Inventory turnover hits historic low "Half the year is already over, and revenue hasn't even reached one-tenth of last year's." Li Hua (pseudonym) speaks with deep helplessness. Li Hua has run a tobacco and alcohol store in Jinan, Shandong for 12 years, and now worries so much about keeping the store running that he can't sleep at night. The 40-square-meter store is filled with shelves of various premium cigarettes and liquors, looking no different from previous years. But only Li Hua knows that a significant portion of these goods has been sitting for nearly six months, with inventory turnover at an all-time low. "High-end baijiu basically doesn't move, and mid-range liquor sells only a few bottles. Now I can only barely get by selling low-priced liquor at a few dozen yuan a bottle," Li Hua sighs. "In all my years in this business, I've never seen it this tough." Li Hua's predicament is not unique. Under the dual pressure of changes in consumer demand in the baijiu industry and the downturn of the industry cycle, millions of tobacco and alcohol stores across the country are experiencing an unprecedented winter. According to data from Tianyancha, from 2015 to 2022, the tobacco and alcohol store industry grew at a compound annual growth rate of 15%, and by 2022, the number of such stores nationwide had surpassed 3.54 million. However, in 2023, the industry situation reversed sharply, with new registrations plummeting by 64%. Behind this cliff-like decline is a dramatic shift in the consumer market. The most direct impact comes from the shrinking of baijiu consumption scenarios. For example, the share of government and business banquets in baijiu consumption has dropped from 45% in 2019 to 28% in 2024, a decline of more than 17 percentage points. "In the past, during holidays, high-end cigarettes and alcohol were never hard to sell. Now even the number of people asking has decreased," Li Hua recalls. "A month before the Mid-Autumn Festival in 2019, I could sell more than 20 bottles of Moutai. This year, I've only sold 4 bottles so far." Price inversion is also causing immense pain for store owners. A distillery owner said that during recent visits to tobacco and alcohol stores in multiple regions, he found that most stores are doing poorly, with sales for many group-purchase-oriented stores down 40%-50%. According to the "2024 Baijiu Industry Channel Transformation and Development In-depth Report," on April 22, 2024, the retail price of Pu Wu (Wuliangye) at tobacco and alcohol stores was about 980 yuan per bottle, while the price on Pinduoduo's 100-billion subsidy was only 859 yuan per bottle, a difference of 121 yuan. The online price of Feitian Moutai was even 380 yuan per bottle lower than the retail price at tobacco and alcohol stores. Such a huge price gap has completely eroded the price advantage of traditional stores. Inventory backlog has also become a "Sword of Damocles" hanging over store owners. In 2022, the total inventory of 18 listed baijiu companies was about 3.35 million tons (including semi-finished products), which increased to 3.5 million tons in 2023, with inventory accumulation growing year after year. This pressure eventually transmits to the channel, forcing distributors and store owners to bear enormous financial strain. "I currently have over 400,000 yuan worth of inventory in my store, of which more than 200,000 yuan was purchased in the first half of this year and hasn't moved at all," says Wang Gang (pseudonym), another store owner in Jinan, helplessly. "All my funds are tied up in goods, and my cash flow is almost broken." The cigarette business is also facing challenges. "Cigarette profits were never high, and now sales are declining, so we basically don't make money," Li Hua admits. The contribution of tobacco business to store revenue is shrinking. Survival difficulties under multiple pressures The predicament of tobacco and alcohol stores is not caused by a single factor but is the result of multiple pressures stacking up. The first is the "dimensional reduction attack" from online e-commerce. Major e-commerce platforms generally tend to use low-price models such as 100-billion subsidies and flash sales for baijiu to attract customers. Compared with other categories, baijiu is a standard product with high consumer awareness and higher repurchase frequency, and its higher unit price makes it easier to support low-price strategies. "Consumers are now savvy. Before buying alcohol, they check prices online, and if they find it cheaper online, they just buy it there. Who still comes to physical stores?" laments a store operator. The change in consumer decision-making paths has stripped stores of their former information advantage. In the past, consumers often relied on store owners' recommendations when buying alcohol, and the owners' professional advice had strong influence. Now, consumers first compare prices repeatedly on e-commerce platforms, then check product reviews on social media, and finally visit physical stores to buy as needed. Stores are often just "pickup points." The impact of the macroeconomic environment cannot be ignored. Overall, the slowdown in macroeconomic growth has reduced consumers' purchasing power and willingness to spend. "Now everyone is cautious with spending. If they don't have to buy, they won't, and if they do buy, they compare prices," Li Hua observes. Consumer behavior has become more rational, and impulse buying has almost disappeared. Changes in the policy environment have also brought challenges. The "strictest alcohol ban in history" introduced