"Old wine" narrative disillusioned? Net profit plummets, bleeding for two consecutive years, Shandong Still is repaying debts

For a long time, “second-tier premium” has been one of the most compelling narratives in the baijiu industry. Countless酒企 (liquor companies) have tried to replicate the success of the industry leaders by raising prices, expanding capacity, and moving upmarket. However, when the tide of consumer upgrading receded and core consumption scenarios such as business banquets underwent profound changes, second-tier premium baijiu was hit first. It became the industry segment facing the heaviest pressure during the period of deep adjustment.

In 2019, Shikde Liquor Industry Co., Ltd. (600702.SH, hereinafter “Shikde”) proposed its “old liquor strategy,” focusing on the second-tier premium market, with the goal of turning the Shikde brand into a leading brand in the second-tier premium price segment and the No. 1 brand in the old liquor category. With this strategy, Shikde topped its historical peak in 2023 with revenue of RMB 7.08B and net profit of RMB 1.77B.

However, within just two short years, this former “second-tier premium black horse” that once surged forward not only saw its revenue shrink by more than 30%, but its net profit fell by nearly 90%.

The decline in profit is only the surface. The operating cash flow that remained negative for two consecutive years, the large-scale departure of distributors, and stockpiles of inventories totaling tens of billions of yuan on the balance sheet… all of this prompts the question: did Shikde’s “old liquor strategy,” which it takes pride in and invested heavily to build, truly create an unassailable “moat” of quality, or has it become a gigantic “embankment failure” that is swallowing up liquidity?

Net profit plunges,

Q4 “free-falls” for two straight years

As shown in the chart below, in both 2024 and 2025, Shikde’s net profit attributable to shareholders fell at a double-digit rate for two consecutive years. Although its financial statements still recorded positive net profits of RMB 346 million and RMB 223 million, in the same periods, net cash flow from operating activities suffered a collapse, recording massive net cash outflows of RMB 708 million and RMB 523 million, respectively.

It earned profits but didn’t receive the money, and even ended up paying out of pocket. Behind this is a failure in working-capital management.

The baijiu industry is a typical “pay first, then deliver” model. Distributors’ payments that have not yet been delivered generally appear as “contract liabilities,” and they directly convert into extremely abundant operating cash inflows in the current period, becoming an interest-free leverage for liquor companies. But now, with high channel inventory causing distributors’ willingness to purchase to drop to near zero, Shikde has shifted from “having others begging for inventory” to “begging others to place orders,” resulting in cash accumulating heavily in channels and warehouses.

Take a set of data: In 2024, Shikde’s accounts receivable were RMB 236 million; in 2025, this rose to RMB 286 million. Inventories surged from RMB 8B in 2023 to RMB 8B in 2025. This is close to half of total assets. In 2025, selling expenses, although slightly lower than in 2024, were still as high as RMB 4.42B.

On one side, the “water supply” of the channels is drying up; on the other, rigid expenditures remain elevated. The combination directly pierces Shikde’s operating cash flow. Although in 2025 the cash outflow narrowed somewhat compared with 2024, the operating cash losses exceeding RMB 1.2 billion for two consecutive years still test Shikde’s overall health.

If Shikde’s annual report data are further broken down by quarter, another intriguing pattern emerges.

In 2025, Shikde remained profitable in the first three quarters, but in the fourth quarter it posted a single-quarter net loss of RMB 249 million; its net profit after non-recurring items was also a loss of RMB 261 million. Similarly, in 2024 the same happened: in the fourth quarter, it again staged a “plunge from a high platform,” with a massive single-quarter net profit loss of RMB 323 million.

Posting a huge loss in the final quarter of consecutive accounting years is Shikde’s “financial cleaning” that front-loads losses. For example, in 2025 it recognized credit impairment losses of RMB 9.8753 million (involving allowances for bad debts related to receivables) and asset impairment losses of RMB 38.0896 million (covering inventory write-downs, fixed-asset impairment, and intangible-asset impairment).

Although this kind of foam-squeezing behavior helps reinforce asset quality over the long term, the massive losses in the fourth quarters for two consecutive years also clearly expose the extensive management style and the legacy problem of channel overstocking that were concealed during Shikde’s rapid expansion period in recent years.

Second-tier premium hits a wall

Behind the two-year decline in Shikde’s performance is the shift of its high-end liquor from “star products” that delivered high growth and high profit, sliding inevitably into “problem products” where growth stalls and market share gets squeezed, and even into “products like sick dogs.”

In 2024, Shikde’s mid-to-high-end liquor revenue was RMB 5.9B, down 27.66% year over year. Entering 2025, this slump did not stop; in that year, mid-to-high-end liquor revenue fell to RMB 1.14B, again dropping sharply by 23.83% year over year.

