Behind the dual growth in revenue and net profit, Qingdao Beer’s mid-to-high-end market faces a siege

Jiemian News reporter | Zhang Rui

Jiemian News editor | Ren Xuesong

On the evening of March 26, Qingdao Brewery (600600.SH) released its 2025 annual report. During the reporting period, the company achieved operating revenue of RMB 32.473 billion, up 1.04% year over year; attributable net profit to shareholders was RMB 4.588 billion, up 5.6% year over year; net profit attributable to shareholders after deducting non-recurring items was RMB 4.13 billion, up 4.53% year over year; net operating cash flow was RMB 4.593 billion, down 10.91% year over year; and EPS (fully diluted) was RMB 3.3632.

Despite profit performance coming in below expectations from multiple brokerages, against the backdrop of a 1.1% year-over-year decline in industry production, Qingdao Brewery’s sales still grew against the tide, rising 1.5% to 7.648 million kiloliters. At the sales level, it outperformed the broader market. Meanwhile, its profit growth rate was significantly higher than its revenue growth rate, which also indicates that the company still has the capability to improve profitability.

When it comes to shareholder returns, Qingdao Brewery plans to distribute about RMB 3.206 billion in a “bonus” to shareholders, with a cash dividend of RMB 2.35 per share (including tax). The payout ratio is as high as 69.87%. With its dividend ratio staying close to 70% for two consecutive years, it ranks at a relatively high level among A-share consumer goods companies, to a certain extent reflecting the company’s sound cash-flow position.

However, with the backdrop of both revenue and net profit increasing, what exactly does Qingdao Brewery’s growth quality amount to? Widening losses in the fourth quarter and obstacles faced in the mid-to-high-end market provide two angles to observe.

Source of image: Qingdao Brewery official website

Fourth-quarter losses widen, with off-season operations becoming a hidden concern

Looking at the fourth quarter alone, the company recorded a loss of RMB 686 million in attributable net profit for the quarter, further widening from the RMB 645 million loss in the same period of 2024. Jiemian News reviewed prior years’ financial reports and noted that from 2019 to 2025, Qingdao Brewery has recorded losses in the fourth quarter for seven consecutive years.

In the fourth quarter of 2025, the gross margin was 24.72%, down 1.51 percentage points year over year, and the quarter-on-quarter decline was even more significant, dropping 18.84 percentage points. Meanwhile, the company’s full-year gross margin was 41.84%, up 1.62 percentage points year over year. The sheer contrast between before and after reflects the fragility of off-season operations: the company achieved gross margin improvement through optimization of product mix on a full-year basis, but this advantage was almost entirely offset in the fourth quarter.

An analyst in the liquor and beer sector, Xiao Zhuqing, pointed out that beer consumption is highly seasonal: the fourth quarter is a traditional off-season. Qingdao Brewery’s upgrade of its mid-to-high-end product mix relies mainly on the on-premise and ready-to-drink channels (restaurants and night venues), which causes substantial fluctuations in off-season capacity utilization and gross margin.

The fourth quarter is already a consumer off-season; combined with mounting pressure on ready-to-drink channels, concentrated year-end spending, and other factors, losses were amplified together. This also means that the profitability improvement achieved through product-mix optimization has not yet been effectively transformed into the ability to smooth out seasonal volatility.

Changes in contract liabilities provide another perspective. At the end of 2025, Qingdao Brewery’s contract liabilities were RMB 7.674 billion, down 7.68% from RMB 8.313 billion at the end of 2024. As a core leading indicator reflecting channel confidence, a decline in contract liabilities often means that distributors’ willingness to prepay and stock up has cooled, reflecting a slowing pace of sell-through at the retail end and increasing pressure to work down inventory.

This is consistent with the 10.91% year-over-year decrease in the company’s net cash flow from operating activities in 2025—because the latter was driven by changes in prepaid purchases, which led to a year-over-year reduction in cash received from sales of goods. Off-season losses combined with a fall in channel confidence create a dual test of Qingdao Brewery’s operating resilience.

Source of image: Jiemian photo library

Growth of mid-to-high-end faces headwinds, with regional markets squeezed from the north and the south

If the losses in the fourth quarter reflect the fragility of Qingdao Brewery’s seasonal operations, then competitive pressure in the mid-to-high-end market is about the foundation for its long-term growth.

In 2025, Qingdao Brewery’s main brand sales increased 3.5% year over year to 4.494 million kiloliters, while sales of products above the mid-to-high-end segment increased 5.2% year over year to 3.318 million kiloliters. Based on calculations, this implies that the share of total sales is about 43.4%. Sales of white beer ranked first in the industry’s white-beer category, and sales of the Classic series and the Ultra-High-End series reached record highs.

The company continued to push on the product side, launching multiple new products in the course of the year, such as light-dry beer, jasmine white beer, and cherry blossom white beer, attempting to hold the mid-to-high-end stronghold through segmenting and targeting specific categories.

