Xifeng Liquor's New Appointment: A New Dawn for the Revival of a Famous Brand?

Xifeng Liquor, on its path to "revival," has every move closely watched. The newly appointed "young and promising" "liquor industry veteran" Zhang Zhouhu has been thrust into the spotlight! In nearly two months since taking office, Xifeng's national expansion has become increasingly efficient. After surveying Shangyuan Group and partnering with Xiangyu Liquor, Xifeng has initially stabilized its presence in the Yangtze River Delta and Pearl River Delta markets. Additionally, Zhang Zhouhu revealed that in Q1 this year, Xifeng's performance grew by 34%, with Red Xifeng surging over 50%. In response, liquor industry analyst Cai Xuefei stated that in recent years, Xifeng's competitiveness has significantly strengthened, particularly with Red Xifeng in the high-end market and Green Neck Xifeng in the mass-market segment. The most important work ahead remains structural adjustment, addressing sustainable growth, and national market development. For Zhang Zhouhu, newly appointed, the revival of this famous brand is a long and arduous journey, with both challenges and opportunities!

Why Did the "Young and Promising" Take Office?

2019 was a year of rebirth for Xifeng Liquor. At that time, Zhang Zheng was transferred to Xifeng Liquor Group as Chairman, and he set the goal of "breaking 10 billion in 3 years." However, by 2022, Xifeng only achieved 8.429 billion yuan, still over 1.5 billion short of the 10 billion target. Notably, in 2022, Xifeng's growth rate was only 5%, despite having surpassed the 8 billion mark in 2021 with a growth rate of 26.98%, comparable to top-tier liquor companies. The sharp decline in growth led the industry, which had high expectations, to question whether Xifeng's revival had come to an end, especially given the intense competition in the liquor sector. Although in 2023, Xifeng stopped loudly proclaiming "breaking 10 billion," at the beginning of the year's distributor conference, Chairman Zhang Zheng emphasized that 2023 was the "decisive year to launch a full-scale assault on the established strategic goals." This implies that solving sustainable growth was the top priority for 2023, with "realizing the 10 billion dream" at stake. Perhaps against this backdrop, Xifeng made the choice to "change generals before the battle," completing a transition from the older generation to the younger, with the energetic "young and promising" representative Zhang Zhouhu and "brewing master" Jia Zhiyong. Public information shows that Zhang Zhouhu was born in 1979, making him 44 years old this year, a typical young and promising figure at Xifeng. He has worked in the finished products workshop, factory office, research center, corporate planning department, and board office. Since 2015, he has served as the board secretary, and since 2017, as deputy general manager. Overall, Zhang Zhouhu has climbed up from the grassroots, with a relatively fast promotion pace, and has gained experience in production, branding, and marketing, indicating that Xifeng has intentionally cultivated him as a young cadre. In this regard, industry insiders say that the senior management change is to build momentum for achieving the 10 billion goal, and it is not ruled out that other significant adjustments will be made in products and markets later. For Zhang Zhouhu, completing the 10 billion breakthrough in 2023 might be just a step away. Based on data previously disclosed by Zhang Zhouhu, Q1 performance grew by 34%. Calculated this way, "breaking 10 billion" in 2023 is indeed promising. Three Major Challenges With the completion of the generational transition, Xifeng has entered the most important year of change on its revival path—success could lead to a meteoric rise, while failure could mean continued stagnation. In this regard, Cai Xuefei told Jiu Zhou Zhi that currently, Xifeng's most important work remains structural adjustment, addressing sustainable growth, and national market development. These core tasks pose three major challenges for Zhang Zhouhu. Specifically, structural adjustment focuses on product lines, with two main threads: first, optimizing Xifeng's high, medium, and low-end product lines; second, balancing the relationship between self-owned products and OEM products. In terms of self-owned product lines, Xifeng has already established a high, medium, and low-end mix centered on Red Xifeng, Zang (Reserve), and Old Green Bottle. However, due to Xifeng's long-term regional focus and consumers' outdated perception of Xifeng as a low-end brand, promoting mid-to-high-end products is difficult. Notably, the price span across self-owned products is too wide, and consumer upgrades are often filled by OEM products. However, due to historical channel issues, Xifeng has long relied on brand distributors, which has led to brand distributors often dominating, creating a struggle between self-owned and OEM products. In this regard, a Xifeng OEM distributor said, "We primarily sell our own OEM products, but we also sell Xifeng Group's self-operated products. In terms of promotion, we tend to favor self-operated products." Additionally, regarding sustainable growth, Xifeng is in an awkward position. Data shows that since 2019, Xifeng's performance has continued to grow, with revenues of 6 billion, 6.3 billion, 8 billion, and 8.4 billion yuan from 2019 to 2022. While the performance looks good, its revenue lacks substance, and its growth is largely driven by "price increases." According to incomplete statistics, Xifeng has continuously raised prices since 2019. 2021 was particularly aggressive, with price increases in May, June, and July for three consecutive months. Notably, its high-end product Red Phoenix soared from a terminal price of 1,099 yuan per bottle to 1,499 yuan per bottle, directly benchmarking against Feitian Moutai. In this regard, some distributors have reported that except for Green Neck Xifeng, other products have limited influence outside the province. The high-end Red Xifeng has sales, but the scale is relatively small. Continuous price increases have also caused some chaos, with many Red Xifeng prices inverted, and some distributors privately selling at low prices. To address this, at the beginning of this year, Xifeng took significant action against a batch of price-disrupting distributors and launched a "price protection" campaign. In Q1, Red Xifeng achieved a growth rate of over 50%. However, some industry insiders say that given Red Xifeng's limited market share, there is still room for further growth beyond the 50% increase. The