The days of easy profits from selling top-tier Chinese spirits are over, with one major distributor now facing significant losses.
HuaZhi Wine & Spirits Co., Ltd., known as China's first listed alcohol distribution company, recently disclosed a substantial tax payment adjustment. Following a self-review, two of its wholly-owned subsidiaries are required to pay approximately 129 million yuan in back taxes and late fees, which the company stated have been fully settled and will impact its 2026 financial results.
HuaZhi Wine & Spirits Co., Ltd. is a leading distributor and service provider in China's alcohol market. Its founder, Wu Xiangdong, a prominent figure in the industry, built a spirits empire over three decades, encompassing distribution, branding, and production, with holdings in both A-share and H-share listed companies.
However, the baijiu industry has entered a period of deep adjustment, characterized by high channel inventory and price inversion for premium brands, creating new challenges. In 2025, HuaZhi Wine & Spirits Co., Ltd. reported its first annual loss since listing, with revenue falling 37.7% to 5.9 billion yuan and a net loss attributable to shareholders of 369 million yuan. The downward trend continued into the first quarter of 2026.
The Burden of Premium Inventory
The two subsidiaries involved in the tax adjustment are significant contributors to the company's performance. One handles sales to major retail chains and corporate clients, while the other is primarily responsible for procuring famous brands like Moutai and Wuliangye. The nearly 130 million yuan payment adds further pressure during a difficult period for the company's operations.
HuaZhi Wine & Spirits Co., Ltd. attributed the need for the payment to a "difference in the understanding of tax policies," declining to provide more specific details.
From Easy Profits to Steep Losses
The company's past success was built on premium spirits, but this has now become its primary challenge. As a major distributor deeply tied to top producers, its business model relied on purchasing from these brands and selling at a markup. During the industry's boom, this was highly profitable.
With the sector's downturn, however, consumer demand has softened amid oversupply, leading to high inventory levels and falling prices. The retail price for a bottle of Feitian Moutai, for instance, has fallen sharply from its peak. This widespread price inversion means distributors' inventories are losing value daily. The more stock held, the greater the risk and the thinner the margins.
The company's general manager, Yang Wuyong, noted that upon taking his role in 2024, the company was sitting on over 3 billion yuan worth of inventory that was depreciating every day. The gross margin for its baijiu business has collapsed from over 20% in 2021 to just 4.9% in 2025. A major factor in the 2025 loss was a 302 million yuan inventory write-down due to falling prices.
The retail landscape has fundamentally changed. As Yang summarized, selling premium baijiu has shifted from a guaranteed win to a potential loss.
Pinning Hopes on Instant Retail
Under performance pressure, the company is now betting on a new instant retail model called "Huazhi Youxuan." This initiative is a core strategic focus for store expansion in 2026. The model features small-format stores of about 80 square meters that function as both shopfronts and warehouses, promising delivery within 15 to 30 minutes to reach consumers in communities and lower-tier cities.
These stores are integrated with major platforms like Meituan, Ele.me, JD.com, and Douyin. The company provides a unified digital system, product supply, and operational support. Yang described opening one such store as equivalent to opening five traditional stores.
The "Huazhi Youxuan" network has expanded rapidly, surpassing 250 stores nationwide, primarily converted from traditional tobacco and alcohol shops. The goal for 2026 is to add 1,000 new locations.
The company is also accelerating the development of its own branded products under the "Huazhi Youxuan" label, launching four new offerings in March 2026 priced between 100 and 300 yuan. Yang aims for own-brand sales to account for over 30% of revenue within three to five years, aspiring to emulate a membership warehouse club model with strict product selection for quality and value.
Navigating a Crowded and Competitive Field
The instant retail channel for alcohol is already fiercely competitive. Beyond traditional distributors, major platforms pose a significant threat. For example, Meituan's "Waima Songjiu" platform reported an estimated transaction volume of 6 billion yuan in 2025, with over 2,000 fulfillment centers, placing it among the top three alcohol retail chains.
Simultaneously, upstream producers like Kweichow Moutai Co.,Ltd. are accelerating their direct-to-consumer sales. In 2025, Moutai's direct sales channel revenue surpassed its traditional wholesale channel for the first time. Its "i Moutai" digital platform saw explosive growth in early 2026. As producers sell directly or partner with platforms, the value proposition of traditional distributors like HuaZhi Wine & Spirits Co., Ltd. is being squeezed.
The "Huazhi Youxuan" model remains in its early stages of market validation. Whether instant retail can provide a successful path forward for the company is a question that only time and the market can answer.
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