Summary of Key Points
In the first half of 2026, the liquor industry as a whole faced a tough period (revenue of 19 listed liquor companies decreased by 7%, profits decreased by 8%, with Moutai's profits declining for the first time in 12 years). However, Wuliangye reported a “impressive” 89% increase in profits. This growth was not due to actual operational improvement but was achieved by adjusting the financial accounts late at night to lower the base figure from the previous year. The real operational situation is mixed: the main brand’s sales volume increased significantly, but the average price per unit decreased; the sales of lower-priced series plummeted; promotional expenses soared, leading to a net outflow of cash flow; and profits are highly dependent on the peak season during the Spring Festival, with growth slowing down in the second quarter. Additionally, Wuliangye is facing regulatory inquiries, the former chairman has been detained, and inventory clearance issues remain. The new management team is trying to stabilize the situation through measures such as price controls and inventory reduction.
Detailed Analysis
1. The “Magic of Doubling Profits”: The Key Lies in Adjusting the Base Figure
The secret to Wuliangye’s “doubling” profits is hidden in an announcement made late at night on April 30, 2026, the deadline for annual reports of listed companies. Wuliangye suddenly declared that the financial accounts for the previous year were incorrect, reducing the net profit for the first half of 2025 from 19.49 billion to 4.62 billion (a decrease of 14.87 billion) and revenue from 52.77 billion to 23.51 billion (a decrease of 29.26 billion).
Why the adjustment? Previously, Wuliangye counted any payment received from distributors as revenue, even if the goods were still in the distributors’ warehouses and not sold to consumers. This time, they eliminated these inflated revenues. As a result, the profit for the first half of 2026 (8.75 billion) appeared to have increased by 89% compared to the adjusted figure from the previous year, but it actually decreased by 55% when compared to the unadjusted figure of 19.49 billion.
It’s like taking an exam: if you scored 100 last year and 90 this year, it seems like a decline; but if you change last year’s score to 50, a score of 90 this year would be considered a 80% increase. The Shenzhen Stock Exchange immediately sent an inquiry letter, questioning whether the adjustment was deliberately delayed or information was concealed, and requested an audit by an independent institution.
2. Real Operations: Sales Volume Increased, but Prices Declined
After removing the inflated figures, what was Wuliangye’s actual sales performance?
Good News: The main brand, Wuliangye, sold 16,300 tons in the first half of the year, an 88% increase, with corresponding revenue rising by 73%—indicating that more goods were sold.
Bad News: The increase in sales was due to price cuts. The price per ton dropped by about 8%, similar to a supermarket clearance sale, meaning more goods were sold, but less profit was made per unit. The situation for lower-priced series was even worse, with revenue plummeting by 60%—these cheaper products are losing market competitiveness.
Looking at different channels, growth mainly came from distributors (distributor revenue increased by 36%), while direct sales only increased by 1.8%. Overall, the gross profit margin rose by 1.39 percentage points, suggesting that a higher proportion of the products sold were higher-end.
3. Spending Money to Boost Growth: Excessive Promotional Expenses Lead to Negative Cash Flow
To encourage distributors to sell more, Wuliangye spent heavily in the first half of the year:
- Sales expenses increased by 80% to 6.3 billion.
- Promotional expenses rose by 170% to 4.49 billion, with efforts such as offering red envelopes for scanning product codes and conducting promotional activities.
The problem is that despite the increased expenses, revenue only increased by 21%, meaning money was spent faster than it was earned. More critically, cash flow was negative, with a net outflow of 2.15 billion (compared to a net inflow of 31.1 billion in the same period last year). Where did the money go? The company blamed slow collections from distributors and fewer payments from due promissory notes.
In other words, the books showed a profit, but the actual cash on hand decreased.
4. Dependence on the Peak Season and Inventory Pressure: Growth Was a “Flower in the Spring Festival”
Breaking down the year into two quarters reveals a clearer picture:
- The first quarter (the peak season for the Spring Festival) saw a net profit of 8.06 billion, accounting for 92% of the annual total.
- The second quarter (a off-season) saw a 13% decrease in revenue, with a net profit of only 6.9 billion, a 91% drop—growth vanished immediately after the Spring Festival.
Looking at inventory, there were 25,100 tons of goods in storage at the beginning of the year (a 307% increase from the previous year), and production decreased by 30% (due to caution not to overproduce), while sales volume increased by 88%. The increase in sales was largely due to drawing on inventory. However, the ending inventory was still 1,489 tons higher than at the beginning of the year, suggesting that although goods were sold, they might still be in distributors’ warehouses and not with consumers.
Another detail: The 2025 annual report included a new item called “regulatory payments,” amounting to 26.3 billion, which were payments made by distributors but not yet recognized as revenue because the goods were not sold. Whether this amount can be converted into actual revenue is key to future growth.
5. Regulation and the Future: Price Controls to Maintain Channels, New Management Seeking Stability
Behind Wuliangye’s “impressive” results, there are also regulatory pressures and changes in management:
- The former chairman was detained in February 2026 and removed from office in June. The new chairman, Deng Min, has proposed five principles: avoiding reckless diversification and not seeking short-term profits.
- In August, Wuliangye issued a price control order, stipulating that the price of the eighth-generation Wuliangye cannot be lower than 800 yuan (previously, the price had dropped to 730 yuan, resulting in losses for distributors).
- The company is also exploring new markets, such as fruit-flavored liquors, to attract younger consumers, as the liquor market is aging.
In summary, Wuliangye’s “doubling” of profits was more a numerical trick than a reflection of actual operational improvement. The company is still in a period of adjustment, focusing on clearing inventory, maintaining prices, and finding new growth directions. With a substantial cash reserve of 119.1 billion yuan, it has the resources to make changes. However, whether it can truly overcome its challenges depends on how well it manages inventory and maintains healthy channels.
(The analysis is presented in plain language to make it understandable to non-financial readers.)