Prioritizing quality: Shuijingfang's proactive adjustments and value reversion

Ask AI · What is the core driving force behind Shuijingfang’s performance recovery?

The liquor industry is still in a deep adjustment period.

As the 2025 annual report and the Q1 2026 quarterly report are gradually disclosed, about 20 listed liquor companies have all delivered their performance reports, truly reflecting the current macro environment of the liquor industry—slowing down, shrinking, stabilizing prices, controlling volume… To smoothly navigate the cycle, liquor companies are shifting their development goals from seeking “speed” to seeking “quality.”

From the performance perspective, in the first quarter of 2026, listed liquor companies such as Kweichow Moutai, Yingjia Gongjiu, and Shuijingfang have shown signs of stabilization and recovery in their key financial indicators. Behind this is the liquor companies’ deep understanding of the “scale expansion” as a critical challenge in corporate development.

Prioritizing quality, marginal recovery of profitability

“Slowing down is not only a respect for the cycle by liquor companies but also an investment in their future. In the liquor industry, slow equals fast, stable equals winning.” Ouyang Qianli, a researcher in the beverage industry, believes that for liquor companies, “finally slowing down” is not just an exclamation but a strategic judgment.

The pattern of first suppressing and then rising is a foreseeable result of liquor companies’ quick response to the strategic judgment of “slowing down.” In Ouyang Qianli’s view, Shuijingfang’s financial report is one of the examples of “slowing down for quality” during this round of liquor industry adjustment.

As one of the representative Sichuan liquors, Shuijingfang’s Q1 2026 revenue and net profit declines have narrowed compared to Q4 2025, and at the same time, the net cash flow from operating activities has turned positive.

“Turning positive in operating cash flow indicates an improvement in operational quality, which is a more solid signal of stabilization than profit figures,” said Cai Xuefei, a liquor industry analyst, to reporters.

Additionally, according to Wind data, Shuijingfang’s net profit margin on sales in Q1 2026 increased by about 1.12 percentage points compared to the same period in 2025, and increased by 7.6 percentage points compared to the full year of 2025. Behind this is the proactive response of the company to industry deep adjustment through phased adjustments.

The breakthrough in enhancing profitability mainly revolves around optimizing expense efficiency and deepening quality and efficiency improvements.

In terms of optimizing expense efficiency, Shuijingfang has implemented a “city-specific policy” for expense investment, focusing sales expenses on three major areas: brand building, channel capability development, and consumer outreach, aiming to build long-term brand assets and sustainable channel capabilities.

In terms of deepening quality and efficiency, Shuijingfang has established a dynamic evaluation mechanism for expense efficiency, continuously promoting resource concentration on high-quality businesses, optimizing organizational and budget management, strictly controlling administrative expenses, and shutting down inefficient marketing projects. It fully focuses on core markets and high-return channels. “The significant ‘cost optimization’ directly enhances Shuijingfang’s profit recovery resilience,” Cai Xuefei said.

Although a series of measures have put short-term performance under pressure, by stabilizing prices, deepening channel governance, and consolidating long-term investments, the company has maintained its fundamental development foundation and laid a solid groundwork for future light-weight operations. In the 2025 annual report, Shuijingfang explicitly stated that “the current adjustments will transform into resilience for future growth, accumulating momentum for higher-quality development.”

“The core driving force behind Shuijingfang’s improving performance comes from management’s proactive ‘retreat to advance’ strategy during the industry’s deep adjustment period,” Cai Xuefei believes. Currently, Shuijingfang is exchanging “short-term scale sacrifice” for “long-term channel trust and profit quality.”

Ouyang Qianli shares a similar view, believing that it is premature to talk about “comprehensive stabilization” now, but “the worst period may have passed, and Shuijingfang’s business logic is shifting from ‘preserving scale’ to ‘preserving profit.’”

Structural support behind high gross profit margins

When discussing efficiency improvements, another key financial data point must be mentioned—sales gross profit margin. In recent years, Shuijingfang has consistently ranked among the top listed liquor companies in this metric. According to Wind data, in Q1 2026, Shuijingfang’s gross profit margin on sales remained near the 80% level.

Cai Xuefei believes that Shuijingfang’s ability to maintain a high gross profit margin is due to the company’s unique historical culture and brand assets. “Internally, Shuijingfang’s high-end liquor revenue share has exceeded 90% for many years, ensuring its gross profit margin remains around 80%. Externally, its ‘living intangible cultural heritage assets’ are also an important support for the brand value system.” Cai summarized this as twelve characters: famous wine genes, quality craftsmanship, and market foundation, corresponding to the company’s brand strength, product strength, and channel strength.

Focusing on brand building, Shuijingfang has launched a “dual-brand” layout of “Shuijingfang” and “First Fang,” along with the brand proposition of “Enjoy fine wine, celebrate good things,” festival scene marketing, and innovative banquet experiences as a set of “combination punches.” Among them, the “Shuijingfang + First Fang” dual-brand strategy established in 2025 is the core of this brand building system.

According to Shuijingfang’s financial report, the company’s “Shuijingfang” focuses on the mid-to-high-end price segment, using “national protected fine wine” quality to meet consumers’ needs in various “heartfelt” scenarios; “First Fang” relies on the scarce asset of “China’s No.1 Baijiu Workshop” to create museum-grade high-end products and collectible experiences, achieving value feedback and synergy for the main brand.

With a clear brand development system, Shuijingfang has been targeted in product innovation. Over the past year, the company has continuously launched new products around scene-based operations: in March 2025, the “First Fang·Jing Shi,” aimed at establishing a high-end real vintage wine benchmark, was officially launched; in September 2025, Shuijingfang iterated its core product series, launching “Shuijingfang·Jing 18”; in January 2026, it introduced “Shuijingfang·Zhen Nao Master,” targeting instant retail channels and young consumer scenarios, expanding new customer groups and new consumption demands.

Regarding channel strength, Shuijingfang has given a firm answer through “strengthening old channels” and “expanding new ones.” In 2025, the company focused on deep cooperation with key terminal outlets, investing resources and providing services to turn them into core positions for consumer cultivation and opinion leader interaction. Meanwhile, centered on consumer experience, Shuijingfang expanded new retail formats beyond traditional e-commerce and interest-based e-commerce, partnering with over ten instant liquor retail platforms such as Weima, JD Liquor World, and Jiu Xiao Er, helping related businesses achieve triple-digit growth.

Additionally, Shuijingfang launched a “partner” mechanism for “Jing 18,” using a “three no’s, two limits, one bottom line” policy to build a “scarcity” channel moat; for “First Fang,” it implemented a “light inventory, heavy sales” strategy, effectively maintaining product pricing systems and channel profit margins.

“For most liquor companies, channels are the last link to reach consumers and are key to transforming ‘brand height’ into ‘operational depth,’” Cai Xuefei pointed out. During the industry adjustment period, Shuijingfang’s focus on channel value rather than blindly pursuing scale expansion means its high gross profit advantage is expected to continue into the next cycle.

Reporter: Chen Zhi