Xing Wenwen: "Being a distributor is too hard; finding customers to buy liquor every day is too difficult." In 2024, Lin Fan, born after 1995, gave up a stable government job to become a distributor for a baijiu brand, but unexpectedly found that even famous-brand development products were hard to sell, moving only about 200 cases in six months. Lin Fan's initial ambition began to waver, and the distribution business gradually became a side hustle. Caught in the industry's adjustment cycle, even seasoned veterans have had their confidence worn down. "In previous years before Mid-Autumn Festival and National Day, my phone never stopped ringing, and I had to keep it plugged in. In 2024, it's been quiet as still water; it's really a bottleneck." Seeing no growth in existing group-buying channels, a leading sauce-flavor baijiu distributor is now looking for other liquor partners. In 2024, the trillion-yuan baijiu market continued to sharply differentiate, accelerating concentration toward famous brands and advantageous production areas, with both growth opportunities and challenges. Many in the industry see the baijiu circle as a walled city: those inside want out, and those outside want in.
Small and medium distilleries see cooling OEM business; most fear customer price haggling
As the New Year approaches, Zhao Xin, a sales manager at a second-tier distillery in Maotai Town, calculated that his 2024 income was only around 200,000 yuan, leaving less than 50,000 yuan to take home for the New Year. "To win customers, many orders in 2024 were unprofitable, some even at a small loss. Adding the cost of maintaining clients, my income dropped by over 60% compared to previous years." In his fourth year in sales, Zhao Xin finds 2024 orders harder to close than when he was a rookie. "Previously, after a customer bought from me, their friends would call directly to order, and a deal would be done in seconds. Now, even small retail customers have to be pursued." In 2024, Zhao Xin contacted 30-40 OEM liquor clients, but only closed deals with six or seven, with total order volume down 40% from previous years. He believes the hardest part is competition among distilleries, driving sauce-flavor liquor prices lower and lower. "I'm most afraid of customers comparing prices and then bargaining with me. But our distillery is positioned as mid-to-high-end, mainly producing kunsha liquor, with a minimum quote of 50 yuan per bottle, and discounts to 45 yuan for large volumes. Some other distilleries quote them 30-something yuan." Zhao Xin notes that except for famous distilleries like Moutai, the quality of liquor from other distilleries in the town is similar, so if competitors are willing to lower prices, customers are easily poached. For most small and medium distilleries, OEM liquor has relatively low production costs, but the OEM business is volume-driven, lacking the brand premium of famous liquors, resulting in lower profits. Zhao Xin gives an example: his distillery's suisha liquor, with a production cycle of two to three months, earns only one or two yuan per bottle, and a thousand cases yield only 5,000 yuan. For higher-quality kunsha liquor, with a minimum order of 500 cases, gross margins are 10%-20%.
The China Alcoholic Drinks Association's "2024 Mid-Year Research Report on China's Baijiu Market" (hereinafter "the Report") shows that production-side performance is accelerating differentiation. Distilleries with sales below 10 billion yuan will face stock competition, even needing to respond to the shrinking competition from T9 brands (i.e., other listed liquor companies) expanding downward. Among 100 surveyed baijiu producers, those reporting declines in output, sales volume, and sales revenue were mainly those with annual turnover below 1 billion yuan.
Image source: Tuchong
The "Research Report on Building Zunyi into a National Important Baijiu Production Base" released in May 2024 also noted that many small and medium enterprises in the city rely on OEM or base liquor sales, and are extremely passive under the competitive pattern of mid-to-high-end expansion and low-end squeeze. During the deep adjustment period of the baijiu industry, coupled with the cooling of the "sauce-flavor liquor craze," there is a stark contrast between head distilleries tightening their code policies and raising development product thresholds, and small and medium distilleries seeing a significant cooling in OEM business. Guo Xiang, a liquor distributor in Guangdong, had the idea of making OEM liquor during the 2021 sauce-flavor craze. At that time, he found that several distilleries in Maotai Town required a minimum order of 50 cases, but now 10 cases are enough to place an order. Zhao Xin confirmed this: "To grab customers, even small distilleries can blend a single case for you." Additionally, the head of a medium-sized distillery in Maotai Town told the author that its threshold for custom OEM liquor dropped from 5 million yuan in 2023 to 3.5 million yuan. According to Zhao Xin's observations, the Henan Bairong Market, the largest liquor wholesale market in the country, was mainly selling OEM liquor two years ago, but now it sells three categories: circulating products, famous-brand development products, and OEM sauce-flavor liquor. Famous-brand development products and OEM products require distilleries to open codes, and since fewer merchants are opening new codes, overall inventory of OEM sauce-flavor liquor in Bairong Market has declined.
