Anhui Kouzi Distillery Co., Ltd. disclosed its 2025 annual report on April 22, 2026, revealing annual operating revenue of 3.991 billion yuan, a decrease of 33.65% year-on-year. Net profit attributable to shareholders was 673 million yuan, plunging 59.32% compared to the previous year.
This performance set several record lows for the company since its listing in 2015. The annual net profit decline was the steepest in a decade, and the 673 million yuan net profit marked a ten-year low. Additionally, net cash flow from operating activities was negative 216 million yuan, the first time it has turned negative since the company went public.
Potentially more impactful for Kouzi Distillery's future are the hidden risks within the annual report. As of the end of 2025, the company's inventory balance reached 6.455 billion yuan, accounting for 50.77% of its total assets of 12.713 billion yuan. Inventory represented a significant 85.84% of its current assets, creating a substantial overhang.
Despite the poor performance, one of the company's actual controllers, Liu Ansheng, continued to reduce his shareholding. In July 2025, Kouzi Distillery announced that shareholder Liu Ansheng would sell up to 10 million shares via block trades, representing 1.67% of the total share capital. Block trade data shows the sale occurred on August 25, 2025, executed in 15 transactions totaling 10 million shares at a price of 32.92 yuan per share, netting Liu approximately 330 million yuan.
Calculations indicate that since 2019, Liu Ansheng has conducted multiple share reductions, cumulatively realizing nearly 1 billion yuan. According to informed sources, following these sales, Liu has left Anhui and now resides permanently in Shanghai with his family.
After Liu's share sale was completed, Kouzi Distillery's stock price experienced a significant decline. On December 10, 2025, the share price fell below 30 yuan per share. By March 23, 2026, it hit an interim low of 24.22 yuan intraday, subsequently fluctuating around 25 yuan.
Concurrent with the declining performance, the compensation for Chairman and General Manager Xu Jin also decreased. His pre-tax remuneration for 2024 was 2.6436 million yuan, a reduction of approximately 27%, or 1 million yuan, compared to 3.6436 million yuan in 2023. In 2025, Xu's compensation fell further to 1.5503 million yuan, a decrease of another 1.09 million yuan.
Compensation for other senior executives also continued to decline. The pre-tax remuneration for Board Secretary and Deputy General Manager Xu Qinxiang was 1.1783 million yuan in 2025, down 720,000 yuan from 2024. Deputy General Manager and CFO Fan Bo received 840,400 yuan, a reduction of 480,000 yuan. Deputy General Manager Huang Shaogang's pre-tax remuneration was 1.0808 million yuan, down 720,000 year-on-year.
Revenue and net profit both declined, with gross margins falling across the board. The deterioration in Kouzi Distillery's performance was not abrupt. Reviewing the full year of 2025, the company maintained growth momentum in the first quarter. However, entering the second quarter, demand in the baijiu industry contracted sharply. Second-quarter revenue was only 721 million yuan, down 48.48% year-on-year and over 60% quarter-on-quarter. Net profit attributable to shareholders was 105 million yuan, plummeting 70.91%. The downturn continued into the third quarter, with revenue of 643 million yuan (down 46.23% year-on-year) and net profit of just 27 million yuan (a drastic 92.55% decrease).
In the fourth quarter of 2025, operating revenue was 817 million yuan, down 50.6% year-on-year, and the company reported a net loss attributable to shareholders of 68.68 million yuan, a decrease of 119.9%.
In its annual report, Kouzi Distillery attributed the performance decline to "increased downward pressure from the macroeconomy, intertwined issues of intense industry competition, weak consumption, high inventory, and poor sell-through," noting a significant drop in sales volume for its core profit driver, high-end cellar products.
Data shows that in 2025, revenue from high-end baijiu was 3.689 billion yuan, accounting for 94.5% of alcohol beverage revenue, but down 35.08% year-on-year. The gross margin for high-end baijiu also fell to 71.46%, a decrease of 4.19 percentage points.
Geographically, the company's regional dependency became evident. Revenue within Anhui province was 3.246 billion yuan, comprising 81.33% of total operating revenue, but down 34.51% year-on-year. Revenue from outside Anhui was 657 million yuan, a decrease of 28.58%. The steeper decline within the province suggests Kouzi Distillery is losing further ground in the highly competitive Anhui baijiu market.
