Over the past few years, the baijiu sector has been declining in a less-than-dignified manner.
The market has long debated the question of "the golden age of baijiu is over, when will it finally bottom out?"
Since October, the baijiu sector appears to have seen some warmth. On October 30, baijiu stocks surged across the board, with the CSI Baijiu Index jumping more than 5%. Huangtai Liquor, Gujing Distillery, and Yingjia Distillery all hit the daily limit, while Luzhou Laojiao also hit the limit up for the first time in nine months. Kweichow Moutai rose more than 2%, with its share price reaching a nearly six-month high.
On October 29, what was described as the worst collective third-quarter earnings report in recent years for the baijiu industry was released. The numbers on the earnings sheets were not pretty, yet share prices collectively hit the daily limit. What does this divergence mean?
After nearly five years of continuous adjustment, has baijiu finally reached its inflection point?
01
Over the past week, baijiu companies have successively released their third-quarter reports. If looking only at year-on-year comparisons, most liquor companies' results were indeed dismal.
Luzhou Laojiao's revenue for the first three quarters was 14.668 billion yuan, with net profit attributable to shareholders of 5.671 billion yuan, representing year-on-year declines of 36.58% and 47.31% respectively, with the single-quarter decline in Q3 further widening. Gujing Distillery's Q3 net profit declined by as much as 68% year-on-year. It is no exaggeration to call this the worst third-quarter report in recent years.
But positive signals also emerged. Luzhou Laojiao's Q3 net profit attributable to shareholders was 1.332 billion yuan, up 111.12% quarter-on-quarter from 631 million yuan in Q2, with revenue also growing 71.45% quarter-on-quarter. Shanxi Fenjiu and Shede Spirits similarly completed a directional shift on a quarter-on-quarter basis. Shede Spirits' Q3 net profit was 49.55 million yuan, turning profitable quarter-on-quarter, with a year-on-year increase of 72.44% and gross margin rising 4.7 percentage points year-on-year.
Yingjia Distillery's performance showed a rare double increase, with Q3 revenue of 1.413 billion yuan, up 4.25% year-on-year, and net profit attributable to shareholders of 414 million yuan, up 8.58% year-on-year. Moreover, in Q3, Yingjia Distillery's contract liabilities balance was 454 million yuan, up 30 million yuan from the end of Q2, sales cash receipts were 1.56 billion yuan, and operating net cash flow was 516 million yuan, up 9.3% year-on-year.
The quarter-on-quarter recovery in contract liabilities means that distributors were still willing to pay the distillery during the off-season. The simultaneously improving cash flow also indicates that these payments were not propped up by credit sales and inventory stuffing. Against the backdrop of weak overall payment willingness in the industry, regional leaders with rigid demand from their home-province base markets can more quickly complete a positive cash flow cycle in their channels. In contrast, pan-national brands are still bearing the cost of proactive clearing, with relatively poor performance.
Wuliangye's Q3 operating cash flow turned positive at 2.2 billion yuan year-on-year, but contract liabilities declined by 1.5 billion yuan quarter-on-quarter. Sales receipts were 7.21 billion yuan, and receivables financing decreased significantly by 6.5 billion yuan quarter-on-quarter. Behind these numbers is liquor companies actively tightening the pace of payment collection, no longer blindly stuffing channels with inventory, but instead letting channels digest inventory first. Part of the single-quarter performance decline is precisely the cost of this proactive choice.
But from another perspective, the single-quarter performance decline may have bought breathing room for the channels. The ugly third-quarter data partly reflects that real demand for baijiu remains relatively weak, but on the other hand, it also shows that liquor companies are actively relieving pressure on channels and squeezing out the "water" from past inventory stuffing in their financial reports.
After multiple consecutive quarters of demand contraction and channel destocking, the quarter-on-quarter recovery of some liquor companies' performance may not mean the inflection point has arrived. Under a low base in Q4, some liquor companies are expected to turn positive, but the direction is still bottoming rather than reversing.
However, taken together, it still shows that the industry's risks have been fully released, and the bottoming characteristics of the baijiu cycle are becoming increasingly obvious. But recovery is destined not to happen overnight.
Regional leaders have stronger demand resilience because consumption scenarios in their base markets lean more toward mass banquets and daily drinking, and the channel destocking path is shorter. Pan-national brands have accumulated longer distribution chains and heavier inventory burdens over the past few years, and clearing naturally requires more time.
From a price-band perspective, a structure of strength at both ends and weakness in the middle is further taking shape. Feitian Moutai achieved double-digit year-on-year growth in sell-through across multiple regions, making it one of the very few ultra-premium single products still maintaining positive growth. At the low price band, mass-market products under 100 yuan such as Bokfen and Yingjia Dong 6, benefiting from demand driven by self-drinking and family gatherings, have seen stable or even slightly growing sell-through.
