comfort. In the first half of 2026, the company saw double-digit declines across revenue, net profit attributable to shareholders, and non-GAAP net profit, with the latter two metrics nearly halving. High-end baijiu, the company's core revenue driver, fell more than 24% year-on-year during the period, while revenue from its home province of Anhui dropped at a steeper pace than that from external markets, signaling weakness on both fronts.
Meanwhile, cash flow remained in negative territory, and contract liabilities plunged 60% from the start of the year, reflecting that channel confidence has yet to recover. Notably, in its push toward a 10-billion-yuan revenue goal, the company had enlisted global consulting giant McKinsey at a substantial cost, paying over 100 million yuan in consulting fees over four years, though the target remains unfulfilled. The distiller has now decided not to renew McKinsey's contract and is shifting toward independent, deeper reforms. However, the immediate challenge is steep: to meet its full-year 2026 budget, second-half revenue must reach 2.358 billion yuan - a formidable hurdle for a company still navigating its adjustment phase.
Net Profit Declines Outpace Revenue, Cash Flow Remains Negative
According to data from the National Bureau of Statistics, revenue for the national alcohol, beverage, and refined tea manufacturing sector totaled 695.49 billion yuan in the January-June period, down 7% year-on-year. Operating costs fell 4.6% to 453.46 billion yuan, while profits declined 17.7% to 111.33 billion yuan. The baijiu industry remains in a deep adjustment cycle, with declining volumes, falling prices, and shrinking profits showing no signs of bottoming out. Against this backdrop, Anhui Kouzi Distillery's performance is equally concerning.
Financial reports show that in the first half of this year, Anhui Kouzi Distillery generated approximately 1.952 billion yuan in revenue, down 22.89% year-on-year. Net profit attributable to shareholders fell sharply by 48.97% to 365 million yuan, while non-GAAP net profit dropped 48.44% to 360 million yuan. The decline in attributable net profit significantly outpaced the revenue drop, highlighting a major hit to profitability. The company attributed the sharp profit fluctuation to reduced revenue, noting that administrative and selling expenses did not fall as fast as revenue, putting additional pressure on the bottom line.
On a quarterly basis, revenue for the first quarter of 2026 came in at 1.375 billion yuan, down 24.02% year-on-year, with attributable net profit falling 46.16% to 329 million yuan and non-GAAP net profit down over 46%. In the second quarter, traditionally a slow sales season, revenue reached 576 million yuan, down 20.03% year-on-year, while attributable net profit tumbled 65.43% to just 36.15 million yuan, and non-GAAP net profit fell 63.89% to 32.96 million yuan. Sequentially, both revenue and profit declined markedly in the second quarter, indicating a significant slowdown in operating momentum.
On the cash flow front, net cash flow from operating activities stood at -257 million yuan in the first half, an improvement from -383 million yuan in the same period last year, but still firmly in outflow territory. Contract liabilities, a key indicator of distributor willingness to pay and channel confidence for baijiu companies, fell to 129 million yuan at the end of June, down 61.38% from 334 million yuan at the end of 2025. This sharp decline reflects waning distributor enthusiasm, suggesting channel confidence will take time to rebuild.
High-End Products Struggle, External Expansion Yields Little
From a product mix perspective, Anhui Kouzi Distillery has built a full lineup spanning high, medium, and low-tier offerings. However, high-end baijiu, the company's primary revenue source, underperformed in the first half and became the main drag on overall results. According to the company's semi-annual operating data announcement, high-end baijiu revenue fell 24.43% to 1.802 billion yuan. In contrast, mid-tier baijiu revenue grew 4.41% to 33.71 million yuan, and low-tier baijiu revenue rose 5.29% to 71.69 million yuan.
While mid- and low-tier products posted counter-trend growth and improved versus the broad decline seen in the first half of 2025, their combined scale remains just around 100 million yuan - far too small to fill the gap left by the high-end downturn. Regionally, in Anhui province, the company's home base, distributor numbers reached 566 in the first half, a net increase of 2, yet revenue fell 24.61% year-on-year to 1.584 billion yuan, a steeper drop than in external markets. Expansion beyond the province faces similar bottlenecks: despite a net addition of 23 distributors, bringing the total to 593, revenue decreased 15.73% to 324 million yuan, as newly added channels have yet to translate into productive output.
On the channel front, direct sales (including group purchases) revenue rose 21.19% year-on-year to 161 million yuan in the first half, indicating progress in building a direct sales system. However, wholesale and distribution revenue, which dominates total sales, fell 25.75% to 1.747 billion yuan, significantly dragging overall performance. During the company's 2025 annual and 2026 first-quarter results briefing, management noted that many newly added distributors are still in early-stage market development, team building, and terminal cultivation, with current focus on brand building and outlet expansion, meaning meaningful revenue contributions are unlikely in the short term.
Meanwhile, the company has deliberately moved away from the traditional extensive wholesale model, pushing channels toward refined terminal operations and scenario-based sales activation. As the channel profit model undergoes restructuring, per-distributor revenue has experienced temporary fluctuations.
Over 100 Million Yuan in Consulting Fees Fail to Deliver, McKinsey Contract Not Renewed
In 2022, Anhui Kouzi Distillery set a strategic goal to "accelerate the realization of 10 billion yuan in revenue and secure a leading position in the national baijiu market," partnering with international consulting firm McKinsey to jointly develop a five-year plan aimed at becoming a top-tier Anhui liquor maker. The company invested heavily in consulting services, with fees reaching 12.89 million yuan in 2022, 38.27 million yuan in 2023, 30.07 million yuan in 2024, and 23.34 million yuan in 2025. Over four years, cumulative consulting fees exceeded 100 million yuan.
Yet the 10-billion-yuan target remains elusive. In 2024, revenue exceeded 6 billion yuan, but in 2025, it fell to 3.991 billion yuan, down 33.65% year-on-year. Attributable net profit dropped 59.32% to 673 million yuan, while non-GAAP net profit fell 59.27% to 656 million yuan. In an investor relations disclosure on July 20, investors raised questions about channel reform effectiveness, further cooperation with McKinsey, lessons learned, and the direction of 2026 reforms.
Chairman and General Manager Xu Jin responded that the company's earlier channel reforms effectively resolved issues such as weak channel control and insufficient terminal sell-through. Direct terminal management, digital enablement, and model market operations are progressing steadily, and the company has decided not to renew McKinsey's contract. Xu added that in 2026, the company will independently continue deepening channel reforms, focusing on three key directions: enhancing channel quality, improving manufacturer-distributor collaboration, and empowering distributors. Meanwhile, the Anhui operations center will primarily execute headquarters strategy, coordinating refined market operations in the province, sales implementation, and new business incubation, pushing the home market from extensive expansion toward high-quality, digital, and refined development. The center is currently operating smoothly and efficiently.
Notably, consulting fees in the first half of this year plunged to 250,100 yuan. According to the company's 2026 financial budget plan, the full-year revenue target is set at 4.31 billion yuan, representing 8% growth year-on-year. To achieve this, second-half revenue would need to reach 2.358 billion yuan, requiring a 61.51% year-on-year increase. In the context of the industry's deep adjustment cycle, that is no easy feat.
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