The contract liabilities balance, an indicator of distributor confidence, was 334 million yuan at the end of 2025, down 40.26% year-on-year, reflecting a significant decrease in distributors' willingness to make advance payments. The cash flow situation is more concerning, with net cash flow from operating activities at negative 216 million yuan, down 114.81% year-on-year, marking the first negative reading since listing and indicating severely impaired operational vitality. The company stated this was primarily due to reduced cash received from sales following the decline in revenue.
The downturn persisted into the first quarter of 2026, with revenue of 1.375 billion yuan (down 24.02% year-on-year) and net profit of 329 million yuan (down 46.16%).
High inventory levels and counter-cyclical capacity expansion pose concerns. If the dual decline in revenue and profit reflects short-term pain, the high inventory reveals deeper structural risks. The 6.455 billion yuan inventory balance at the end of 2025 constituted 50.77% of total assets. Inventory representing 85.84% of current assets indicates over 80% of the company's liquid assets are tied up in stock, raising liquidity concerns.
Longitudinally, Kouzi Distillery's inventory-to-total-assets ratio has climbed steadily over the past four years: 37.38% in 2022, 40.44% in 2023, 42.86% in 2024, and exceeding 50% for the first time in 2025. This ratio is among the highest for major listed baijiu companies in the A-share market.
The high inventory stems from a severe mismatch between aggressive capacity expansion strategy and a downturn in the demand cycle. Kouzi Distillery has heavily invested in capacity construction in recent years, spending over 5 billion yuan to build the Kouzi Industrial Park.
During a previous performance briefing, the company stated, "With the gradual operation of Kouzi Industrial Park, the company's capacity for 65° base liquor continues to expand. It is expected that upon full operation, base liquor production capacity will exceed 50,000 tons, with storage capacity surpassing 400,000 tons."
However, when substantial new capacity meets a sudden cooling of end-consumer demand, inventory accumulates rapidly. In 2025, the company's baijiu production volume decreased by 22.19%, and sales volume fell by 19.98%, yet inventory volume increased against the trend by 6.44%. The capacity utilization rate was only about 38%, indicating significant idle capacity and raising concerns about operational efficiency.
A critical consideration is whether counter-cyclical expansion, amidst largely idle existing capacity and continuously shrinking demand, will further exacerbate inventory levels and bring additional depreciation costs and asset idling risks.
The former second-ranked Anhui baijiu player falls to third place. Kouzi Distillery was once grouped with Gujing Distillery and Yingjia Distillery as the "Three Giants of Anhui Baijiu," long holding the second position within the Anhui baijiu camp. However, this structure was broken in 2022 when Yingjia Distillery's revenue surpassed Kouzi's for the first time, relegating Kouzi to third place. The gap widened further in 2025. The former runner-up has now clearly become the third player.
The failure of its premiumization strategy is a key internal reason for this decline. Starting in 2023, the company launched the Jian 10, Jian 20, and Jian 30 series, aiming to cover the 300-yuan to 1,000-yuan price band. However, market performance indicates the "Jian series" has not driven breakthrough growth. Management also admitted in last year's earnings briefing that while prices for Jian 5, Jian 6, and Jian 8 products remained relatively stable, the actual transaction prices for Jian 10 and Jian 20 had fallen below suggested retail prices, indicating price inversion.
Confronting these challenges, Kouzi Distillery is striving to find a way out. In December 2025, the company opened its first "Kouzi Jiufang" direct-operated store in Huaibei, focusing on pure grain bulk liquor and community experience to tap into mass daily consumption scenarios. Direct sales revenue grew 64.94% year-on-year in the first three quarters, with the e-commerce exclusive "Yuan Ming Qing" series becoming a new growth engine online. Simultaneously, the company began shifting from a large-distributor system to a "1+N" small-distributor model, extensively enlisting group-purchase and special-appointment distributors in an attempt to transition from a "inventory-pushing logic" to a "sell-through logic."
However, significant uncertainty remains regarding whether these measures can turn the tide.
First-quarter 2026 data continued the weak trend: revenue of 1.375 billion yuan (down 24.02% year-on-year), net profit attributable to shareholders of 329 million yuan (down 46.16%), and net operating cash flow still negative at 135 million yuan.
Against the backdrop of accelerating industry concentration and a increasingly pronounced "Matthew effect," the road to reclaiming its former glory appears long for Kouzi Distillery, a regional distillery representing the Jianxiang baijiu type.
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