Firm long-termism and through the industry cycle Shuijingfang's revenue and profit will grow in 2023

Text/Li Ran

Shuijingfang is steadily moving forward on the established track.

On the evening of April 26, Shuijingfang released its 2023 annual report. During the reporting period, Shuijingfang achieved an operating income of 4.953 billion yuan, a year-on-year increase of 6%, and a net profit of 1.269 billion yuan, a year-on-year increase of 4.36%.

For the whole year, Shuijingfang achieved year-on-year growth in revenue and profit, and completed the business goals set at the beginning of the year. Among them, the fourth quarter of 2023 set the best performance for the same period of the previous year. In the first quarter of 2024, the company also maintained performance growth as expected, of which the net profit attributable to the parent company achieved double-digit growth in the first quarter.

The liquor industry has entered a period of deep adjustment, the competition situation of the industry's squeezed stock continues to evolve, and the cooling of the demand side has become a common problem faced by the industry. Predicting this situation in advance, Shuijingfang took the initiative to advance and retreat with the channel, giving priority to ensuring the stability and health of the value chain, and successfully promoting the growth of performance against the trend.

Under the overall pressure of consumption, the Matthew effect of "the strong and the strong" in the liquor industry continues to intensify, and the industry concentration continues to increase.

In the face of this ever-evolving industry trend, Shuijingfang is advancing in two directions: relying on large single products such as Zhenzhuo No. 8 to undertake the dividends of consumption stratification, and at the same time integrating the first-mover advantage of being a famous wine enterprise located in a famous wine production area, and meeting consumers' strong demand for famous wines with high quality and high brand value with high-quality products.

Ouyang Qianli, an expert in the liquor industry and founder of Qianli Think Tank, believes that consumers are paying more and more attention to quality and personalized experience in their choice of liquor, and for consumers who pursue high-quality life, famous liquor is not only a drink, but also a manifestation of life attitude. Famous liquor companies like Shuijingfang are meeting the diverse needs of consumers through continuous product innovation and channel breakthroughs, and seizing new growth opportunities in the changing market.

Zhou Yuanxin, Chief Marketing & Digital Business Officer of Shuijingfang, said: "Shuijingfang's growth is driven by three aspects – first, the irreplaceable famous wine genes, secondly, the long history that is recognized by consumers, and finally the unremitting efforts in market expansion. Looking to the future, we will continue to explore innovative marketing models and tell consumers the story and culture behind baijiu in more innovative ways. ”

Revenue, profit, and cash flow both increased

Shuijingfang reproduces a stable background

In 2023, the overall trend of the liquor industry will decline. According to the National Bureau of Statistics, in 2023, the output of liquor by enterprises above designated size in China will be 4.492 million kiloliters, a year-on-year decrease of 2.8%.

But it was also this year that Shuijingfang went from reversing back to growth, to accelerating back to double-digit growth, and then to a record high in the fourth quarter, and walked out of a beautiful contrarian upward curve.

Among them, in the fourth quarter of last year, Shuijingfang achieved revenue of 1.364 billion yuan and net profit attributable to the parent company of 246 million yuan, setting the best fourth-quarter performance in the past years.

In the first quarter of this year, the growth of Shuijingfang also continued to improve. According to the first quarter report of 2024 disclosed at the same time, Shuijingfang achieved revenue of 933 million yuan in the first quarter, a year-on-year increase of 9.38%, and a net profit attributable to the parent company of 186 million yuan, a year-on-year increase of 16.82%.

It is particularly noteworthy that the net cash flow generated by Shuijingfang's operating activities in 2023 will be 1.734 billion yuan, a year-on-year increase of 31.98%, proving the "stable background" of performance.

Walk side by side with the channel

Feed back the healthy development of the business

The key operating data rose together, thanks to Shuijingfang's accurate insight into industry trends last year. With the increasingly fierce competition in the industry, China's liquor market has entered a stage of diversification and quality development, and the market demand for high-quality liquor continues to grow.

In this context, Shuijingfang focuses its resources on channel expansion, constantly tapping the depth and breadth of channels, and leveraging channels to explore the market's demand for high-quality liquor.

In terms of depth, Shuijingfang has taken deep roots in core cities to stabilize its fundamentals, while expanding potential markets and looking for new market increments.

In terms of breadth, Shuijingfang actively focuses on group buying, consumer cultivation and other fields, and actively strengthens e-commerce to seize traffic opportunities. Through multi-channel joint efforts, multi-dimensional grasp of business incremental opportunities.

In this process, Shuijingfang firmly believes that a stable and healthy value chain is an important guarantee for maintaining the common interests of manufacturers and an important prerequisite for consumers to establish stable brand value, so it will take the initiative to reduce social inventory and stabilize the value chain in the first quarter of 2023.

This move has ensured the healthy development of the value chain, and since the second quarter of 2023, the inventory of Shuijingfang dealers and stores has been maintained at a reasonable level.

Jiang Wei, general manager of Shuijingfang's core products division, emphasized the importance of adapting to the times and focusing on resources. "We have been deeply engaged with our customers, listened to their voices, and reached out to the front line of the market, working side by side with our dealer partners to face challenges together. Looking ahead, we plan to adopt a more detailed methodology, refine market segments, and adopt an intensive approach to ensure that steady growth can continue. Jiang Wei pointed out.