However, this growth in the mid-to-high-end space is now running into increasingly severe competitive encirclement.

In terms of imported brands, with the channel network of China Resources Beer as support, Heineken’s sales in China in the first half of 2025 grew by nearly 20% year over year. In less than five years, China jumped to become Heineken’s second-largest market globally. Heineken has moved from traditional night-venue channels into mass channels such as restaurants and supermarkets, directly taking market share in regional markets such as Fujian.

On the domestic brand side, Yanjing Beer has continued to step up product innovation and marketing, accelerating its penetration into the mid-to-high-end market. In the first half of 2025, the revenue share of mid-to-high-end products already exceeded 70%. Carlsberg China, meanwhile, relies on a dual-track strategy of “local brand + international brand.” In the first half of 2025 alone, it rolled out nearly 30 new products, covering craft-brewed beer, tea beer, and even non-beer categories. Its market share rose from about 6% in 2017 to 9% in the first half of 2025.

At the regional market level, Qingdao Brewery also faces a “squeezing from the north and the south” landscape. In the north, in traditional markets along the Yellow River where it has advantages, Qingdao Brewery has consolidated its base through refined operations, but it still needs to respond to Yanjing Beer’s continued expansion in North China and nearby areas. In the south, the company must not only deal with Carlsberg’s long-term deep cultivation in the Southwest, but also prevent China Resources and Heineken’s pair from making relentless inroads across East China and South China.

In the company’s annual report, it candidly states that in key strategic markets in the south, it needs “to focus on breakthrough, deepen cultivation of regional markets, and steadily improve its share.” In Xiao Zhuqing’s view, under the current competitive landscape, “whoever can capture new scenarios such as convenience stores, community group buying, and e-commerce live streaming will win in mid-to-high-end 2.0.”

From the company’s own practice, it has maintained growth for multiple consecutive years in this emerging channel of instant retail: in the first half of this year, Meituan Flash Sales’ sales grew 60% year over year. However, this track has also become a battleground for every major brand. Whether it can truly be converted into a substantial advantage for regional markets remains to be seen.

Source of image: Qingdao Brewery official website

In addition, 2025 was a year of frequent management reshuffles for Qingdao Brewery. At the end of 2024, Huang Kexing stepped down as chairman upon reaching retirement age, and was succeeded by former president Jiang Zongxiang. In May 2025, the board completed the renewal and adjustment of the company’s senior management team. Later that year-end, Qingdao Brewery Group Co., Ltd. completed a capital increase, raising registered capital from about RMB 1.34 billion to RMB 1.63 billion.

However, on the evening of the day it released its 2025 financial report, the company announced that its marketing president, Cai Zhiwei, resigned due to an internal adjustment of job responsibilities, and Li Hui took over. Li Hui was born in 1978 and belongs to the company’s mid-career generation. He has previously been responsible for strategic investments, innovative marketing, market development research, and other work, and has a background in digital transformation and marketing. A core executive who had served for less than a year resigned on the day the annual report was released; regardless of the specific reasons, it inevitably draws external attention to the continuity of the company’s marketing strategy.

In response, Xiao Zhuqing analyzed that 2024–2025 is a “big year for personnel” in the liquor industry; leading liquor companies generally seek new development opportunities by adjusting leadership. This is a normal generational change rather than a strategic wavering.

Furthermore, in October 2025, Qingdao Brewery previously announced its plan to acquire 100% equity interest in Jimo Huangjiu Brewery Co., Ltd. for RMB 665 million, trying to enter the huangjiu (yellow wine) segment to enrich its product lineup. However, this diversification attempt ultimately did not take hold. The company subsequently announced the termination of the acquisition, citing that delivery and closing conditions were not met, and that the equity interest of the target had been frozen multiple times, with relevant shareholders included in the list of persons subject to enforcement. Even though the acquisition did not go through, this incident to a certain extent reflects the real obstacles Qingdao Brewery faces in expanding into non-beer businesses, and also indirectly reflects the company’s prudent attitude toward risk control of acquisition targets.

In 2026, Qingdao Brewery’s test questions are quite specific: how to improve profitability in the off-season so that the results of the full-year structural upgrades are not swallowed up by fourth-quarter losses; how to rebuild channel confidence and stop and reverse the decline in contract liabilities; and how to hold its mid-to-high-end share amid a competitive landscape squeezed from both the north and the south, while also finding new space for incremental growth?

In its annual report, the company said it will comprehensively step up its “five new” business initiatives—new products, new channels, new customer groups, new scenarios, and new needs—to expand markets at home and abroad. At the same time, it will accelerate digital transformation and promote green manufacturing. By the end of 2025, the company had created 30 national-level green factories and 36 factories that use 100% renewable energy electricity. Whether these plans can be converted into core capabilities to get through the cycle remains to be tested by time.