Provision for impairment exceeds 2.7 billion yuan; China Resources Beer places an order to acquire a hundred-billion-yuan Baijiu company; net profit last year declined by nearly 30%.

This article is from Times Finance, written by Lin Xinlin.

The beer giant pays the price for its bold claim to “turn white.”

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On the evening of March 10, China Resources Beer (00291.HK), a leading domestic beer company, issued a profit warning, stating that for the fiscal year ending December 31, 2025, it may record a profit of approximately 2.92 billion to 3.35 billion yuan, compared to 4.759 billion yuan in the same period last year, a decrease of about 29.6% to 38.6% year-on-year.

This is uncommon in China Resources Beer’s development history. According to Times Finance, the company’s profit in 2025 may hit a five-year low.

The sharp decline in profit is due to a one-time large impairment loss. China Resources Beer disclosed in its announcement that the decrease in profit was mainly due to goodwill impairment of about 2.79 billion to 2.97 billion yuan, which was recognized after acquiring a 55.19% stake in Guizhou Jinsha Jiaojiu Distillery Co., Ltd. (“Jinsha Jiuye”) on January 10, 2023.

While competing fiercely in the high-end segment against Budweiser and Carlsberg, the company is still hampered by its continued underperformance in the Baijiu business. After a leadership change last year, China’s leading beer company has begun to address the “hidden risks” planted in earlier years.

Post-billion-dollar acquisition, goodwill impairment increases

A large impairment has brought the high-profile billion-yuan Baijiu acquisition back into the public eye.

On January 10, 2023, China Resources Beer completed the transfer of its 55.19% stake in Jinsha Jiuye, officially becoming the controlling shareholder. From announcement to completion, the acquisition took just over two months, making it the largest M&A deal in the Baijiu industry to date.

Through this acquisition, China Resources Beer proposed a “beer + Baijiu” strategy, aiming to leverage its strong beer distribution channels to empower its Baijiu business. Additionally, Baijiu companies tend to have higher profit margins, which could boost China Resources Beer’s overall profitability and optimize its business structure. According to the 2024 financial report, Jinsha Jiuye’s gross profit margin reached 68.5%, compared to around 40% for the industry average.

Before the acquisition, Jinsha Jiuye, known as a “dark horse” in sauce-flavor Baijiu, showed promising performance. China Resources Beer disclosed that in 2021 and the first half of 2022, Jinsha Jiuye’s revenue was 3.641 billion and 2.001 billion yuan, respectively, with net profits of 1.315 billion and 670 million yuan.

Such a strong foundation once fueled expectations for this cross-industry integration.

However, the gap between expectations and reality quickly emerged. The different distribution channels and strategies of beer and Baijiu, coupled with a cooling in the Baijiu market over the past two years, have left Jinsha Jiuye, especially its high-end brand “Summary Liquor,” facing inventory clearance and price inversion issues.

According to Times Finance’s review of China Resources Beer’s recent financial reports, the company’s Baijiu business has shown little significant progress. In 2023-2024, its Baijiu revenue was 2.067 billion and 2.149 billion yuan, with EBIT (earnings before interest and taxes) of 130 million and 121 million yuan. In the first half of 2025, revenue was 781 million yuan, a 34% decrease year-on-year, with a loss of 152 million yuan in EBIT.

It’s worth noting that Jinsha Jiuye, which mainly contributes to China Resources Beer’s Baijiu segment, has been underperforming. Due to continued poor performance, the company recognized a goodwill impairment of 2.79 billion to 2.97 billion yuan in 2025.

China Resources Beer stated that the impairment related to Jinsha Jiuye’s goodwill was mainly due to weak demand in the Baijiu market and shrinking consumption scenarios, leading to reduced consumer spending. Goodwill impairment refers to the high premium paid during acquisitions, which must be written down when the future profitability outlook of the target significantly declines.

“Essentially, it’s a correction of overestimated past acquisition valuations, using a one-time impairment to clear risks,” said an industry insider familiar with Baijiu, who wished to remain anonymous.

Meanwhile, since China Resources Beer took control, Jinsha Jiuye’s management has undergone multiple changes, with three chairmen and two CEOs replaced within two years.

Baijiu expansion fails, Jinzenshi also incurs losses

This large impairment effectively clears the valuation and operational risks associated with the billion-yuan acquisition, marking a potential strategic contraction or adjustment in Hou Xiaohai’s white liquor expansion route.

On June 27, 2025, Hou Xiaohai resigned as executive director and chairman; on September 3, Zhao Chunwu, the former president, was appointed chairman of China Resources Beer, marking the beginning of Zhao’s full leadership.

For Zhao Chunwu, besides leading the company through the current complex market environment, he must also address the lingering issues of the overall sluggishness and integration difficulties left by Hou Xiaohai’s white liquor strategy.

Industry insiders believe that this move to offload the historical baggage of the Baijiu acquisitions in one go could lower future performance baselines and pave the way for subsequent growth, “all the negative news has been cleared at once.”

However, for Zhao Chunwu, the new leader, the burdens are not limited to Jinsha Jiuye.

Under Hou Xiaohai’s leadership, China Resources Beer began aggressively entering the Baijiu sector in 2020, acquiring a 55.19% stake in Jinsha Jiuye, a 1.3 billion yuan investment in a 40% stake in Shandong Jingzhi Baijiu Co., Ltd., and indirectly holding 13.28% of Jinzenshi Group (600199.SH) through strategic investments, making it the second-largest shareholder and establishing a Baijiu portfolio covering sauce, fuyu, and sesame flavor types.

Jinzenshi is one of Anhui’s “Four Golden Flowers” of Baijiu. In recent years, its performance has also been sluggish, with losses for three consecutive years from 2022 to 2024. In January, Jinzenshi released a profit forecast, expecting a net loss for 2025; its third-quarter report showed revenue of 628 million yuan, down 22.08% year-on-year, and a net loss of 100 million yuan, down 0.97%.

The situation of Jingzhi Jiuye is even more delicate. As the starting point of China Resources Beer’s Baijiu venture, Jingzhi’s national expansion has been limited, and it still mainly operates in Shandong.

According to information disclosed by Jinshiyuan at the end of 2019, Jingzhi’s 2018 revenue was 1.248 billion yuan, with a net profit of 6.275 million yuan; but since China Resources Beer’s investment in 2021, no specific data has been disclosed.

How to truly coordinate the beer and Baijiu businesses and break through the integration challenges will be the most pressing issue for Zhao Chunwu’s leadership.