Baijiu becomes a walled city; 1688 enters
Affected by the broader environment, high-end business scenarios decreased in 2024, leading to obvious consumption differentiation. Combined with market involution and transparent e-commerce pricing, famous liquor prices have fallen, becoming traffic drivers. "It's like selling vegetables in a market; it's mainly for traffic and covering store expenses. Many famous liquors earn only 10-20 yuan per bottle, and those with early inventory may even sell at a loss," Guo Xiang said.
Lin Fan, born after 1995, originally worked as a civil servant in a county in Hubei. Feeling high pressure and low pay, he chose to start a business as a distributor for Xijiu development products. He told the author that mature products like Junpin and Xijiu Jiaocang 1988 have transparent prices with little profit, and the distribution threshold is high; failing to meet targets means no rebates from the distillery. In contrast, development liquor distribution only requires a one-time purchase of 300,000 yuan. Lin Fan chose a series with higher profits, with the best-selling product earning over 100 yuan per bottle: "The purchase price is over 200 yuan, and it basically sells for 350 yuan." But even with famous brand endorsement and occupying the best-selling 300-500 yuan price band in the retail market, sales remain difficult.
Image source: Provided by interviewee
"Baijiu has strong social attributes; without channels, it's hard to sell. In the first two months, my dad helped me sell, and it went okay. Now, relying on myself, it's not moving. Since it's our own warehouse with no pressure, we just leave it." After half a year, Lin Fan's planned entrepreneurship turned into a side hustle.
Baijiu investor Zhang Wen pointed out that according to the difficulty of selling, famous products, famous-brand development products, second-tier brand liquors, and OEM liquors increase in difficulty. Famous-brand development products leverage brand advantages to sell a wave initially, and if well-operated, they can survive, like Xifeng's well-known Huashan Lunjian series. Besides famous-brand development products, liquor merchants wanting to enter the "walled city" are eyeing OEM liquors with larger profit margins. Data from the China Trademark Network shows that in Q3 2024 (as of September 15, 2024), the number of valid registrations for Class 33 trademarks (mainly including alcoholic beverages (except beer), such as baijiu and red wine) across provinces, autonomous regions, and municipalities totaled 1,118,214, nearly 100,000 more than the 1,026,889 in the same period last year. Narrowing to sauce-flavor liquor, according to Guizhou Province's trademark statistics report, as of October 2024, valid registered Class 33 trademarks numbered 124,741, an increase of 11,877 from 112,864 in the same period of 2023.
"Since there's basically no profit in selling famous liquors, we now recommend customers do OEM customization, ensuring at least 50% profit for distributors. For example, if we ship a sauce-flavor liquor at 100 yuan per bottle, its market price should be at least 200 yuan," Zhao Xin said. He added that for the same price, OEM liquor quality might sometimes be better than famous brands. "The main issue with OEM liquor is sales channels; as long as you have connections, it's fine. Moreover, people are increasingly accepting OEM liquor, and many buy it on Douyin or Kuaishou." In 2023, Douyin's liquor sales reached about 40 billion yuan, multiplying compared to 2022. Among them, baijiu was the largest category, accounting for over 70%. One type is famous liquor standard products used for traffic, and the other is non-standard products, i.e., OEM custom products. These products have high gross margins and high repurchase rates, and due to low market concentration, there is still huge market space. According to Zhao Xin, a potential client in Jiangsu sells OEM strong-flavor liquor, buying at 40 yuan per case and selling at 300-400 yuan per case. After deducting labor and other costs, the profit per case is substantial. "The client does community group-buying activities to acquire customers, with stable monthly sales of around 1,000 cases." Additionally, a client in Guiyang ordered 2,000 cases in 2024 and has sold 1,500. "The remaining 500 cases are normal inventory; they're about to place a second order, and samples have been sent. This client previously worked in the internet industry and uses big data to screen customers."
