Source | Giant Finance
The liquor industry, which has entered the stage of stock competition, will continue to be under pressure in 2023.
Data shows that China's liquor production has been declining for seven consecutive years.
From 2017 to 2022, domestic liquor production dropped sharply from 11.981 million kiloliters to 6.712 million kiloliters, nearly halved. In the first 11 months of 2023, enterprises above designated size in the country produced a total of 3.958 million kiloliters of liquor, a decrease of 6% from the same period last year.
At the same time as the output is declining, the problem of losses within the industry is also becoming increasingly prominent.
As of the first half of 2023, there are 983 liquor production enterprises above designated size in mainland China, of which as many as 333 have incurred losses, with a loss of 33.8%.
The chill of the liquor market has been reflected in the declining liquor sector, citing the data mentioned in the Guosen Securities research report, the current valuation of the liquor industry has rebounded to a low point in the past decade.
The sharp decline in market capitalization may only be the prelude to the market correction, and a more severe freezing point may be yet to come. Especially in the context of the increasing complexity and uncertainty of the global economic environment, the entire liquor industry is about to usher in a tough battle?
01 Can't stop the decline in holdings and repurchases?
The industry, which was originally looking forward to the recovery of liquor consumption this year, has recently frequently staged price inversions.
Especially in the past month, Luzhou Laojiao's operation of rising first and then falling directly led to a sharp setback in its own stock price.
After entering December, the stock price of Luzhou Laojiao, which was already weak, suffered a cliff-like decline of 7.35% at the opening of the 11th, falling below the 180 yuan mark, and the current stock price is 165, maintaining a decline of 5.6%.
Looking back, the stock price decline caused by the price reduction promotion not only hit Luzhou Laojiao itself, but also affected the entire liquor sector.
It is understood that although Luzhou Laojiao quickly responded that the settlement price had not changed, and only pre-adjusted the profits of some customers, it still failed to effectively curb the overall decline of the liquor sector.
The downturn in the market even stimulated Wuliangye, which has never increased its holdings, to announce on December 14 that it planned to spend 400 million yuan to 800 million yuan to increase its holdings.
In fact, including Wuliangye and Luzhou Laojiao, many wine companies such as Huazhi Liquor, Shede Liquor and Kouzijiao have successively announced or updated their repurchase plans, hoping to boost market confidence.
However, judging from the actual effect, the protection of these wine companies does not seem to be satisfactory. For example, Shede Liquor, which hit a high price of more than 260 yuan per share two years ago, has now fallen below 100 yuan, a drop of more than 60%.
The logic behind it is not difficult to understand. In the consumption upgrade stage, consumers are willing to pay for high-end liquor, even if the purchase volume is relatively reduced, but the price increase makes dealers and consumers also tend to hoard investment.
However, when the economy is downturn and consumption is downgraded, consumers prefer cost-effective products, resulting in a decline in sales of high-end liquor.
In order to sell as soon as possible, dealers do not hesitate to reduce prices at a loss, forming a "price inversion".
When it is no longer feasible to make profits by hoarding high-end liquor, if market demand continues to be weak, high-priced liquor in inventory may trigger a large-scale sell-off at low prices, which in turn will affect the overall sales performance and profit level of the liquor industry.
02 Young people have a colder attitude towards liquor
Subject to factors such as the economic slowdown and the decline in consumer purchasing power, the liquor industry market is gradually returning to rationality.
The phenomenon of "hard to find a cellar" in the peak season has been transformed into "inventory overstock" today, and many companies have begun to face the problem of weak sales and fallen into a vicious circle of further decline in sales due to price inversion.
From a price perspective, baijiu is usually sold for more than beer, but in terms of quality, blends are becoming more and more abundant on the market, and consumers who lack professional knowledge are almost unable to distinguish counterfeits.
There is no doubt about the potential harm to health caused by counterfeit and shoddy liquor, and when users cannot effectively identify it, they will inevitably reject liquor.
In addition to the price and the quality of the product itself, there is a deeper reason behind the reduction in the production of the liquor market, that is, the cultural logic on which the liquor industry is based is undergoing fundamental changes.
Young people have different backgrounds, and they are more likely to choose coffee to stay awake rather than liquor with obvious sleep aids.
To a large extent, this change also reflects the new dependence path of the new generation of consumer groups on beverage demand in the process of transforming from agricultural civilization to industrial civilization.
Rejecting the traditional liquor culture is becoming a new trend of the times. Although some innovative attempts, such as the launch of cross-border co-branded sauce coffee, have been quite a breakthrough in the marketing field, this is more out of temporary novelty than translated into stable consumption Xi.
Therefore, the attitude of young people also indicates that the future liquor industry will still show a trend of shrinking demand.
03 The Matthew effect exacerbates the gap between the rich and the poor
Seeing this, most people may think that the non-essential liquor industry should be cool.
On the positive side, there is still potential for improvement behind the recession of the liquor industry. However, this opportunity will be more inclined to the high-end liquor market with strong brand influence and product advantages.
To put it another way, with the increasingly fierce competition in the market, the liquor industry will further highlight the Matthew effect, that is, the head enterprises are becoming more prosperous, while the survival of the tail enterprises is becoming more and more difficult.
In fact, in the past few years, the phenomenon of the strong getting stronger and the weak getting weaker in the liquor industry has been very obvious, and it will be further exacerbated in 2023.
According to the "2023 Annual Report on the Development of China's Liquor Industry" released by the China Liquor Industry Association, about one-third of liquor companies fell into a loss-making state in the first half of the year. Despite the general pressure on the entire industry, the revenue and profits of the leading wine companies are still on the rise.
According to the words of professionals, the pattern differentiation of the liquor market will become increasingly serious in the future, and the overall structure will gradually transition from the current rugby shape to the dumbbell shape.
From the perspective of price, the consumption trend of high-end and value-based differentiation has become the mainstream, and a few top high-end liquor brands will continue to occupy a large share of the industry's revenue and profits.
In terms of industry layout, resources will be further concentrated in advantageous production areas (such as the Yangtze River Famous Wine Belt, Huanghuai Famous Wine Belt, etc.), and the integration of leading enterprises (such as Moutai, Wuliangye, Yanghe, Fenjiu, Luzhou Laojiao, Gujing, Niulanshan, etc.), as well as high-quality brands with brand heritage (such as Dongjiu, Baofeng, Huanghelou, Quanxing, etc.).
As evidenced by relevant data, the total revenue of the five major liquor companies in the first three quarters of "Mao Wuluyang" and Fenjiu was close to 244.8 billion yuan, and the sum of net profit exceeded 100 billion yuan.
In contrast, 3 billion to 5 billion yuan of waist enterprises are facing great pressure in the process of breaking the situation, and the premise of their breakthrough in the future is to enhance brand influence and achieve differentiated operation.
04 Optimize channels to cater to young people in the involution
In 2023, "involution" ranked first among the top ten keywords in China's liquor industry, and many regional wineries fell into fierce competition based on promotion.
In 2024, when differentiation and innovation are intertwined, China's liquor industry urgently needs to cater to young people, build a value system with thousands of flavors and brand characteristics, and cultivate young people's preferences and recognition of liquor brands.
It is worth mentioning that Jiang Xiaobai once swept the young group with his innovative taste and fashion marketing, but he never won the hearts of old drinking friends. How to attract the younger generation while winning the support of old wine friends has also become an urgent problem for liquor companies.
As a result, relying on the huge consumption base and profound historical heritage, the investment value of China's wine industry still exists. It's just that companies need to be more active in adjusting their strategies to adapt to the constant changes in the market.