Edit |Yuer Lake
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In China, liquor is a consumer product with strong historical and cultural attributes. A liquor brand without historical origins has no way to tell a story, and a liquor brand that cannot tell a story will have a hard time occupying the minds of consumers.
Among the top ten famous liquors in China, Sichuan liquor occupies half of the country: Wuliangye, Luzhou Laojiao, Jiannanchun, Langjiu and Shuijingfang. Among them, Shuijingfang, which focuses on mid-to-high-end liquor, has had ups and downs in performance in recent years and has frequently changed its face. In the ranking of Sichuan Liquor's "Six Golden Flowers", Shuijingfang was overtaken by Shede Liquor and has fallen to the bottom of the rankings.
In 2022, Shuijingfang's revenue will increase by less than 1% year-on-year;In the first half of 2023, revenue and net profit attributable to the parent company both plunged. Fortunately, the liquor market will usher in a recovery in the second half of 2023, which is reflected in the financial report for the third quarter of 2023, and Shuijingfang's performance has also picked up.
But at present, problems such as high inventory and declining sales of high-end products are still deeply troubled by Shuijingfang.
Shuijingfang, which is gradually falling behind, is not high or low
The "origin" of Shuijingfang has quite a long history, and its predecessor originated from Quanxing Daqu, which is one of the eight famous liquors in China, with a long history and the aura of "China's first liquor workshop".
In 2007, Quanxing Group spun off the high-end Shuijingfang brand and the low-end Quanxing Daqu and operated them independently. In the early days of its birth, Shuijingfang was priced one level higher than that of Moutai and Wuliangye, and it was in the limelight.
It is a pity that the subsequent development of Shuijingfang is like a roller coaster. Diageo Group, the world's largest liquor group, has been acquiring shares of Shuijingfang since 2006, and in 2013, Diageo became the actual controller of Shuijingfang.
But this transnational "marriage" has brought about unadaptation. This may be related to the fact that Shuijingfang's business leader is a foreign-funded enterprise. Under the pressure of an unfamiliar foreign market and cross-border operations, foreign companies often make short-term decisions. Since Diageo took over, Shuijingfang's performance has been on the verge of delisting year after year, and foreign executives have been replaced one after another.
In 2015, Shuijingfang finally changed to a local Chinese management team, and Shuijingfang's performance only returned to normal levels in 2017. However, the delay in this period made Shuijingfang miss the opportunity to stand in the first echelon of high-end liquor. Moutai Wuliangye and other liquor companies have left Shuijingfang far behind.
Now Shuijingfang is in the second-tier echelon, and in the recently announced financial report for the third quarter of 2023, various performance indicators have picked up. At first glance, the decline in Shuijingfang's performance has been temporarily stopped, but looking at the entire A** field, its situation is not optimistic.
As of the end of December 2023, among the 20 A-share liquor companies, Shuijingfang has a total market value of 28 billion yuan, ranking tenth. Among the top 10 wine companies in terms of market capitalization, Shede Liquor and Shuijingfang, which rank last, have a large gap with the top eight.
Looking at the scale of revenue, Shuijingfang not only fell out of the top ten, but also lagged far behind its peers. In the first three quarters of 2023, Shuijingfang achieved revenue of 302.4 billion yuan, down 4 percent year-on-year84%。Among the 20 A-share liquor companies, 17 liquor companies have achieved double-digit performance growth, and eight of them have a revenue growth rate of more than 20%.
It is worth noting that the concentration of the liquor industry CR5 (the top five in terms of scale) has increased from 20% in 2013 to 43% in 2022. According to data from industry institutions, the CR5 of the liquor industry will increase to more than 70% in the next ten years.
In this way, the competitive advantage of the leading wine companies is further highlighted, and small and medium-sized wine companies will gradually be integrated, merged, or even eliminated directly by the head wine companies. In addition, a second-tier wine company like Shuijingfang may be difficult to maintain its market share.
Continued high marketing investment, but still can't drive sales
In recent years, the total consumption of liquor has continued to decline, and the consumer market has tended to be rational. Especially under the liquor consumption trend of "drinking less and drinking better", the competition between high-end liquor brands has become more intense.
Despite the poor performance, Shuijingfang's gross profit margin can soar to 80%. This is because Shuijingfang has been showing its high-end positioning for many years, and its product pricing is relatively high. However, after parting ways with the famous wine Quanxing Daqu, Shuijingfang's high-end positioning became awkward.
In order to support the premium space of high-end products, Shuijingfang had to invest heavily in marketing.
Since 2015, Shuijingfang's sales expense ratio has basically ranked among the top five in the industry. Shuijingfang's sales expense ratio in the past five years is between 27% and 31%, much higher than the industry average of about 18%. While the sales expense ratio is on par with the first-tier wine companies, the revenue volume has never been able to catch up.
More importantly, even if we continue to increase market investment, the sales of Shuijingfang's high-end products have not been able to get corresponding returns.
In the first half of 2023, the total sales volume of Shuijingfang will be 409159 thousand liters, down almost 15% year-on-year. In terms of products, the revenue of ** high-end products decreased by 27 year-on-year95%。
The high-end liquor products are also divided into several grades. In Shuijingfang's financial report, it is disclosed that more than 90% of its revenue structure comes from mid-to-high-end products, one is "well platform", and the other is "Zhenjiu No. 8". These two series of products are between 300 yuan and 600 yuan, which belongs to the "sub-high-end" belt in the liquor industry.