Over the past decade, liquor distribution models have undergone multiple iterations, with mobile e-commerce, e-commerce live streaming, and instant retail emerging. Many liquor merchants are no longer confined to traditional offline wholesale channels. Retail giant Alibaba also started making OEM liquor last year, entering this traditional and complex track. In November 2024, Alibaba's 1688, a direct sourcing platform for factory goods, announced its entry into the sauce-flavor liquor market, choosing 53-degree sauce-flavor products, launching at 329 yuan and 198 yuan per bottle. Guangke Consulting Chief Strategy Officer Shen Meng said that traditional OEM liquor lacks the empowerment of its own brand, with meager profits and dependence on order customers. E-commerce platforms, however, have a stable customer base and channels to reach customers, as well as certain brand advantages.
However, besides sales channels, trademarks are also a major 'minefield' in OEM liquor.
To increase company profits, Guo Xiang, who has been in the liquor business for years, recently cooperated with a distillery in Maotai Town to customize 20 cases of self-operated OEM liquor. Unexpectedly, he hit a snag when registering the trademark: the other party only informed him after receiving payment that the intended trademark was already registered. "During negotiations, they agreed to everything, but now they've breached the contract and are slow to refund the payment." After a week of wrangling, Guo Xiang finally received the full payment.
As industry competition intensifies, trademark disputes in the baijiu circle have been frequent in 2024. The most notable was the trademark dispute between Yelanggu Liquor and Langjiu, with Langjiu initially claiming damages of over 190 million yuan, but eventually reaching a settlement through negotiation. "Now in Maotai Town, some people specifically register various trademarks, and when you use them, they sue you," Zhao Xin said. He also mentioned that some salespeople exaggerate liquor quality to close deals, boasting that 50-yuan-cost liquor is equivalent to 100-200 yuan quality and can sell for 700-800 yuan per bottle. "Many customers don't know much about baijiu and easily believe them; this happens often."
Making baijiu is about being a friend of time
2024 marks the third year of the baijiu industry's deep adjustment. Practitioners are still struggling in the cage of price inversions for famous products, insufficient sales, and difficulty in clearing terminal market inventory. Small tobacco and liquor shops at the channel's end are the first to suffer, quietly disappearing from streets. Midstream channel inventories have become a barrier lake. Overwhelmed liquor merchants are selling famous products at low prices both online and offline. E-commerce platforms' aggressive subsidies during "Double 11" further impacted the prices of major famous liquor products.
Image source: Tuchong
Facing these industry ills, liquor companies have successively introduced measures to "control volume and stabilize prices," create model markets, and develop new consumption scenarios to gain C-end growth. In Q3, they proactively shed the halo of high growth, regained their own rhythm, and gave distributors some breathing room. Currently, the imbalance between supply and demand in baijiu persists. Distributors are lukewarm about paying for the new year's "good start," with some continuing to share the fate of manufacturers, while others, unable to bear the burden, leave the "battleship." The traditional strong-manufacturer-weak-distributor relationship is being repaired and adjusted.
Looking ahead, the baijiu practitioners interviewed generally remain optimistic. Zhao Xin earned only a few thousand yuan per month when he started, but now has a stable client base with consistent monthly shipments. "If the liquor industry develops steadily long-term, income is considerable. Many people in our distillery who have worked for over ten years earn at least 3 million yuan annually. As long as I maintain my old client resources, the future will be easier." Zhang Wen, who originally invested in the tech industry, thought baijiu could be quickly matured by capital, but his views were overturned after entering the circle. "Liquor is a friend of time. With enough money and time, you can continuously invest and pass it on to the next generation. Especially sauce-flavor liquor, as time goes by, its scarcity value will become apparent."
【New Order · Symbiosis】
The 10th China FMCG Innovation Conference
Time: March 17-19, 2025
Location: Chengdu, China