Compared with previous industry recovery rhythms, which were mostly led and defined by top liquor companies like Moutai, Wuliangye, and Luzhou Laojiao, this round's recovery pace is clearly very different from the past. But the worst may already be over.
02
After the prosperity peak in 2021, baijiu did not escape its previous cyclical path. The entire industry similarly unfolded in sequence from weakening demand, declining wholesale prices, channel inventory accumulation, to financial report clearing — it is just that this time, the road has been longer than before.
By the third quarter of 2026, this chain has advanced to its final stage, but has not yet been completed. And if true recovery is to be achieved, this process must also be completed.
Beyond the partial warming in third-quarter reports, during the recently passed 2026 Mid-Autumn and National Day double festival period, channel-side data showed that overall sell-through in the baijiu industry declined about 10% year-on-year. Although still declining year-on-year, the same period in 2025 saw a decline of about 20%, and in 2024 about 30%. The decline has narrowed for two consecutive years, indicating that the downward slope on the demand side is moderating.
On wholesale prices, the bulk bottle wholesale price of Feitian Moutai stabilized around 1,710 yuan after the double festival, with the full-case wholesale price around 1,725 yuan. Wuliangye Puwu wholesale price maintained around 780 yuan, and Guojiao 1573 high-strength wholesale price was about 830 yuan. Against the backdrop of wholesale prices declining steadily over the past two years, the confirmation of a price bottom is a rather important change.
More critically, there is inventory. From an industry-wide perspective, after nearly two years of proactive destocking, channel inventory has dropped to historically low levels. Kweichow Moutai distributors are basically at low or even zero inventory, and Wuliangye distributor inventory has declined year-on-year to around 10%–15%. Inventory levels in most regions have fallen back to reasonable ranges, distributor dumping behavior has noticeably decreased, and the industry inventory cycle is shifting from proactive destocking to the early stage of passive destocking.
But inventory falling back to a reasonable range does not mean demand is recovering. There is still a key variable in between: after inventory normalizes, will distributors choose to restock or continue to shrink their balance sheets?
The contract liabilities data in the third-quarter reports provides a rough perspective. Contract liabilities at regional leaders such as Yingjia Distillery and Gujing Distillery rebounded quarter-on-quarter, and Jinhui Liquor's contract liabilities reached 820 million yuan, surging 30.3% year-on-year, showing that payment collection at some terminals and channel willingness to stock up are indeed repairing. This means localized demand may have already touched bottom.
However, at present, the absolute level of finished liquor inventory across the industry remains high, and the repair of channel confidence is far from sufficient to support large-scale payment and stocking. Q4 and the 2027 Spring Festival peak season will be key nodes for testing whether the inventory cycle turns.
In this sense, the price bottom and inventory bottom may have been preliminarily confirmed, but the demand bottom still needs time to verify. It is precisely in this gap where the fundamentals are gradually clarifying at the bottom but recovery has not yet been confirmed that valuation and dividends begin to assume the pricing of baijiu companies, determining whether one can take an early position in the bottom area.
After a period of gains, the CSI Baijiu Index's rolling price-to-earnings ratio has risen to about 22 times, but remains below the historical median of 28.82 times, sitting at the 23.96th percentile over the past decade. Over the past ten years, fewer than a quarter of trading days saw baijiu cheaper than now. From a price-to-book perspective, it is even at an extremely low percentile of about 5% over the past decade. At the same time, institutional holdings in the baijiu sector have also dropped to historical lows, with the chip structure clearing ahead of fundamentals.
The dividend yield, however, continues to climb. The CSI Baijiu Index dividend yield has reached 4.45%, with Luzhou Laojiao's dividend yield exceeding 7%, Wuliangye's exceeding 6%, and Shanxi Fenjiu's exceeding 5%. Now, with the 10-year government bond yield hovering near 1.6%, the spread between the baijiu sector's dividend yield and the 10-year government bond has reached a historically high range, and leading liquor companies' payout ratios are still rising.
In a low-interest-rate environment, consumer goods leaders with still-positive operating cash flow, no substantial weakening of brand moats, and clear dividend willingness — even if revenue growth cannot return to double digits — are providing shareholder returns through dividends and buybacks themselves, offering bottom support for share prices. Being cheap and offering dividends does not itself constitute a reason to buy, but it at least means safety.
03
Conclusion
The inventory cycle will not complete its clearing along a smooth curve, and share prices will not rise in a straight line without looking back. Baijiu will certainly not return to the era when growth could be achieved simply by stuffing inventory into channels. But a valuation of 20 times, a dividend yield above 4%, and accumulated inventory destocking mean that the most painful phase for this industry is, in all likelihood, passing. The rest is left to time and divergence.
Comments