The Mystery of Luzhou Laojiao’s “Low-Alcohol” Strategy: A Lifesaver or Just a Showy Gesture?
Hello everyone, I’m your financial journalist. Today, we’re going to discuss a topic in the liquor industry that seems sophisticated but is actually quite controversial – the trend towards lower alcohol content.
Recently, Luzhou Laojiao released its semi-annual report for 2026 (note: although the actual year is not 2026, we’re analyzing based on the provided text). There’s a statement in the report that’s particularly worth pondering: “The promotion of low-alcohol products has been fully implemented, and the 28-degree ‘Gaoguang’ brand has completed the construction of our brand portfolio.”
In the past, if you heard a established liquor company like Luzhou Laojiao, known for its 52-degree Guojiao 1573, mention a 28-degree product in its semi-annual report, you might have thought, “Is this a distraction from their core business? Shouldn’t liquor get stronger and more expensive?”
But times have changed. Lower alcohol content, a younger target audience, and better taste have become the “standard answer” for the entire liquor industry. Even companies like Moutai and Wuliangye are now focusing on low-alcohol products. So the question is: For Luzhou Laojiao, is the low-alcohol strategy a viable way to break through the current challenges, or is it just a narrative tool to impress the capital market?
Let’s break this down in plain language without using jargon.
---
I. Strategic Analysis: Separating the Products to Make Money and Maintain Image
Luzhou Laojiao’s approach to low-alcohol products isn’t random; it’s a very clever form of “tiered management.” You can think of it like a family with distinct roles for each product:
1. The Eldest Child (38-degree Guojiao 1573): Stabilizing the Main Business
This is the top-tier product. Although the alcohol content has been reduced, it still carries the “Guojiao 1573” brand. Data shows that it accounts for about 50% of the Guojiao series’ sales.
- Plain Language: This is a smart move. Many business guests find the 38-degree version more pleasant than the 52-degree one, preserving the “Guojiao” brand while being more comfortable for their bodies. This demonstrates that mature business customers are accepting lower-alcohol options, not just younger consumers.
2. The Second Child (28-degree Guojiao 1573): Still in the Testing Phase
The company claims the 28-degree version has been successfully developed but hasn’t been released yet, with the reason being “waiting for the right timing.”
- Plain Language: The fact it hasn’t been launched after over a year indicates uncertainty. If the 28-degree version carries the “Guojiao” brand, it might dilute its premium image. So, the company is hesitating between “successful development” and “official release.”
3. The Third Child (28-degree Gaoguang): A Pilot Brand for Trial and Error
This is the most significant change. The 28-degree product wasn’t included in the Guojiao series but was placed under a separate brand called “Gaoguang.”
- Plain Language: This is the most strategic move. “Gaoguang” is a “safety net” brand. If it succeeds, it’s a bonus; if it fails, it only affects the Gaoguang brand and won’t harm the prestige of Guojiao 1573. It’s like a subsidiary created for innovative ventures, allowing the company to experiment with marketing strategies (such as music festivals and cocktail creations) without risking the main brand.
Conclusion: Luzhou Laojiao’s strategy is to “mix high and low alcohol content to diversify risks.” They use the lower-alcohol products to appeal to younger consumers while maintaining the revenue from their core high-end products.
---
II. Financial Reality: Low-Alcohol Products as a “Painkiller,” Not a “Lifesaver”
Let’s look at Luzhou Laojiao’s financial performance for the first half of 2026:
- Revenue: 10.472 billion yuan, a 36.35% decrease year-on-year.
- Net Profit: 4.339 billion yuan, a 43.37% decrease year-on-year.
- Cash Flow: Shrank by 65.68%.
- Core Business (Mid-to-high-end Liquor): Revenue of 9.2 billion yuan, a 38.86% decrease, with sales plummeting by 42.53%.
In contrast, the “other liquor categories,” including low-alcohol products, had revenue of 1.211 billion yuan, a 10.27% decrease.
Many might ask: If low-alcohol products had less of a negative impact, does that mean they’re the solution?**
The answer is no:
1. Too Small a Contribution: Mid-to-high-end liquor accounts for over 90% of revenue, while low-alcohol products account for just over 10%. It’s like a family where the main income comes from the father’s high-paying job, and when the father loses his job, expecting the mother’s part-time job to fill the gap is unrealistic. The 1.2 billion yuan in revenue isn’t enough to make up for the significant loss.
