---
title: "Baijiu Industry in 2023: The Trouble of 'Inventory'"
description: "The Chinese baijiu industry faced significant inventory challenges in 2023, leading to price inversions and postponed expos. Companies employed various strategies like supply control and marketing to destock, with mixed results as the industry transitions from active to passive inventory reduction."
author: "Kyra"
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published: "2023-12-18"
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# Baijiu Industry in 2023: The Trouble of 'Inventory'

> The Chinese baijiu industry faced significant inventory challenges in 2023, leading to price inversions and postponed expos. Companies employed various strategies like supply control and marketing to destock, with mixed results as the industry transitions from active to passive inventory reduction.

Recently, the official WeChat account of the China Alcoholic Drinks Association announced that due to "excessive inventory backlog among distributors and agents, preventing normal procurement," the 2023 Hangzhou International Wine Expo, originally scheduled for December 11-13, has been postponed and will be merged with the 2024 Beijing International Wine Expo. The phrase "excessive inventory, unable to procure normally" sends a chill through the entire baijiu industry. "Inventory destocking" can be considered a keyword for the baijiu industry in 2023. This year, liquor companies and channel distributors have been trying every means to digest inventory: companies have used digital tools, strengthened channel management, controlled supply to stabilize prices, while distributors have resorted to price cuts, all in an effort to effectively reduce inventory. However, with the Spring Festival approaching, how effective have these destocking efforts been?

**Price Inversion: Is Baijiu No Longer Selling?**
As the saying goes, "No feast is complete without liquor." In China, baijiu is not just a beverage; it is a culture and a tradition. It carries profound historical heritage and rich cultural connotations, witnessing thousands of years of Chinese civilization. The aroma, taste, and unique brewing techniques of baijiu make it an indispensable part of social occasions. **However, at some point, baijiu began to lose its appeal, and some brands even experienced price inversion.** It is well known that a bottle of baijiu typically goes through multiple links from the factory to the consumer, each adding costs. It is an indisputable fact that the distribution price is higher than the ex-factory price, and the market transaction price is higher than the distribution price. But the China Alcoholic Drinks Association's "2023 Mid-Year Research Report on China's Baijiu Market" stated that after the Spring Festival this year, the transaction prices of many baijiu products in the market were lower than the distribution prices, indicating severe price inversion. According to a survey on e-commerce platforms, the suggested retail price for the eighth-generation Wuliangye is 1,499 yuan per bottle. During the year-end good price festival, the price on Tmall's flagship store after coupons was around 1,050 yuan, and after receiving the platform's billion-dollar subsidy, the price even dropped to 855 yuan per bottle. For Guojiao 1573, the price after coupons on Tmall's flagship store during the year-end good price festival was 1,109 yuan per bottle, and after the platform's billion-dollar subsidy, it dropped to 808 yuan per bottle. In fact, apart from Moutai, most baijiu products have experienced price inversion. **Looking from another dimension, it is not difficult to find the reasons for the price inversion.** Data shows that in the first half of 2023, the production of baijiu by enterprises above designated size nationwide was 2.097 million kiloliters, a year-on-year decrease of 14.8%. In the first three quarters, production was 3.066 million kiloliters, a year-on-year decline of 9%. More striking is the long-term trend: according to public data, baijiu production has declined for six consecutive years since 2016, and this year it is highly likely to decline again. However, while production has been declining, the inventory of baijiu enterprises and distributors has been rapidly increasing. Data shows that as of the end of the third quarter of 2023, the total inventory of 20 A-share listed baijiu companies was 136.354 billion yuan, with five companies—Kweichow Moutai, Yanghe, Wuliangye, Luzhou Laojiao, and Shanxi Fenjiu—each having inventory exceeding 10 billion yuan. Kweichow Moutai ranked first with 40.99 billion yuan in inventory, an increase of 5.808 billion yuan year-on-year. Luzhou Laojiao, Shanxi Fenjiu, Gujing Gongjiu, and Jinshiyuan each saw inventory increases of over 1 billion yuan year-on-year. Only Shunxin Agriculture saw a year-on-year decrease in inventory, but its inventory at the end of the third quarter was 4.317 billion yuan, accounting for 26.29% of total assets, still at a relatively high level. However, companies with higher inventory-to-total-asset ratios include Yingjia Gongjiu, Golden Seed Wine, and Kouzijiao, at 41.35%, 40.93%, and 40.08%, respectively. According to Flush data, as of the end of the third quarter this year, the total inventory of the 20 listed liquor companies increased by 12% compared to the same period last year. **On one hand, baijiu production is rapidly decreasing; on the other, baijiu inventory is continuously increasing. It seems that baijiu is indeed not selling well.**