The data can prove the channel's recognition of Shuijingfang. The annual report shows that the balance of contract liabilities of Shuijingfang will increase to 1.22 billion yuan at the end of 2023, and the balance of contract liabilities at the end of the first quarter of this year will be 1.151 billion yuan, both exceeding the same period of the previous year. The contract liabilities directly reflect the distributor's confidence in the wine company, and are regarded as the "performance reservoir" of the wine company.

Focus on advantageous products and high-end attributes to help pass through the cycle

While moving forward side by side with the channel, Shuijingfang further dismantled the user needs of the market segment, increased the investment in the main single products, and launched new products for different customer groups and channels.

On the one hand, in response to the diversified needs of consumers, Shuijingfang has increased its investment in large single products such as Jingtai and No. 8, and at the same time expanded its product layout in both directions. In order to meet the consumption of the circle and further broaden the coverage of the well platform series, Shuijingfang continued to promote the classic product new well platform and launched the "Shuijingfang Jingtai Yipin". At the same time, it launched the ultra-high-end product "Shuijingfang First Fang" to enrich the company's brand matrix and bring consumers more high-quality and unique liquor experience. In addition, it has launched a variety of e-commerce exclusive products such as "Small Water Well", "Water Well Banquet" and "Treasure Series (Kirin Pixiu) Gift Box" in the e-commerce channel, aiming to allow more consumers to taste more high-end and high-quality liquor in the price range of about 200 to 300 yuan.

On the other hand, Shuijingfang started from the optimization of the sales strategy of the high-end products division, focused on the core cities for business expansion, and enhanced the brand awareness and reputation among the target consumer groups. At the same time, through a wealth of brand and circle activities such as aesthetic festivals and liquor workshops, as well as the construction of offline networks such as aesthetic halls and experience halls, consumer reach will be more widely promoted.

2023 coincides with the 25th anniversary of Shuijingfang's scientific archaeology, which is also Shuijingfang's innate advantage in famous wines. Based on this, last year, Shuijingfang cooperated with Professor Bai Fengyan, deputy director of the State Key Laboratory of Mycology, Institute of Microbiology, Chinese Academy of Sciences, and his team to jointly carry out the second phase of scientific research on Shuijingfang's unique "No. 1 microflora", and released the latest phased research results at the 25th anniversary event conference of Shuijingfang scientific archaeology in September 2023.

By vigorously telling the brand story of "more than 600 years of uninterrupted brewing and inheritance" and deepening the rare quality label of "Double National Insurance", Shuijingfang has further strengthened its own good wine genes and famous wine genes.

Chen Quan, general manager of Shuijingfang High-end Products Division, said: "On the basis of stable fundamentals, the company's adherence to the high-end strategy, as well as the continuous cultivation and investment in brands and high-end flagship products, is an important help for the company to steadily promote the implementation of its long-term strategy and realize the cycle crossing." ”

Future-oriented, long-term investment

Promote sustainable business development

Shuijingfang not only grasps the current development, but also based on the long-term in the past year, and makes long-term investment for the future.

In 2023, based in the Chengdu production area, Shuijingfang will work closely with the government, industry organizations and upstream and downstream enterprises in the industrial chain, and join hands with all parties to deeply explore and make full use of the unique geographical, ecological, historical and cultural advantages of the Chengdu (Qionglai) production area, and actively advocate and practice the innovative and diversified development model of the whole industry chain.

The construction of Shuijingfang Qionglai whole industry chain base enables Shuijingfang to realize the integrated operation of the whole industrial chain from raw material procurement to brewing and packaging, and provides important support for Shuijingfang to reduce costs and optimize efficiency. This not only ensures the quality and stability of the product supply, but also provides a solid material foundation for the company's long-term development.

In this process, Shuijingfang has also strengthened its label image as the leader of the Chengdu production area, and jointly enhanced the brand value with the famous wine production area.

At the same time, Shuijingfang has continued to promote the implementation of the "Shuijingfang 2035 Sustainable Development Goals" in the past year, and integrated the ESG strategy of "Shuijingfang, Respect for the Future" into the overall development strategy of the company, demonstrating the company's commitment to social responsibility and far-reaching consideration for future development.

In the 2022 ESG report, Shuijingfang announced the "Shuijingfang 2035 Sustainable Development Goals", as a guide for future medium and long-term sustainable development, Shuijingfang took the lead in announcing the "ESG work KPI" in the liquor industry. Through these measures, Shuijingfang is taking the lead in building a sustainable business model in the industry to create greater value for shareholders and society.

In the past year, Shuijingfang has not only made remarkable achievements in product innovation and brand inheritance by sticking to its long-term strategy, but also demonstrated its keen market insight and execution in marketing strategy and market expansion.

Looking forward to the future, Shuijingfang will continue to adhere to its long-term strategy, continuously optimize product structure, strengthen brand building, expand market influence, and continue to promote the sustainable development of the enterprise to bring consumers a more excellent product experience.

Jiang Leifeng, acting general manager of Shuijingfang, said that steady and healthy growth is the product of sticking to a long-term strategy and focusing on key areas. Growth doesn't happen in isolation, it's about the environment, partners, consumers, and stakeholders. In the future, on the basis of sticking to the long-term strategy, Shuijingfang will adapt to market dynamics and constantly review strategies and tactics in order to create more value with stakeholders.

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