Shede Spirits reports a 67.26% first-half profit drop after cutting shipments

Shede Spirits, a Chinese baijiu producer listed in Shanghai, reported a sharp drop in first-half profit after cutting shipments to reduce channel inventories and support prices in a weak domestic liquor market.

In its half-year report disclosed on Aug. 18 and carried in Shanghai Stock Exchange filings on Aug. 19, the company said first-half operating revenue fell to 2.287 billion yuan, while net profit attributable to shareholders dropped to 145 million yuan. The profit figure was down 67.26% from about 442.9 million yuan a year earlier, a decline of roughly 297.9 million yuan.

The pressure was especially clear in the company’s liquor business. Revenue from alcoholic products fell to 2.0374 billion yuan in the first six months of 2026 from 2.4182 billion yuan a year earlier, a decline of 380.8 million yuan, or 15.75%.

The company said the baijiu industry remained in a deep adjustment period in the first half, with weak consumer demand, intense competition for existing market share and continued pressure on both sales volume and pricing. Shede said it responded by actively pursuing a strategy of controlling supply and defending prices, while helping distributors work through inventory to keep market operations and channels stable.

That strategy came with a direct cost to earnings. Shede said the reduced shipment policy, combined with higher selling expenses and front-loaded market investment, created short-term pressure on profit. The company posted a net loss of about 86.4 million yuan in the second quarter, underscoring how the inventory adjustment moved beyond slower sales and began to weigh on quarterly profitability.

At the same time, some operating indicators improved. Shede said cash flow from operating activities turned positive in the second quarter, reaching 75.406 million yuan. The company also reported contract liabilities of 161 million yuan at the end of the reporting period, up from the end of last year and more than 30 million yuan higher than at the end of the first quarter. In China’s liquor sector, contract liabilities are often watched as a sign of dealer advance payments and channel confidence.

Total assets at the end of June rose 2.55% from the end of 2025 to 12.936 billion yuan, according to the filing. The company also said it continued cost-control efforts, with operating costs down 4.29% year over year and administrative expenses down 23.6%.

The earnings figures reflect a broader slowdown in China’s baijiu market, though Shede’s results are company-specific and do not represent the entire industry. The company said traditional and newer channels are both under pressure, and competition between them has intensified as overall growth has weakened.

Securities Times, citing the filing and operating data also reproduced by market data provider CFI, said the results made Shede a clear example of how premium and sub-premium baijiu makers are navigating the industry downturn. The company is trying to trade short-term earnings for longer-term channel health by slowing deliveries and avoiding a buildup of unsold stock.

Industry analyst Xiao Zhuqing, quoted by Securities Times, said the weaker revenue and profit reflected both the market environment and a deliberate corporate choice. He said the company’s decision to sacrifice short-term financial performance in order to reduce inventory and stabilize pricing could help support long-term channel health, but he also pointed to continuing challenges in product mix, channel change and Shede’s push to expand nationally.

Xiao said the effectiveness of the strategy would depend less on the published accounts than on real demand indicators such as actual bottle-opening rates at the consumer level, inventory turnover days in distribution channels and whether wholesale prices for core products can remain stable. If end-user sales improve, he said, the earnings hit could prove worthwhile. If consumer demand does not recover, the adjustment period could last longer.

By product tier, Shede’s mid- to high-end liquor revenue fell 22% in the first half to 1.539 billion yuan. The company said mass-market liquor, including products such as Tuopai T68, performed better and helped lift ordinary liquor sales by 11.97%. That mix shift suggests lower-priced offerings were more resilient than premium lines as consumers stayed cautious.

The company also pointed to stronger online sales. Revenue through e-commerce channels reached 398 million yuan in the first half, up 18.41% from a year earlier. Shede said it is adjusting its channel structure by focusing more on modern retail, restaurants and other higher-quality offline outlets, while also strengthening e-commerce and instant retail channels in an effort to improve real sell-through.

In its report, Shede said it remained focused on what it calls its aged-baijiu strategy and a broader shift toward consumer-oriented operations. The company said it concentrated resources on core flagship products and on key regional markets including Sichuan, Hebei, Shandong, Henan and northeastern China. It also said it was using more detailed local operations to lift market share in those areas.

Looking ahead to the second half, Shede said it plans to target the peak liquor consumption season and accelerate its shift toward consumer-led growth. The company said it would deepen investment in products, branding, channels and organization, and continue marketing activities aimed at high-end consumer groups and regional events tied to its aged-baijiu positioning.

For investors, the central issue in the latest results is that Shede’s voluntary inventory adjustment is no longer affecting only top-line sales. It has now produced a second-quarter loss and a steep reduction in first-half profitability, even as some balance-sheet and cash-flow indicators show early signs of stabilization in the distribution channel.