Of course, during this process, Shikde’s ordinary-liquor segment targeting the mass market showed resilience against the cycle. After ordinary liquor revenue dropped 23.44% in 2024, it quickly stabilized. In 2025, it achieved positive growth of 5.75% against the trend, reaching full-year revenue of RMB 733 million, becoming the only product segment within Shikde that maintained positive growth.

However, the structural shift of “second-tier premium down, ordinary liquor up” has limited positive impact on Shikde’s performance, and instead brings two notable negative financial consequences.

First is the passive compression of profit margins.

The logic is simple: as the share of higher-margin mid-to-high-end liquor in total revenue falls significantly, and the share of lower-margin ordinary liquor rises, the company’s overall gross margin must be dragged down. This also explains why Shikde’s net profit decline rate in 2025 was far greater than the decline rate of revenue.

Second is the “embankment lake” of inventories.

In 2025, Shikde Liquor’s inventory balance was as high as RMB 8B, up 13.13% year over year. Among them, the most core “self-produced semi-finished products” (that is, base liquor stored as inventory in cellars) totaled RMB 8B. The number of days of inventory turnover increased from 798.23 days in 2023 to 1,214.89 days in 2025.

This means that, on average, the inventories in Shikde’s warehouses need more than three years to complete one cycle from production to sales, which is significantly higher than the industry average of 2.5 years.

Of course, for Shikde, these billions of yuan of base liquor are “liquid gold” that gets better and more fragrant with age. As long as the logic of the “old liquor strategy” holds, when these base liquors are blended and shipped in the future, they can capture very high gross margins.

But the value of any asset does not depend on its physical attributes; it depends on whether it can generate predictable cash inflows in the future.

No matter what, the inventory of these billions in base liquor occupies a massive amount of working capital, and misallocation of resources brings Shikde enormous opportunity costs. Looking ahead, once consumer preferences shift, or if macro factors cause the price band of second-tier premium baijiu to move downward overall, these “old liquors” stored at high cost will inevitably face pricing pressure.

In 2025, Shikde’s inventory write-down provisions represent the small crack through which this potential risk begins to materialize.

Distributors vote with their feet

In the baijiu industry chain, the distributor system is one of the most core assets of liquor companies. As mentioned above, in an upcycle, channels serve as the manufacturer’s “reservoir.” But in a downcycle, if this “reservoir” breaks, the resulting flood is also devastating.

Shikde is currently facing turbulence in its channel network.

In 2025, Shikde added 378 new distributors, but the number that exited was as high as 516. By the end of 2025, it had 2,525 distributors, a net decrease of 138 compared with the end of 2024. Among them, in the out-of-province markets that serve as the main battlefield for national expansion, there was a net loss of 130 distributors.

Reflecting this in revenue, in 2025, sales revenue in the wholesale agency channel plummeted by 25.12% year over year to RMB 325 million, with a decline far exceeding the overall revenue decline.

It is clear that distributors lack confidence in Shikde.

And behind this is the fact that, with weak terminal consumption, Shikde forcibly pushes inventory to the channels to meet performance targets, causing distributors’ inventories to become abnormally high. To recapture funds and preserve cash flow, some distributors are forced to engage in cross-regional off-selling in the market and low-price dumping, leading to “inverted pricing,” which further consumes the last bit of profit space in the channels.

Under such circumstances, distributors ultimately vote with their feet and choose to withdraw on a large scale.

Worth mentioning is that Shikde’s e-commerce channel has become a small glimmer of light. In that year, sales revenue in the e-commerce channel increased by 35.46% to RMB 604 million. The growth of e-commerce benefits, on the one hand, from the company’s implementation of its direct-to-consumer (C-end) strategy. On the other hand, it also reflects that in the context of market youthfulness and deeper penetration, digital marketing methods can effectively reach groups that are price-sensitive but still have brand demand.

However, within Shikde’s channel system, e-commerce is still in its early stage—its growth rate is extremely fast, but its scale is too small. E-commerce revenue of RMB 604 million accounts for less than 20% of the total pool, and the incremental contribution is simply unable to make up for the revenue gap left behind by the departures of wholesale agency channel partners.

Conclusion

For Shikde Liquor Industry, the 2025 financial report is a “bottoming-out” answer sheet. The core question it continues to face is how to find incremental growth in a “game with existing capacity.”

Baijiu is an industry with no theory of quick victory; time is the only standard for testing the quality of “old liquor.”

In a new cycle of compressed growth, Shikde needs more patience to digest historical inventory, and a keener touch to embrace the new retail ecosystem. When the storm settles, only those liquor companies that truly have their channels in order, defend the brand, and capture core consumers will be able to secure entry tickets to the next wave of prosperity.

Source: China Manager Network

Editor: Cao Xuan

Proofread by: Zhi Yan