Shuijingfang's ** products of more than 800 yuan and 1,000 yuan, such as "Shuijingfang Collection" and "Shuijingfang Jingcui", account for only about 5% of its sales.
The sales volume of liquor is very dependent on multi-level distribution, so liquor companies with strong channel control usually have better sales figures.
Compared with today, Shiyuan recorded revenue of 59 in the first half of 2023700 million yuan, a year-on-year increase of 28%;Another example is Shanxi Fenjiu, which also achieved high growth performance of about 24% and 35% in net profit in the first half of last year.
Another set of data is that in 2022, the number of distributors in Shanxi Fenjiu and Jinshiyuan in the province will be 768 and 395 respectively, and both rely on these distributors to achieve refined operation of the provincial market.
In contrast, Shuijingfang, which relies on provincial first-class merchants for market promotion, is not proficient in this. As of June 2023, the number of dealers in Shuijingfang is less than 50. On this basis, Shuijingfang is bound to channel businessmen, and its high-end product sales company is jointly funded by 25 provincial dealers.
It's just that this model is not in harmony with the changes in the liquor market today. On the one hand, the main channel of the current mid-to-high-end liquor brands has been seriously impacted. The rise of new channels such as instant retail, live e-commerce, and circle marketing has made traditional channel merchants no longer enjoy the right to speak in the past.
On the other hand, under this model, Shuijingfang can only digest the inventory by itself, and like Jinshiyuan, they can directly disperse the growth pressure and transfer it to various channels.
In 2022, the inventory of Shuijingfang is 244.3 billion yuan, and in 2023, Shuijingfang's inventory in the first quarter will be as high as 244.9 billion, which is equivalent to the inventory level for the whole year of 2022. While the decline in performance is unstoppable, inventories are also high. Since the second quarter of last year, Shuijingfang has had to urgently control shipments to ease inventory pressure.
From the perspective of inventory turnover days, the inventory turnover days of Shuijingfang in 2022 will be 1,152 days, compared with 1,023 days in the same period last year, a year-on-year increase of 126%。The problem of rising inventory and slower and slower inventory realization directly reflects the pain point of insufficient competitiveness of Shuijingfang's products.
Frequent price increases to save performance, treating the symptoms but not the root cause
In September 2021, Shuijingfang released a new version of the upgraded collection, and the retail price increased by 200 yuan to 1,399 yuan. In April 2022, the retail price of the 52-degree new-generation well platform was 808 yuan, and the retail price of 38 degrees was 768 yuan, which was 70 yuan higher than the previous average.
By the middle of 2023, Shuijingfang announced a price increase for the entire Zhenzhuo No. 8 series, and the terminal retail price will be increased by 30 yuan bottlesHigh-end single product collection (38 degrees) raised by 15 yuan bottle.
Although the unit price of the product has been bullish in the past three years, the price increase has not had a positive impact on Shuijingfang's revenue.
Shuijingfang's performance has been declining since 2022, and Shuijingfang will achieve a revenue of 46 in 20227.3 billion yuan, a year-on-year increase of 088%；The net profit attributable to the parent company was 121.6 billion yuan, a year-on-year increase of 140%。In the first quarter of 2023, Shuijingfang's revenue will be 85.3 billion yuan, down 3969%；Net profit attributable to the parent company 15.9 billion yuan, down 5602%。
Shuijingfang attributed the decline in revenue and net profit to the poor market and the decrease in demand for liquor. However, compared with other A-share liquor companies that achieved double-digit high growth in the same period, the explanation given by Shuijingfang is really untenable.
With the intensification of the Matthew effect in the liquor industry, there is not much time left for Shuijingfang. You must know that Shuijingfang is the only foreign-controlled liquor company on the A-share market. And in the past ten years, Shuijingfang has undergone several management changes.
What is shown to the outside world is the turbulent business state from within on the one hand, and the development dilemma of the high-end recognition of the brand on the other hand.
Under the internal and external troubles, the capital market also began to vote with its feet on Shuijingfang. Since December 2022, Shuijingfang's share price has been *** falling by more than 37% in 2023, and its market value has evaporated by about 45 billion yuan.
Since the beginning of 2016, China's liquor production has declined significantly, from 1358 in 201640,000 kiloliters fell to 671 in 202220,000 kiloliters.
It is worth noting that although the market size of the liquor industry is expanding year by year, it has increased from 565.4 billion yuan in 2017 to 662.1 billion yuan in 2022. At the same time, the number of enterprises above designated size in the liquor industry has continued**, from 1,593 in 2017 to 963 in 2022. This shows that the concentration trend of the liquor market is obvious, and the competition in the industry is further intensified.
In this context, the overall performance of Shuijingfang is not good, so that the outside world has to be pessimistic about the future development of Shuijingfang.
Conclusion
Looking back on the development process of Shuijingfang, it can almost be described as twists and turns. The high-end route is the main development strategy of Shuijingfang, but it is very difficult for Shuijingfang to go on this road. From the perspective of the consumer market, the core competitiveness of liquor enterprises is product quality and brand genes. How to find the missing high-end product "DNA" is an important topic for Shuijingfang.
From the perspective of the entire fundamentals of the liquor market, the industry has ushered in a new round of cyclicality, and the positive sentiment in the capital market is obvious. In the second half of 2023, Shuijingfang's performance will gradually pick up. Next, whether Shuijingfang can take advantage of the east wind of the industry and return to the fast lane of performance growth, let us wait and see.