Kweichow Moutai reports first profit decline in two decades

Kweichow Moutai has reported its first interim profit decline since its 2001 Shanghai listing, with net profits falling 1.95% year-on-year. This downturn signals a broader contraction in China’s luxury consumption and high-end discretionary spending, driven by macroeconomic headwinds, a cooling economy, and shifting consumption habits among younger generations.

In response to these challenges, the distiller is undergoing significant channel reforms to regain market control. Direct sales now account for over 50% of its revenue, up from less than 10% a decade ago. This shift aims to reduce reliance on a complex distributor network that previously captured significant margins and engaged in speculative behavior, such as using Moutai as financial leverage.

Notably, China’s “national team” of state-backed investors, including Central Huijin Investment and China Securities Finance, have exited the company’s top 10 shareholders. This withdrawal by influential state funds underscores growing caution regarding the baijiu industry and the broader Chinese consumer sector.