The baijiu giant Wuliangye Yibin Co.,Ltd. has executed a drastic revision of its historical financial data, effectively wiping out over 100 billion yuan in previously reported profits. The company's full-year net profit for 2025 plummeted by 72%.
The situation reveals management turmoil, a major accounting clean-up, and regulatory scrutiny. However, a fundamental question arises: if the industry were still booming, with distributors selling effortlessly, would Wuliangye have dared to take such extreme measures? The answer is likely no; it would have been neither necessary nor attempted.
The core issue is the current downturn in the baijiu industry. A review of industry data makes this clear: for the full year 2025, the revenue of 20 listed baijiu companies fell by approximately 6% year-on-year. Industry-wide production volume has declined for eight consecutive years, dropping about 70% from its 2016 peak. The third quarter was even more severe, with overall industry revenue falling 18.47% and net profit declining 22.22%. More than half of distributors reported increasing inventory accumulation and worsening price inversions.
In essence, the industry's foundation has been exposed, making it impossible for Wuliangye to continue accounting under the old rules.
First, examine the staggering data reported by Wuliangye: full-year 2025 revenue was 40.529 billion yuan, a collapse of 54.55%; net profit was 8.954 billion yuan, a plunge of 71.89%. The damage was not confined to the fourth quarter. The company went back and completely restated its financial reports for the first three quarters of 2025. First-quarter net profit was slashed from 14.86 billion yuan to 4.416 billion yuan. Revenue for the first three quarters was adjusted down from 60.9 billion yuan to 30.6 billion yuan, a reduction of 30.3 billion yuan.
Hidden within the balance sheet details is an even more alarming figure: 26.3 billion yuan in "supervised merchandise payments." This refers to funds that distributors had already paid to Wuliangye, for which goods were shipped. However, because these goods remained unsold at the retail level, they are now being pushed back onto Wuliangye's balance sheet.
Wuliangye has reclassified these funds from "actual company revenue" back to a "pending area where revenue cannot yet be recognized." This is a silent but deafening signal: inventory has been stuck in distributors' warehouses for so long that circulation has stalled, potentially to a breaking point. While reported revenue was severely cut, the company's actual operating cash flow remained unchanged, which is clear proof of channel stuffing where goods are not reaching end consumers.
Given the intense competition within the industry, did Wuliangye's previous management know about this "loophole"? Almost certainly. So why was it necessary to completely overhaul the third-quarter accounts now? The detention of former chairman Zeng Congqin for investigation on February 28, 2026, was the major trigger. With the former leader detained, the company entered a "power vacuum." Vice Chairman Hua Tao faced an impossible dilemma regarding signing off on the old accounts: refusing to sign would prevent the annual report's release, potentially leading to a trading halt or even delisting; signing would mean endorsing the previous aggressive reporting, creating future liabilities. Consequently, the new management used "accounting error corrections" as a pretext to overturn the former revenue recognition method.
However, this is essentially a big bath accounting strategy. The central contradiction is this: if this were a genuine historical correction of accounting policy, why were the previous four years never adjusted? Why was this "overturn-style major surgery" performed only after the chairman was removed? This selective timing for corrections is almost unprecedented in the A-share market. The immediate issuance of a severe inquiry letter by the Shenzhen Stock Exchange confirms this, directly questioning why errors occurred only now and not in prior years.
But the key point must be reiterated: Is this all accidental? No. The industry's chill has reached the bone. Business entertainment scenarios have sharply contracted, reducing demand for premium baijiu. The main sales price band is rapidly shifting down from 300-500 yuan to 100-300 yuan. Younger generations are increasingly disinterested in high-proof baijiu, forcing a supply-side transformation towards lower alcohol content and youth-oriented products.
Previously, the industry widely operated on an unwritten rule of "recognizing revenue upon shipment," essentially a game played with distributors. Manufacturers transferred growth pressure to the channels to beautify their books, while distributors used their capital to stockpile inventory to support manufacturers' sales figures, even though the goods never reached final consumers. Inventory turnover days have stretched longer, with the industry average now reaching 900 days—meaning a bottle might sit on a shelf for nearly three years before being sold. This figure represents a vast, dust-covered "quagmire," where the entire industry's risks and pressures are borne by the distributors.
Wuliangye's move to shift 26.3 billion yuan of "supervised merchandise" back onto its own books is like opening a floodgate. The old business model of driving growth through channel stuffing has completely failed, and the industry must now "squeeze out the水分." This logic applies to other peers: In 2025, Luzhou Laojiao experienced its first double-digit decline in a decade, with revenue of 25.7 billion yuan, down 17.52% year-on-year, and net profit of 10.8 billion yuan, down nearly 20%. Yanghe saw an even steeper decline, with net profit falling nearly 67%. Kweichow Moutai reported its first-ever simultaneous decline in revenue and profit since listing. With the overall market plummeting, Wuliangye's extreme "self-detonation" tactic seems designed to expose the channel risks hidden across the industry in recent years all at once.
For the entire baijiu industry, Wuliangye is not an innocent victim; its past channel-stuffing practices exacerbated today's vicious cycle. However, its forced "self-exposure" now presents the entire industry with an unavoidable ethical question: How much inventory, Moutai, Luzhou Laojiao, Yanghe, is still sitting in your channels without genuine end-consumer sales? As end-consumer sales decline, how long can the "performance reservoir" of contract liabilities be maintained?
