Summary of Key Points
As a leading domestic liquor distribution company ("the first stock in the liquor distribution sector"), Huazhi Liquor has recently faced additional challenges due to its two core subsidiaries having to pay a tax penalty of 129 million yuan. This comes amidst its first annual loss in 2025 (net parent company profit of -369 million yuan) and continued declining performance in the first quarter of 2026. The root of its difficulties lies in its past reliance on well-known brands such as Moutai and Wuliangye for easy profits, a strategy that has become ineffective during the deep adjustment period in the liquor industry (high inventory levels and inverted prices). Currently, Huazhi is betting on the new retail format "Huazhi Youxuan" as a means of transformation, but it faces competition from platform giants and the direct sales efforts of upstream liquor manufacturers.
I. The 129 Million Yuan Tax Penalty: Making Things Worse for an Already Lossing Company
The two subsidiaries responsible for this tax penalty are key pillars of Huazhi Liquor's business. Huazhi Jingpin handles core sales channels such as large supermarkets and group purchases, while Tibet Zhongtang specializes in purchasing well-known brands like Moutai and Wuliangye, each of which contributes more than 10% to the company's net profit. The 129 million yuan in taxes and late fees has already been paid and will be included in the 2026 income statement, further reducing this year's profits.
Huazhi already suffered a loss of 369 million yuan in 2025, and its net profit decreased by 37.9% in the first quarter of 2026. This tax penalty is like "adding salt to the wound." The company attributes the issue to a misunderstanding of tax policies but has not disclosed the specific reasons. Regardless, this money could have been used for operational needs or transformation, and now it is gone, increasing the company's financial pressure even more.
II. From Easy Profits to Heavy Losses: Dependence on Well-Known Brands Becomes a Burden
Huazhi's past success was entirely dependent on these well-known brands. Moutai and Wuliangye accounted for 70% of its revenue. During the golden period from 2017 to 2021, as prices of these brands rose, Huazhi made substantial profits by selling them at a higher price. However, the situation has changed since 2022:
- Inverted Prices: The price of Moutai has dropped significantly, with loose bottles now selling for 1500 yuan, which is lower than the purchase price (for example, if a distributor bought them for 1800 yuan and sells them for 1500 yuan, they lose 300 yuan per bottle).
- Depreciating Inventory: Huazhi had over 3 billion yuan in inventory in 2024, which continued to depreciate in value. In 2025, these depreciated assets were recorded as a loss of 302 million yuan.
- Sharp Drop in Gross Profit Margin: The gross profit margin on the liquor business plummeted from 20% to 4.9%, leaving almost no profit.
General Manager Yang Wuyong frankly stated, "In the past, selling well-known brands was like earning easy profits; now it might be more like incurring heavy losses."
III. Betting on Instant Retail Transformation with Huazhi Youxuan: Aiming to Be the "Sam's Club of the Liquor Industry"
To turn things around, Huazhi launched Huazhi Youxuan in 2025, focusing on instant retail:
- Small Store Model: They are opening community-based stores around 80 square meters in size, reaching cities, counties, and communities, with delivery taking 15-30 minutes (integrating with platforms like Meituan, Ele.me, and Douyin).
- Own Brands: They have launched four types of liquor priced between 100 and 300 yuan, covering various flavors, aiming to compete with brands like Sam's Club by offering high-quality products at competitive prices. The goal is for their own brands to account for more than 30% of sales within 3-5 years.
- Rapid Expansion: They opened 250 stores in 2025 and plan to open another 1,000 in 2026, many of which are conversions from traditional liquor stores.
In short, Huazhi is trying to shift from selling well-known brands at a profit margin to offering affordable liquor directly to consumers with fast delivery, in order to reduce their dependence on these high-priced brands.
IV. The Challenges of Transformation: Facing Competition from Giants and Liquor Manufacturers
Huazhi Youxuan faces significant obstacles:
- Competition from Platform Giants: Meituan's "Waima Songjiu" (a liquor delivery service) has already established more than 2,000 stores, with a transaction volume of 6 billion yuan in 2025, several times that of Huazhi Youxuan.
- Direct Sales by Upstream Manufacturers: Moutai's "iMoutai" generated revenue of 21.5 billion yuan in the first quarter of 2026, a year-on-year increase of 267%. Direct sales channels are becoming more popular, reducing the value of distributors like Huazhi.
- Unproven Model: Huazhi Youxuan is still in its early stages, and it remains to be seen whether it can attract consumers and become profitable.
Conclusion
Huazhi Liquor's difficulties reflect the broader challenges faced by traditional liquor channel operators during the industry's adjustment period. Transforming into instant retail is a new approach, but with competition from both platform giants and upstream manufacturers, success depends on how well the strategy is implemented. Ultimately, whether consumers will accept Huazhi Youxuan's affordable prices and fast delivery services will be the deciding factor for its success.