2. Thin Profits: The gross margin for mid-to-high-end liquor is 90.74%, meaning they make a 90% profit on every 100 yuan sold. For low-alcohol products, it’s 45.80%, meaning they need to sell twice as much to achieve the same profit. Additionally, they require large volumes to cover costs and have a long development cycle.
3. Inventory Overhang: The turnover time for Guojiao 1573’s channels has increased to 7 months, and the company has 467,800 tons of semi-finished products in stock.
- Plain Language: The real problem is not who will drink low-alcohol products in the future; it’s that the current inventory is piling up and becoming unsalable. Low-alcohol products address future needs but don’t solve the immediate issue of inventory and sales challenges.
Conclusion: Low-alcohol products are a long-term strategy to diversify the business, but they’re not a short-term solution to the company’s financial woes.
---
III. Industry Trends: Follower Behavior and Competitive Pressure
Luzhou Laojiao isn’t alone in this trend; the entire liquor industry is moving towards lower alcohol content. At the Spring Sugar and Liquor Expo, you’ll see:
- More Exhibits: Moutai, Wuliangye, Shuijingfang, and Xijiu are all promoting low-alcohol products.
- But the Premium Products Still Take the Spotlight: Even though they’re promoting low-alcohol products, the most prominent spots are still for their high-end brands. Low-alcohol products are often placed in corners or special sections for new products.
What does this indicate?
1. Image Matters More Than Substance: Liquor companies know that low-alcohol products aren’t the main focus yet. But if they don’t participate, they might be seen as outdated or out of touch with younger consumers, leading to competition.
2. Homogenization: Many low-alcohol products look similar in flavor and packaging, lacking distinctiveness.
- Plain Language: It’s like the current “internet-famous” milk teas – everyone is making them, with similar formulas and endorsers, making it hard for consumers to distinguish them.
3. The Hype May Be Illusory: Many small brands can’t survive in this competitive market without strong brands and distribution channels.
Conclusion: The trend towards lower alcohol content is a result of collective anxiety, with companies following the trend rather than having a clear advantage.
---
IV. Consumer Perspective: Do Young People Really Like Liquor?
This is the key question. Luzhou Laojiao’s low-alcohol strategy focuses on appealing to younger consumers. But is that really the case?
1. The success of the 38-degree Guojiao is due to its popularity in regions with a tradition of drinking low-alcohol liquor, mainly among middle-aged business guests.
- Plain Language: This shows that middle-aged people prefer lighter drinks, not that young people have started drinking liquor.
2. Young people’s taste preferences are hard to cater to. They drink liquor out of social pressure or curiosity, not genuine enjoyment.
- Plain Language: Offering 28-degree liquor to young people might seem acceptable, but they often prefer craft beers, whiskey, or fruit wines.
3. Lack of Suitable Consumption Scenarios: Low-alcohol products need new consumption scenarios. Luzhou Laojiao’s efforts to associate them with trendy culture (like music festivals) are insufficient to change this.
Conclusion: While low-alcohol products have succeeded in the business segment, they still have a long way to go in appealing to the general youth market.
---
V. Final Judgment: Narrative Versus Actual Sales
Back to the initial question: Is the low-alcohol strategy a breakthrough for Luzhou Laojiao or just a narrative tool?
My judgment is: In the short term, it’s a narrative tool to impress the market and competitors. In the long term, it’s a necessary move, but it’s not a solution to the company’s immediate financial problems.
1. Why a Narrative Tool? It’s a way to show the market, competitors, and the media that the company is innovating and embracing the future.
2. Why a Necessary Move? With the liquor industry’s shrinking market and the saturation of high-end products, expanding into lower-alcohol segments is essential for survival.
3. Why Not a Lifesaver? Low-alcohol products have thin profits, a long development cycle, and fierce competition. They can’t quickly offset the decline in high-end sales. Luzhou Laojiao’s real challenges lie in broader economic trends and inventory issues.
Advice for Investors and Consumers:
- For Investors: Don’t expect low-alcohol products to boost Luzhou Laojiao’s stock price significantly. Focus on indicators like inventory turnover and the performance of its high-end products.
- For Consumers: If you prefer lighter drinks, the 38-degree Guojiao is a good choice for business occasions. For daily consumption, consider craft beers, fruit wines, or low-alcohol cocktails, which may better suit your tastes.
In summary: Low-alcohol products represent a second growth path for the liquor industry, but it’s a slow and challenging one. For Luzhou Laojiao, they’re a necessary complement to its core business, not a substitute. The hype around low-alcohol products is easy to create, but actual sales growth is difficult to achieve.