Data shows that the combined contract liabilities of 20 listed baijiu companies decreased by nearly 8 billion yuan year-on-year, with 15 companies showing varying degrees of contraction. As overall channel confidence evaporates, the industry is undergoing an extremely painful period of "de-bubbling, de-leveraging, and de-trusting." Companies still using high contract liabilities to embellish growth and掩盖 channel stuffing could become the next targets for major adjustments.
Wuliangye's shareholders are the most directly harmed group. The stock price has fallen over 60% from its 2021 high, wiping out more than 600 billion yuan in market capitalization. In response, the company announced a repurchase plan of 8-10 billion yuan and total 2025 dividends of 20 billion yuan, attempting to support market confidence through share cancellations and large cash payouts. However, core fundamentals remain严峻: operating cash flow was negative in the first quarter, accounts receivable surged, and inventory remains堆积 above 20 billion yuan. The positive news is largely on paper or achieved through "accounting techniques," but the real pressure in the channels has not been fully eliminated.
What should affected investors do? A channel for compensation claims exists, and lawyers have initiated "pre-registration for claims" during the window period. The provisional conditions for claim eligibility are roughly for investors who purchased shares between a certain date in April 2025 and April 30, 2026, and still held them on April 30. These investors can already register with legal teams for collective维权. Although final determination depends on the court establishing a causal link between the misrepresentation and investor losses, the event's nature as a "large-scale accounting information error" makes it highly likely the court will rule it constituted misleading statements. Such a significant accounting correction is hard to divorce from investor misjudgment and losses. Whether regulators initiate a formal investigation will be a key indicator for the success of future claims.
At this stage, Wuliangye's approach is indeed "unprincipled." Inflating figures in previous years and then abruptly tearing up the books transfers the risk onto trusting shareholders. If listed companies engage in such practices, wouldn't financial markets descend into chaos? The real disorder, however, is not in any single company but in the entire industry's growth logic. Regulators must also step in to set clear boundaries. The China Securities Regulatory Commission has not yet formally launched an investigation into Wuliangye, but the Shenzhen Stock Exchange urgently issued an annual report inquiry letter in the early hours of May 1st, which is an extremely stern signal. Regulators cannot allow this "one-time big bath" to become a free pass for listed companies to manipulate profits at will.
Now, for some deeper reflections.
First, the "golden era" for baijiu is over; a "silver era" is being redefined. For the past two decades, the industry's growth formula was "stuff channels, raise prices, leverage relationships," considering goods sold once they reached distributors' warehouses. This game worked during booming prosperity but becomes extremely fragile when macroeconomic consumption weakens, entertainment scenarios shrink, and youth abandon high-proof baijiu. Wuliangye's exposure of 26.3 billion yuan in supervised merchandise tears off the "emperor's new clothes," forcing the entire industry to shift from "channel-inflation growth" to "sell-through-driven growth."
Second, whether this addresses symptoms or the root cause depends on whether regulators treat this event as an opportunity for long-term governance. Wuliangye merely "lifted the lid." If unified rules for "revenue recognition" in the baijiu industry are not redefined, after this wave of detoxification, the next management might revert to the aggressive "revenue upon shipment" practice to again "pad the numbers" and deceive the market. True reflection requires regulators to use this major event to draw a unified red line for all baijiu companies, mandating强制 transparency in financial reporting and clarity in channel inventory. Only by completely draining the "water" from the distribution chain can the baijiu sector begin to respect real "consumption power" instead of "stockpiling power."
Third, the industry must confront not just Wuliangye, but the entire sector's "mid-life crisis." Changing consumer habits are the deep-seated pain point for reform. Past consumption relied on "face" or status; future growth depends on "open-bottle rates" and "whether young people still drink it." The industry's anxious pivot is visible in the rush to launch low-alcohol products (e.g., Wuliangye's 29-degree "Yijian Qingxin," Luzhou Laojiao's development of a 28-degree Guojiao 1573). This crisis might push the industry to accelerate its shift from reliance on "government + business" consumption towards "pure mass-market consumption."
Finally, some practical observations.
The current state of Wuliangye resembles an over-exercising middle-aged person pushing around a belly of fat. For the first half of the year, it flexed its muscles through promotional packaging, but a full-body CT scan revealed critically high visceral fat. It now presents a set of erroneous old accounts alongside new MRI data, telling the market, "I was completely wrong before, I'm starting over, but I'm still valuable." Capital markets cannot instantly reverse losses, but this "shockwave of halved prices" has pulled the entire baijiu sector into a more rational and transparent state.
The winter is harsh, but winter swimming forces you to identify who can truly swim. If an industry never experiences decline, it would not accumulate such absurd unwritten accounting rules; if it never declined, regulators might continue turning a blind eye to "channel stuffing for performance."
Therefore, this event is not just about Wuliangye's collapse and reshuffle. It is more likely the true turning point for the entire baijiu sector to bid farewell to "high-sugar prosperity" and move towards "low-calorie health." To put it bluntly—without a thorough cleansing of泡沫, how can an industry find new directions for growth and relearn how to live healthily?
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