In the first half of 2025, Anhui Kouzi Distillery Co.,Ltd. (603589.SH) delivered disappointing results: revenue declined 20.07% year-on-year, net profit attributable to shareholders dropped 24.63%, and more alarmingly, operating cash flow plummeted 9,854.35%, turning from positive to negative. This interim report not only reflects the overall pressure facing the baijiu industry but also exposes the company's inherent weaknesses.
The company's high, mid, and low-end liquor revenues all came under pressure, with high-end liquor, being the core profit driver, experiencing nearly 20% revenue contraction that directly dragged down overall performance.
Under intense competition from provincial rivals such as Jiannanchun and Yingjia Gongjiu, Anhui Kouzi Distillery saw its revenue drop nearly 20% in the first half despite a net increase in provincial dealers. The company has not only lost its position as "Anhui's second-largest liquor producer" but also struggles with national expansion, with out-of-province revenue still accounting for less than 20% of total sales. Although the company's channel reforms have driven direct sales growth, this cannot offset the significant decline in traditional channels. The controlling shareholder's reduction plan has further intensified market concerns amid the performance pressure.
**High-End Liquor Stagnation and Cash Flow "Hemorrhage"**
Anhui Kouzi Distillery is one of China's representative mixed-aroma baijiu brands, with product lines including Kouzi Jiao, Lao Kouzi, Kouzi Fang, and Kouzi Jiu series.
Financial reports show that in the first half of the year, the company achieved revenue of approximately 2.531 billion yuan, down 20.07% year-on-year; net profit attributable to shareholders fell 24.63% to 715 million yuan; and non-recurring items adjusted net profit was 698 million yuan, down 24.9% year-on-year.
The company stated that since 2025, market differentiation and channel changes in the baijiu industry have intensified, with production continuing to shrink and sales growth slowing. Particularly affected by economic downturn and weak consumption, the industry faces overall pressure, with declining demand, sluggish sales, and high inventory becoming industry norms.
In the first quarter, the company's revenue, net profit attributable to shareholders, and non-recurring items adjusted net profit increased 2.42%, 3.59%, and 3.48% respectively year-on-year. However, the interim report showed a reversal from growth to decline, indicating particularly poor Q2 performance. Data shows that in Q2 2025, revenue declined 48.48% year-on-year to 721 million yuan, with quarterly net profit attributable to shareholders dropping 70.91% to 105 million yuan, and non-recurring items adjusted net profit falling 73.41% to 91.26 million yuan.
Notably, the profit decline occurred despite cost reductions. Due to decreased promotional spending from lower sales and reduced television advertising investment, the company's sales expenses decreased from 476 million yuan in the same period last year to 357 million yuan, a 25.11% decline.
The poor performance clearly reflects the dual impact of market environment and internal factors. Internally, Anhui Kouzi Distillery underperformed across all baijiu subcategories.
According to financial reports, revenue mainly comes from high-end, mid-range, and low-end baijiu products. In the first half of 2025, baijiu product revenue was 2.485 billion yuan. High-end baijiu revenue was 2.385 billion yuan, accounting for approximately 96% of baijiu revenue, with this category declining 19.8% year-on-year. In Q1, high-end liquor revenue was 1.728 billion yuan, up 3.53% year-on-year, meaning Q2 failed to sustain the growth momentum.
While high-end liquor growth weakened, mid-range and low-end baijiu also struggled. In the first half, mid-range and low-end baijiu revenues were 32.29 million yuan and 68.09 million yuan respectively, declining 10.82% and 2.59%.
Furthermore, operating cash flow turned negative at -383 million yuan, a dramatic 9,854.35% year-on-year decline. The company attributed this primarily to reduced cash receipts from goods sales.
**Provincial Market "Losses" and National Expansion Bottlenecks**
In Anhui Province, besides Anhui Kouzi Distillery, there are three other listed baijiu companies: Jiannanchun, Yingjia Gongjiu, and Golden Seed Winery, creating a highly competitive "multi-player battle" in the Anhui liquor market.
Analysis reveals that among the "Four Golden Flowers of Anhui Liquor," Jiannanchun consistently leads, while competition for second place between Yingjia Gongjiu and Anhui Kouzi Distillery remains intense. Since 2022, when Yingjia Gongjiu overtook Anhui Kouzi Distillery, the latter has been unable to reclaim the second position.
Under fierce competition, the company's provincial market faces pressure. In the first half, provincial market revenue was 2.1 billion yuan, down 19.31% year-on-year, compared to 8.78% growth in the same period last year. Despite a net increase of 34 provincial dealers, revenue declined significantly.
In 2022, the company set the strategic goal of "accelerating entry into China's first-tier baijiu companies." National expansion is unavoidable and represents the second growth pillar. The company noted its location in northern Anhui, adjacent to major baijiu consuming provinces like Jiangsu, Shandong, and Henan, giving its products strong market influence in surrounding provinces beyond Anhui.
However, results remain limited, with out-of-province revenue at 384 million yuan in the first half, down 19.24% year-on-year. The company added 29 out-of-province dealers to 546 total, exceeding provincial dealer numbers, but revenue differences remain vast.
The company has long struggled to expand beyond its home base. From 2022 to 2024, provincial revenue consistently accounted for over 80% of total revenue, with out-of-province revenue below 20%. Currently, the company faces both shrinking market share in its Anhui stronghold and bottlenecks in out-of-province expansion.
Early expansion relied on large dealer systems, but in later development stages, relatively weak manufacturer control over channels resulted in insufficient new product launches, channel order management, and consumer cultivation. Consequently, the company implemented channel reforms, flattening sales channels while dividing large dealers' agency rights from full regional product agency to product-specific agency and developing group purchase channels.
Short-term transformation effects remain limited. In the first half, wholesale agency revenue was 2.352 billion yuan, accounting for approximately 95% of channel revenue, down 21.26% year-on-year, exceeding the company's overall revenue decline. Direct sales (including group purchases) showed strong growth at 133 million yuan, up 44.57% year-on-year. Despite 40% direct sales growth, it cannot compensate for wholesale agency "losses."
As a performance "reservoir," contract liabilities reflect liquor companies' market appeal and channel bargaining power, representing dealer payment willingness. In the first half, contract liabilities declined 46.74% from the end of 2024.
Amid poor company performance, controlling shareholder Liu Ansheng announced plans in July to reduce holdings by up to 10 million shares (1.67% of total share capital) citing "personal funding needs." At current market prices, this represents over 300 million yuan in cash-out. In September last year, Liu Ansheng reduced 6.5 million shares through block trading, cashing out approximately 216 million yuan. Consecutive reductions by the controlling shareholder during a sensitive period of declining performance have intensified negative market sentiment toward the company.
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