Summary of Key Points
Shede Liquor has been very active in overseas markets (participating in global aged wine festivals, expanding into 42 countries with retail outlets, and taking customers to New York to watch sports events), which makes it seem successful. However, its domestic fundamentals are deteriorating: net profit has decreased by nearly 90% over the past two years, with a huge quarterly loss of 250 million yuan, negative operating cash flow, and high levels of inventory and accounts receivable. Although Fosun's global resources have helped overseas operations, they have not addressed the core issues domestically—increasing industry competition, lack of confidence among distributors, and diminishing brand differentiation. This has led to a situation where the company looks good abroad but struggles internally. The future success will depend on whether the semi-annual report for August can reverse the decline in mid-to-high-end liquor sales.
I. Overseas Success: Aiming High with International Events
Shede has invested heavily in expanding its presence overseas:
- Grand Events: Starting 2024, the "Shede Aged Wine Festival" has been held globally, visiting countries like Canada, France, Singapore, Malaysia, and Australia. Each event featured local officials and business elites, along with charity auctions and cultural experiences. In June 2026, the company even took its key customers to New York to watch top sports events, with the executive general manager leading the trip.
- Channel Expansion: It has entered 42 countries and regions, with nearly 1,300 liquor retail outlets. Sales in Southeast Asia have grown by 200% in 2025, and a new low-alcohol aged wine (29 degrees) was launched to target younger consumers and casual social settings.
- Fosun's Support: Fosun's model of global organization combined with local operations provides Shede with distribution channels, brand recognition, and a global network, giving it a competitive advantage over competitors like Moutai and Wuliangye (which rely on their brand strength).
II. Domestic Challenges: A Sharp Drop in Profit
Despite overseas success, domestic performance is poor:
- Dramatic Performance Decline: Net profit dropped from 1.769 billion yuan in 2023 to just 223 million yuan in 2025, a decrease of nearly 90%. Annual revenue in 2025 was 4.4 billion yuan, down 17.5%. The fourth quarter of 2025 was particularly bad, with a quarterly loss of 249 million yuan, erasing the profits from the previous three quarters.
- Negative Cash Flow: Operating cash flow was -523 million yuan in 2025 (for two consecutive years), and another loss of 100 million yuan in the first quarter of 2026. This means that the company is spending more money than it earns from sales, leading to a decreasing cash reserve.
- High Inventory and Accounts Receivable: Inventory has increased from 5.2 billion yuan to 5.98 billion yuan (760 million yuan worth of unsold goods), and accounts receivable have risen from 475 million yuan to 684 million yuan (money owed by customers that hasn't been collected).
- Reasons for the Decline:
1. Fierce Competition: Firms like Fenjiu, Xijiu, and Langjiu are competing in the mid-to-high-end market, making Shede's aged wine strategy less appealing.
2. Lack of Distributor Motivation: Dealers have excessive inventory, and wholesale agency revenue has decreased by 25%, indicating a lack of interest in selling Shede's products.
3. Brand Premium Weakness: Previously, "aged wine" was a unique selling point for Shede, but now Wuliangye and Fenjiu also emphasize the concept of age, which consumers no longer find appealing.
III. Fosun's Help: Boosting Overseas, Yet Not Solving Domestic Issues
Fosun's investment in 2020 provided capital and global resources, but it has not solved the core problems in the domestic market:
- What Fosun Offers: Global distribution channels, brand recognition, and support from Guo Guangchang (who promoted Shede multiple times).
- What Fosun Cannot Provide: Confidence among domestic consumers and vitality in the distribution network. Investors focus on financial results; the stock price dropped from a peak of 260 yuan in 2022 to 33 yuan in July 2026, a significant decline.
- Shede's Response: The company is focusing on the domestic market, with sales in provincial areas increasing by 6% in the first quarter of 2026 and ordinary liquor products increasing by 41%. However, mid-to-high-end liquor sales (the main source of profit) continued to decline by 12.9%, which is not good for a brand targeting this segment.
IV. Appearance vs. Reality: Is Overseas Success Just a Mask?
Overseas success does not hide the domestic difficulties:
- Small Contribution to Total Revenue: Despite rapid growth in Southeast Asia, overseas sales are still insignificant compared to the company's domestic revenue.
- Overseas Success as a Mask: While Guo Guangchang talks about global expansion, domestic dealers are dealing with high inventory levels, and mid-to-high-end liquor sales continue to decline. The positive overseas performance serves more as a distraction from these internal issues.
V. What Lies Ahead: Can the Semi-Annual Report in August Turn Things Around?
The key lies in the semi-annual report for August 19:
- If the decline in mid-to-high-end liquor sales can be reversed, it indicates potential improvement for the domestic business.
- Otherwise, the company will continue to rely on low-end products and provincial markets, which may further weaken its brand image.
In summary, Shede's current situation is one of "strong appearance but weak reality." Whether it can turn things around depends on whether it can revive its domestic operations. The semi-annual report in August will be crucial for determining the company's future direction.