in May 2025 has directly hit the government and business banquet market. Although it is not the only reason, it has indeed made things worse for high-end baijiu consumption. In this regard, a person in charge of a Henan liquor chain said that at its peak, the company had over a hundred stores in Luoyang, Zhengzhou, and other places, but as profit margins for famous liquors shrank, adjustments had to be made. "Single stores have too weak a resistance to risk. Only through scale and specialization can one survive in competition." In addition, supply chain pressure is increasing. Under the dual pressure of manufacturers' targets and inventory backlog, some small and medium-sized distributors, due to poor risk resistance, have chosen to sell off goods at low prices, exacerbating price inversion and disrupting the price system that manufacturers had painstakingly maintained. "Some distributors, in order to recover funds, sell at a loss, causing chaos in the entire market price system," reveals a distributor who requested anonymity. Rising operating costs such as rent and labor are the last straw. While sales decline, fixed costs keep rising, making the already thin profits even worse. Facing unprecedented difficulties, many store owners are trying to transform to save themselves. But in reality, many attempts have encountered setbacks. Some operators tried to expand product categories but failed due to lack of professional knowledge and supply chain resources; some blindly went online but found high operating costs and poor results; others tried to go high-end but couldn't sustain it in the context of consumption downgrading. "Transformation requires capital, technology, talent, and precise market judgment. These are huge challenges for us traditional operators," Li Hua sighs. More store owners have chosen the strategy of "enduring the winter." They reduce risk by cutting expenses, reducing inventory, and diversifying operations, hoping to return to normal when the industry recovers. "Now it's about who can hold out longer." Li Hua's words echo the sentiments of many in the industry. But looking at 2025, the trend of differentiation in the tobacco and alcohol store industry is becoming increasingly evident. Market accelerates reshuffling According to industry forecasts, 2025 is undoubtedly a critical watershed for tobacco and alcohol stores. Those individual stores lacking competitiveness may accelerate their exit from the market, while chain brands and stores with resource advantages will survive. However, no matter what, one core issue cannot be avoided: how to find new growth points in the context of consumption downgrading? CICC Securities research reports that since 2024, demand in the baijiu industry has been weak, with obvious characteristics of stock competition. Mainstream companies are placing more emphasis on sustainable and steady development. It is expected that industry supply may slow down in 2025. To adapt to the new phase of supply-demand balance, the industry as a whole may show a weak recovery trend of first declining and then rising, with the first half of the year mainly bottoming out. For tobacco and alcohol stores, this means the winter may last for some time. During this process, operators with resource integration capabilities, strong innovation awareness, and good adaptability will stand out, while stores that stick to traditional models and lack the drive for change may be eliminated by the market. In this regard, industry insiders say that the market is accelerating reshuffling, and survival of the fittest is an inevitable trend. Industries such as automobiles, clothing, and home appliances have all experienced periods of rapid brand concentration, characterized by the rapid demise of small and medium-sized enterprises and brands. Currently, tobacco and alcohol stores, or more precisely, baijiu, are repeating this experience. From the supply side, to cope with weak demand, many liquor companies are also proactively adjusting strategies. In 2024, several liquor companies have already taken the initiative to lower their target growth rates to around 5%-10%, and it is expected that more companies will join in 2025. For example, Guotai pointed out at its distributor conference that it will implement the "three quantity policy" in 2025, which means allocating quantities based on market development, setting quantities based on distributors' capacity, and giving quantities based on distributors' actual inventory. Some companies are also increasing direct operation models. For example, Wuliangye is fully building the "three stores and one home" model for direct channels, adding 138 specialty stores, 5 cultural experience stores, 490 He Mei collection stores, and 2 large restaurants in 2024. This manufacturer-direct model poses a direct impact on the traditional distribution system. A veteran distributor said helplessly, "Manufacturers are all going direct. Distributors and store owners like us are becoming increasingly marginalized." "Having been in the tobacco and alcohol business for 12 years, I never thought it would be this hard," Li Hua sighs. For countless store owners like Li Hua, this winter is indeed exceptionally long. Of course, in this deep adjustment of the industry, some stores choose to hold on, some choose to transform, and some choose to exit. For the entire industry, this winter is also an opportunity for reshuffling. When the tide recedes, truly valuable and competitive business models will emerge. After all, there is no eternal winter, only an ever-changing market.