Chinese baijiu producers are set to report a weak third quarter

More than 15 Chinese alcohol companies are scheduled to release third-quarter results between Oct. 26 and Oct. 30, setting up an important week for investors watching the country’s baijiu market, where weak consumption and channel inventory pressure are still weighing on growth.

Brokerage forecasts cited by the 21st Century Business Herald point to another difficult reporting season for most listed baijiu producers, despite earlier hopes that last year’s low comparison base would allow many companies to return to growth. Those expectations faded after sales during the National Day and Mid-Autumn Festival period weakened further, reducing the chances that distillers could push more stock into distribution channels.

That has left many producers selling only within the limits of what distributors can absorb, rather than restoring the old model of aggressively loading inventory into the trade. Analysts expect that to keep revenue and profit under pressure across much of the sector in the third quarter.

Kweichow Moutai, the country’s largest baijiu producer, is still expected to outperform the broader group. Several institutions forecast that third-quarter revenue will rise by a low single-digit rate from a year earlier, while profit could either post a slight increase or fall by a single-digit rate. Moutai raised prices again in the third quarter and adopted a more market-based approach that used different pricing across different sales channels, moves that analysts believe should provide some support to earnings.

Even so, expectations for many other leading producers remain subdued. Brokerage estimates suggest that Wuliangye, Luzhou Laojiao, Shanxi Fenjiu, Yanghe, Shede Spirits, Shui Jing Fang and Kouzijiao, among others, are still in a clearing phase. The main reason, analysts say, is that holiday sell-through weakened enough to keep producers from rebuilding inventories in the channel. Instead, they have had to adjust shipments to actual end-market demand.

The contrast between the sector’s top two strong-aroma baijiu groups has remained especially visible. Wuliangye introduced channel support policies ahead of the holiday season, and analysts said its holiday sales recovery was relatively clear. By contrast, Luzhou Laojiao’s premium Guojiao 1573 brand continued to prioritize price discipline over volume. Recent share-price moves have reflected those different approaches, according to market observers cited by the paper.

For many other baijiu companies, the central challenge is less about product quality than about price positioning. Their main products are concentrated in the sub-premium segment, which has seen some of the sharpest contraction in the current downturn. As consumers trade down, companies are launching lower-priced products to capture demand, but those products take time to build recognition and sales momentum.

There are, however, signs that some regional producers may be stabilizing earlier than the rest of the market. After two to three years of efforts to reduce channel inventories, and as market share becomes more concentrated within some provinces, several local markets appear to have moved closer to a bottom. In Anhui, brokers widely expect Gujing Gongjiu and Yingjia Gongjiu to post positive revenue growth in the third quarter, ahead of many peers.

Analysts expect the two companies to gain share from weaker local rivals, including Kouzijiao and Golden Seed Liquor, whose third-quarter results are still projected to decline. Gujing’s stock has recovered somewhat in recent trading, while Yingjia’s shares have remained positive for the year, a rare outcome in the baijiu sector.

Jinshiyuan is also expected to stand out. Most brokers forecast third-quarter revenue growth, and some expect a double-digit increase. Foreign institutions cited by the Chinese paper also see the company as likely to outperform most regional distillers. Analysts point to two factors. First, Jinshiyuan sharply reduced channel loading in the third quarter of last year after changes in the broader operating environment, creating a low comparison base. Second, it has pushed lighter and more affordable products this year, aligning its offering with the market’s shift toward lower spending.

That shift in consumer behavior is one of the main reasons this week’s results matter beyond baijiu alone. The earnings reports are expected to offer a read on demand, pricing power and inventory conditions across China’s beverage market, and they may show how far spirits consumption is moving toward more affordable products. That has implications not only for baijiu makers, but also for beer, wine and other alcohol producers competing for cautious household spending and for distributors deciding how much stock to carry.

Recent production data suggest that the weakness is not limited to one category. Figures released last week by the National Bureau of Statistics showed that China’s baijiu output in September fell 4.8% from a year earlier. Beer output fell 7.8%, and wine output fell 11.1%. For the first nine months of the year, baijiu production was down 3.9%, while beer output was down 6.0%. Wine output for the period rose 1.6%, though from a much smaller base.

The broader alcohol market has also produced mixed company-level results. Huiquan Beer said on Oct. 25 that its third-quarter revenue fell 2.8% from a year earlier, while net profit attributable to shareholders rose nearly 14%. For the first nine months, the brewer reported revenue growth of 2% and profit growth of 17.7%, showing that some companies are still protecting earnings even as volumes remain soft.

In baijiu, though, the main debate is about timing. Brokers cited by the 21st Century Business Herald generally believe that more producers may have to wait until the fourth quarter before returning to positive year-over-year growth. Until then, third-quarter results are likely to show a market still dealing with weak holiday demand, cautious distributors and a consumer base that remains more willing to spend at lower price points than on the premium products that drove the industry’s earlier expansion.