Summary of the Key Points in Plain Language
The recently released 2026 half-year report for Luzhou Laojiao has caused quite a stir in the high-end liquor industry: the total revenue for the first half of the year was 10.47 billion yuan, a year-on-year decrease of 36%, and the net profit that went into the company's pockets plummeted by 43%. The second quarter was even more disastrous, with revenue dropping by nearly two-thirds and net profit plummeting by nearly 80%.
The reason for such a sharp decline, compared to leading competitors like Moutai and Wuliangye, is entirely due to its flagship product, Guojiao 1573. Over the past year, Luzhou Laojiao has refused to reduce the price of Guojiao 1573, hoping to maintain its high-end brand image by controlling inventory and stabilizing prices. However, while the price has not completely collapsed, sales and profits have. Channels have been holding back inventory for seven months, and one-tenth of the dealers have left the market. The company is now in a dilemma: if it lowers prices, it risks losing its high-end status; if it doesn't, it won't be able to sell any products. It's unclear how much longer it can sustain this situation.
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Detailed Analysis from 5 Different Perspectives
1. Why Did Luzhou Laojiao Perform Worse Than Others?
The reason lies in its strategy of "putting all its eggs in one basket":
Looking at the financial report, you'll notice something interesting: 98% of Luzhou Laojiao's revenue decline in the first half of the year came from its mid-to-high-end product line, which includes Guojiao 1573, while the revenue from its lower-end products (such as Erqu) only decreased by 10%, showing relatively stable performance. In the past decade, Luzhou Laojiao has invested all its resources and growth potential into Guojiao 1573. The company's annual revenue soared from less than 7 billion yuan in 2015 to over 30 billion yuan, thanks to Guojiao 1573, for a consecutive ten years. It had forgotten the importance of diversifying its products. Now that Guojiao 1573 is not selling well, the entire company has suffered a significant setback. The growth myth built on Guojiao 1573 over the past decade has come to an end in 2025, and the decline in 2026 is only worsening.
2. The Yearlong Effort to "Stabilize Prices" Was Half a Success, Half a Failure
Luzhou Laojiao has claimed to have successfully stabilized prices, but dealers across the country give a different account: prices have not completely plummeted, but the strategy has not been successful. On the positive side, in most regions, the purchase price of Guojiao 1573 has not dropped to the point where selling one bottle results in a loss. In key markets like Henan, Sichuan, and Guangdong, the price remains stable between 825 and 850 yuan. However, on the negative side, Guojiao 1573 has fallen below its previous thousand-yuan price range. The official recommended price of 1399 yuan is hardly being followed in the market, and the actual selling price is around 800 yuan. This has caused Guojiao 1573 to fall behind its competitors like Moutai and Wuliangye in the thousand-yuan price segment. Additionally, the Zhejiang market has seen price inversion, with dealers buying the product for 910 yuan and selling it for 810 yuan, resulting in a loss of 10 yuan per bottle. Dealers can only make a small profit of 15-35 yuan per bottle, which is not much more than selling regular mineral water.
3. Refusing to Lower Prices Has Led to Worse Sales
Luzhou Laojiao's strategy of keeping prices high was based on the assumption that consumers would return when the economy improved. However, this has backfired, with sales declining even more quickly. Two main reasons for this are:
- Competitors have poached its customers: Before Wuliangye lowered its prices, channels could sell two bottles of Guojiao and one bottle of Wuliangye, with consumers seeing little difference in price. Once Wuliangye reduced its prices, the price gap widened, and consumers chose Wuliangye, which offered a better value for the same price. As a result, Guojiao's customer base has shrunk.
- The overall market environment has changed: High-end liquor is no longer primarily consumed for personal use but for business events and gifts. With more rational consumption, the demand for high-end liquor has decreased, shrinking the market for such products. Keeping prices high has led to a lack of sales.
4. How Much Pressure Does Guojiao 1573 Face Now?
Here are some alarming figures that illustrate the company's difficulties:
- Inventory has been held back for seven months: Normally, dealers can sell all their Guojiao inventory in three months, but now they have seven months' worth of stock. Even if Luzhou Laojiao stops supplying dealers today, it will take more than half a year to sell all the inventory, tying up millions in capital.
- One-tenth of the dealers have left the market: 162 Guojiao dealers have gone out of business nationwide, meaning that one in ten partners could no longer afford the pressure. This has led to a 27% decrease in advance orders from dealers.
- Operating cash flow has decreased by 65%, significantly reducing the company's available funds. Luzhou Laojiao experienced a similar downturn in 2013, during which profits plummeted by 74%, and it took nearly three years to recover from the loss of dealers and consumer confidence.
5. How Long Can This Strategy of "Refusing to Lower Prices" Last?
Luzhou Laojiao is essentially betting on the economy improving in the next 1-2 years, hoping to boost sales without lowering prices and thus preserving its high-end brand image. With its current cash reserves, it can manage a decline in revenue and profits for 1-2 years. However, if the liquor market remains sluggish for more than three years, the company will likely struggle. It may have to offer generous discounts or lower supply prices to attract customers. Its strategy of maintaining both profits and brand image has failed, resulting in a loss of market share. It's in a difficult position with no clear way out.