Summary of Key Points
In the first half of 2026, the liquor market exhibited an unusual phenomenon: despite increased sales at the retail level, profits on the production side declined. The retail sales of tobacco and alcohol products rose by 13.2% year-on-year, yet the profits of the beverage and tea manufacturing sector fell by 17.7%. The fundamental issue is that the industry has been accelerating inventory reduction through price cuts and concessions to distributors (selling the liquor held by dealers to consumers). Leading companies such as Moutai and Wuliangye have adopted different strategies to stabilize prices. There are already signs of a "price bottom" for high-end liquor, but the true "demand bottom" that would indicate a recovery in demand has not yet been confirmed. The industry's recovery will need to be verified through mid-year reports and the peak sales periods around the Mid-Autumn Festival and National Day.
1. Selling More, But Making Less Profit? It Turns Out They're Using Profits to Clear Inventory
The core contradiction in the liquor industry this year is that while sales at the retail level are increasing, profits along the supply chain are decreasing. Why? Over the past few years, liquor manufacturers have stocked up large quantities of liquor with distributors, leading to excessive inventory. To cash out, distributors have been forced to reduce prices, creating a cycle of "price cuts → reduced inventory → declining profits":
- 74% of liquor companies saw a decrease in average transaction prices, and 86.7% of them experienced profit declines;
- More than half of the distributors are reporting situations where the selling price is lower than the purchase price, meaning they rely on manufacturer subsidies to survive;
- The proportion of profits from production has dropped from 18.1% last year to 16%, which means for every 100 yuan in sales, manufacturers earn 2 yuan less.
In simple terms, the entire industry is "losing money" in order to clear the excess inventory.
2. Channel Inventory Acts as a "Reservoir"; When It's Full, Manufacturers Cut Prices to Sell Off Stock
Many people confuse "manufacturer inventory" with "channel inventory": Manufacturer inventory refers to unsold raw or finished liquor (the production cycle for flavored liquors is long, so having more inventory doesn't necessarily mean poor sales); however, channel inventory refers to the liquor that has already left the manufacturer and is held by distributors or retail stores—this is what truly affects prices.
When channel inventory is high, even if consumers continue to buy liquor daily, distributors will sell off their stock due to cash shortages, leading to price drops. Therefore, this year the industry has shifted from forcing distributors to purchase more liquor to maintaining healthy channel operations: manufacturers are reducing shipments and providing discounts to dealers to lower inventory levels to a normal range.
3. Moutai and Wuliangye Use Different Approaches to Stabilize Prices
Leading liquor companies are both trying to stabilize prices, but with different tactics:
- Moutai: Raised prices twice this year (retail price increased from 1499 to 1539 to 1639 yuan) to bring the official price closer to the market price. Previously, distributors could make large profits by buying at lower prices and selling at higher ones; now with smaller profit margins, their incentive to hoard inventory has diminished, allowing Moutai to control prices more directly through its direct sales channels.
- Wuliangye: Didn't raise prices but controlled shipments to stabilize them. The official出厂 price remains at 1019 yuan, but the company has reduced subsidies for distributors (which previously helped lower their costs). The goal is to maintain a stable wholesale price; if this can be achieved without subsidies, it indicates that the phase of excessive channel sales has passed.
4. Is a Price Bottom Already Reached? Inventory and Demand Are Still Uncertain
To determine whether the liquor industry is improving, we need to look at three key indicators:
1. Price Bottom: Wholesale prices should stop falling and stabilize even without subsidies. High-end liquors like Moutai and Wuliangye have already shown signs of this.
2. Inventory Bottom: Channel inventory should return to a normal level where distributors are no longer forced to sell off their stock and are willing to pay manufacturers.
3. Demand Bottom: Consumers should start buying liquor without waiting for price cuts, and sales during peak periods (such as the Mid-Autumn Festival and National Day) should improve, with distributors actively replenishing inventory. Currently, there is no evidence of this—since the sales growth in the first half of the year was driven by price cuts.
The industry is currently at a stage where prices have stabilized, but demand has not yet truly recovered.
5. What's Next? Mid-Year Reports and the Peak Sales Periods Will Provide Clues
The next two months will be crucial for verification:
- Mid-Year Reports: These will reveal the actual financial performance of the companies. For Moutai, we need to see how much was sold through direct sales channels and whether channel inventory has decreased; Wuliangye's mid-year report indicates a nearly doubling of profits, but its first-quarter profit was only 6-11 billion yuan (due to a low base last year), so the focus is on whether it can truly stabilize its channels in the second quarter.
- Peak Sales Periods: The key indicators are whether Moutai and Wuliangye's wholesale prices remain stable, whether channel inventory continues to decline, and whether distributors are willing to purchase more liquor. If all three conditions are met, it will indicate a true recovery in demand, and the industry will have emerged from its adjustment period.
In summary, the liquor industry has clearly paid a price in terms of profits to clear excess inventory. The focus is now shifting from clearing inventory to stabilizing prices, but a real turnaround depends on consumer demand. Only when consumers are willing to spend money will the industry truly recover.
(The entire analysis is written in plain language to make it easy for non-experts to understand the current situation and trends in the liquor industry.)