**How Is the "Destocking" Progressing?**
For enterprises, turnover rate is undoubtedly one of the most critical indicators. It represents how effectively a company utilizes its assets and resources to generate revenue. A high turnover rate typically means the company can achieve sales and recover funds faster, thereby reducing financial risk and improving profitability. **In recent years, the domestic baijiu consumer market has suffered significant impacts, leading to a continuous rise in channel inventory. This situation persists to this day, making inventory digestion the primary task for baijiu enterprises this year.** According to reports, after the Spring Festival in 2023, the traditional off-season arrived earlier than in previous years. Usually, after the Spring Festival, distributors experience a wave of replenishment, but this year broke that tradition. The traditional "business, group purchase, and banquet" markets did not advance in tandem as expected. Especially during the May Day holiday, only banquet liquor performed well in the liquor market, while business and group purchase markets were relatively weak. This also reflects that channel inventory was not effectively digested after the Spring Festival peak season and remained at a high level. In June this year, the China Alcoholic Drinks Association mentioned in its "2023 Mid-Year Research Report on China's Baijiu Market" that 51.43% of surveyed industry practitioners believed that the market cooled in the first half of 2023, with overall channel inventory still at a high level. For baijiu enterprises, traditional Chinese festivals are excellent opportunities for destocking. Therefore, this year, major liquor companies have taken action to reverse the unfavorable situation of high inventory and price inversion. **First, controlling supply and raising prices.** This is a very important measure for baijiu enterprises, mainly aimed at controlling channel inventory, protecting distributors' profit margins, stabilizing brand image, and ensuring the company's own interests. This year, multiple liquor companies, including Luzhou Laojiao, Shanxi Fenjiu, and Yanghe, have issued notices to control supply or raise prices. Langjiu also recently issued a notice to fully control shipments of Qinghua Lang, Hongyun Lang, Qingyun Lang, and other products, and to suspend shipments to all merchants in regions such as Sichuan, Chongqing, Henan, and Guangdong. Luzhou Laojiao, Shanxi Fenjiu, and other liquor companies have launched "price protection" actions, successively issuing notices to control supply or raise prices. **Second, marketing tactics.** In today's highly competitive market environment, effective marketing strategies are crucial for business success. Wuliangye deeply participated in the 2023 CMG Mid-Autumn Festival Gala as a "2023 CMG Mid-Autumn Festival Gala and Good Gifts Interactive Partner," investing over 50 million yuan in "Good Gifts" interactive activities in Yibin to reward consumers. At the same time, Wuliangye announced cooperation with Sichuan Airlines to launch a Mid-Autumn Festival themed flight. Another liquor giant, Yanghe, launched a welfare activity called "Mid-Autumn Reunion Dream, Good Luck on the Rise," increasing the bottle-opening rewards for products such as Sea Blue (22nd edition), Sky Blue (21st edition), Yanghe Dream Blue Crystal Edition, and Yanghe Dream Blue M6+. It also sponsored the CMG Mid-Autumn Festival special "2023 Taihu Lake Beauty Concert." **Whether first-tier or small and medium-sized liquor companies, they are actively responding to various challenges.** In terms of inventory digestion, other liquor companies have also provided solutions. In June this year, Yingjia Gongjiu stated that marketing work was progressing as planned, maintaining healthy channel inventory. A series of promotional interactive measures were adopted in the channel, and market sell-through met expectations. At the same time, the company continued to maintain volume-price balance through measures such as strengthening shipment control and digital empowerment. Jinshiyuan stated during institutional research that it would further strengthen product circulation channel order and inventory control to ensure sustainable market development. Luzhou Laojiao, at its 2022 annual shareholders' meeting, stated that it was using digital means to achieve inventory reduction and strengthen channel control. As 2023 draws to a close, according to Everbright Securities: "Combining listed companies' finished goods inventory and channel feedback, inventory destocking may still be the main theme for the 2024 Spring Festival. However, as a barometer of demand strength, in the third quarter of this year, some expansionary sub-premium liquor companies saw their revenue decline narrow, and distributor inventory improved significantly compared to the same period last year. The period of greatest inventory pressure in the baijiu industry is passing, and the industry is gradually transitioning from active to passive inventory destocking." Zheshang Securities also predicts that the current inventory level in the baijiu industry may be the highest in the next two years. With inventory digestion in the fourth quarter, it is expected that inventory will enter a downward trend after the Spring Festival.

**Is the Future of Baijiu Still Promising?**
Although the baijiu market has faced some challenges in recent years, baijiu remains one of the leading products in China's liquor market, and the future is full of opportunities and challenges. **As a unique Chinese spirit, baijiu has won the love of many enthusiasts over thousands of years of inheritance with its unique taste and profound cultural connotations.** Today, baijiu has become an indispensable role in social activities, and its gift attribute also makes it an important medium in interpersonal communication. **Regarding the issue that young people do not like baijiu, it seems that with the passage of time, the problem will be solved.** Jack Ma once said to Moutai's former chairman Li Baofang: "When I was a child, I hated Moutai, but after gaining life experience and enduring many hardships, I think Moutai is still very interesting." **Finally, it is necessary to mention the overseas expansion strategies of Chinese baijiu enterprises. These companies have long set their sights on more distant overseas markets.** It is understood that Wuliangye has established "Wuliangye Grand Restaurant" in Dusseldorf, Germany, Tokyo, Japan, and other places, and has cross-border collaborations with super IPs such as "Chinese Restaurant" and Michelin, continuously exploring international markets in innovative ways. Similarly, from March to April this year, Shede Spirits held brand launch events in multiple overseas countries, and its sub-brand Tuopai signed a global strategic cooperation agreement with the English Premier League team Wolverhampton Wanderers. In April, Luzhou Laojiao launched its 2023 "Let the World Taste China" global tour in Singapore. In June, Moutai held a Southeast Asia and Hong Kong/Macau market symposium in Bangkok, Thailand. Xifeng Liquor held a "Chinese Red·Red Xifeng" Fengxiang Feast in Seoul and conducted detailed research on overseas markets. In July, Moutai Group's Party Secretary and Chairman Ding Xiongjun met with Stephen Perry, Chairman of the 48 Group Club. Henan Yangshao Liquor initiated strategic cooperation with the French Henan Association and appeared at the first International Food Culture Expo hosted by UNESCO, winning a gold award. Yanghe's Party Secretary and Chairman Zhang Liandong went to Paris for inspection and exchange... Taking the leader, Kweichow Moutai, as an example, Moutai's business now covers 64 countries or regions across five continents. Currently, China's baijiu market is experiencing a time of both challenges and opportunities. Whether it is price inversion or high inventory, for a market carrying a thousand years of culture, these may well be beneficial forces driving the industry forward.


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