slow progress in high-end development has naturally hindered Xifeng's national expansion. The latest data shows that in 2022, Xifeng's cumulative terminal controllable outlets nationwide exceeded 480,000, a year-on-year increase of 23%; exclusive stores reached 498. The data looks good, but compared with other first- and second-tier leading liquor companies, the gap remains significant. In this regard, a major Xifeng distributor pointed out, "Xifeng has not established a high-quality, stable marketing team in the national market." Taking Xifeng's Hainan market as an example, in 2022, Red Xifeng and Green Neck Xifeng only completed 25% of the set targets. Besides the pandemic, the main reason was that the marketing team in Hainan was not formed, distributors operated independently, offline channel prices were chaotic, and distributors had little loyalty to the Xifeng brand. In the first half of this year, Xifeng has been fully committed to its national expansion strategy. In early May, it partnered with Xiangyu Liquor to develop the Fujian market. Currently, Xifeng has initially completed its layout in the Yangtze River Delta and Pearl River Delta. In this regard, a person close to Xifeng noted that compared with the development of first-tier famous liquors like Moutai and Wuliangye, Xifeng started relatively late and has only achieved basic coverage of the national market, requiring further deep cultivation. IPO Opportunities Compared with the aforementioned challenges, the new opportunities for liquor companies to go public might fulfill Xifeng's IPO dream. It is worth noting that no company has had such a bumpy road as Xifeng. Since Xifeng initiated its IPO in 2009, it has encountered financial fraud scandals, executive bribery, and distributor bribery for original shares, leading to failed IPO attempts. By 2018, Xifeng was confident to try again, but unexpectedly faced the "plasticizer超标" (excessive plasticizer) incident. Since then, rumors of Xifeng's "backdoor listing" have circulated, with various Shaanxi listed companies as targets, but all have been denied. Some securities research points out that with the comprehensive advancement of the registration system reform and increasingly strict regulatory review of mergers and acquisitions, Xifeng's backdoor listing path may become increasingly difficult. Reference can be made to Hongxing Co., which, even with the help of its smaller partner Beibingyang, attempted to ride on local state-owned asset restructuring, but ultimately failed. However, with Zhenjiu Lidu successfully listing on the Hong Kong Stock Exchange, and Wa Mao planning to list on Nasdaq via SPAC, new ideas have been provided for Xifeng and other liquor companies eager to embrace capital. Reviewing Zhang Zhouhu's resume, it is found that he served as board secretary for a period, and he is very familiar with modern corporate governance structures. Some industry insiders say that he should be the person in Xifeng's management who has the most contact with capital and institutions, with relatively rich experience in the capital market. Additionally, a liquor industry researcher said that Xifeng's recent changes in equity and personnel adjustments have been made with corresponding considerations. As for when Xifeng will restart its IPO journey, the timing is not yet known. However, Zhang Zhouhu once emphasized: "Xifeng's efforts to enter the capital market will not cease, and Xifeng's determination to return to the ranks of first-class famous liquors will not waver." The Revival of Famous Liquors Is a Long and Arduous Task Currently, the revival of famous liquors has become a hot topic in the industry, and Xifeng is the last gold mine among China's famous liquors. In this regard, Cai Xuefei pointed out that as one of the four old famous liquors, Xifeng is the category representative of Feng-flavor liquor, and with the brand history of the four old famous liquors, in recent years, around brand value upgrading, the brand image has significantly improved, product structure has steadily upgraded, sales have grown rapidly, and corporate competitiveness has visibly increased. In the view of Jiu Zhou Zhi, although Xifeng has achieved major breakthroughs, given the current competitive landscape of the liquor market, Xifeng still needs to strengthen three aspects to accelerate its return to the ranks of first-class famous liquors. First, at the brand marketing level, the "four famous liquors" buff is Xifeng's strongest heritage, but its brand culture output is clearly inadequate. Consumers' awareness of Xifeng starts and ends with the "four famous liquors." Without stories or history, it lags far behind old rivals like Moutai, Luzhou Laojiao, and Shanxi Fenjiu in terms of operational techniques. Recently, Xifeng has shown a clear shift in this area, signing a strategic cooperation agreement with the Shaanxi Provincial Institute of Archaeology and hiring Wang Zijin, Tian Yaqi, Qian Yaopeng, and Liu Cheng as experts for the Xifeng Liquor Culture Research Institute. Research results on Xifeng liquor culture, such as "Qin Liquor and Qin Culture," "Exploring Xifeng Liquor Development in Traditional Cultural Concepts," "The Cultural Significance of Ao Yan and Ao Zao in Liquor Culture," and "Protection and Utilization of Industrial Cultural Heritage under the Value System of Cultural Heritage," are being used to empower the Xifeng brand. At the product level, Xifeng remains trapped in the dilemma of breaking into the high-end market. Currently, Xifeng's self-operated segment relies mainly on Red Xifeng to break into the high-end, while "Green Neck" maintains the basic market and expands territory. For "Green Neck," market performance has been excellent in recent years, attracting a loyal consumer base. There have even been rumors of stopping recruitment of new distributors, strictly implementing a quota system based on existing distributors, and strictly controlling its price system. However, Red Xifeng is somewhat awkward, mainly due to the fact that consumer awareness of Red Xifeng's value is still being cultivated, and how to tell the story of aged liquor requires careful consideration by the Xifeng team. Finally, at the marketization level, how Xifeng designs incentive policies for brand distributors, comprehensive distributors, and self-operated channels may be the key to accelerating the national expansion process in the future. Furthermore, the loyalty of Xifeng distributors has yet to be further cultivated. How to turn two minds into one will depend on the intensity of Xifeng's reforms in the coming period.