Summary of the Key Points in Plain Language
Yanghe’s just-released 2026 mid-year report has been a huge blow: its revenue for the first half of the year was 10.5 billion yuan, a nearly 30% decrease year-on-year, and its net profit was 2.6 billion yuan, a 40% drop. This report has shattered two of the company’s “ironclad advantages” it had held for over a decade. First, it has lost its long-held third-place position in the liquor industry; its main competitor, Shanxi Fenjiu, now has more than twice Yanghe’s revenue for the same period, pushing Yanghe out of the top tier. Second, it has even lost its stronghold in Jiangsu, the province where it was the “king of liquor,” as its local competitor, Jinshiyuan, has surpassed it in sales within the province.
Yanghe’s management claims this is a strategic decision to “not stockpile products to focus on sustainable growth,” but the financial report shows red flags in terms of dealer payments and cash flow. The trend of dealers abandoning the company and consumers choosing competing products is clear. Whether Yanghe’s “painful” reforms can help it regain the lost market remains uncertain.
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Detailed Analysis
1. How bad is this mid-year report?
Yanghe’s decline might be hard to grasp at first glance, but here are some numbers to illustrate:
- Compared to its rival Fenjiu, in 2023, Yanghe’s annual revenue was 33.1 billion yuan, while Fenjiu’s was 31.9 billion yuan, with a difference of less than 1.2 billion yuan. Everyone thought Fenjiu would overtake Yanghe in another two to three years. However, in the 2026 mid-year report, Fenjiu’s net profit for the first half of the year was 6.4 billion yuan, 2.47 times that of Yanghe. It’s as if two students of similar size one year later scored 90 and 40 points, a significant gap.
- Compared to its local competitor Jinshiyuan, Yanghe, which had been the leader in Jiangsu for decades, saw its sales within the province drop by 1.2 billion yuan to 4.39 billion yuan, while Jinshiyuan’s revenue increased by 3%. It’s almost unbelievable that Yanghe, once the dominant player, would be surpassed by a local competitor.
- The entire liquor industry is struggling this year, with both Fenjiu and Jinshiyuan experiencing declines, but their declines were only one-third to one-fourth of Yanghe’s. Yanghe’s poor performance cannot be entirely blamed on the overall market situation.
2. “Actively controlling inventory to adjust the structure,” but dealers have already voted with their feet
Yanghe’s management claims they are not unable to sell products but are deliberately not stocking them to stabilize prices in the long run. However, financial data contradicts this:
- “Contract liabilities,” which are advance payments from dealers, have dropped from 11.1 billion yuan in 2023 to 4.3 billion yuan, a 60% decrease, indicating a lack of confidence from dealers to pay in advance.
- “Operating cash flow,” the actual money left after covering all costs, was 6.1 billion yuan at the end of 2023 but only 3.35 billion yuan this year, nearly zero. This means the company is struggling to even cover its expenses.
- The number of dealers has decreased significantly, with 538 leaving nationwide and 116 leaving just in Jiangsu. If business were actually good, dealers would not leave.
- Yanghe used to stockpile products to expand nationwide, leading to discounted sales. Now, dealers are reluctant to continue this strategy.
3. Why can Jinshiyuan overtake Yanghe in its home province?
Jinshiyuan’s success is not just luck. Over the past decade, Yanghe focused on expanding nationwide and neglected its local market:
- Its core price range (300-600 yuan) is crucial in Jiangsu, where weddings and corporate events are common. Jinshiyuan’s Guoyuan series targets this range and has even expanded into the lower-priced (100-300 yuan) market, seeing a 3% increase this year. Yanghe, on the other hand, focused on high-end products, neglecting its local market, resulting in a 32% drop in sales in this price range.
- The profit margins for dealers differ greatly. Dealers prefer to sell Jinshiyuan because it’s more profitable.
- Yanghe also failed to understand the local business dynamics. With many small businesses and frequent social events in Jiangsu, Jinshiyuan has established strong connections with wedding venues and local businesses, ensuring it gets recommended for events.
4. The cost of Yanghe’s “shock therapy”
The new chairman, Gu Yu, is implementing reforms that aim to restore the company’s damaged channels. While these reforms have helped reduce inventory, the cost is high:
- Net profit in the second quarter was only 1.55 billion yuan, a 78% decrease year-on-year, and the stock price has plummeted from a peak of 248 yuan in 2021 to less than 40 yuan, with a 75% loss in market value.
- The timing is critical: consumers in Jiangsu have now favored Jinshiyuan, and dealers are also more inclined to sell it. Changing consumer habits is not something that can be reversed with price adjustments or promotional campaigns.
- Yanghe’s nationwide network, once a strength, lacks the support of local profits and brand recognition, which may cause dealers outside the province to lose confidence.
5. Yanghe’s decline serves as a warning for all businesses
Yanghe’s downfall highlights a common issue: many companies focus on expanding and rankings, neglecting their core market and the customer experience. No matter how large a brand is or how well its national expansion story sounds, if the local business is not solid and customers don’t profit, all the scale and reputation are worthless. Without a solid foundation, even the strongest brands can be vulnerable to market changes.