Acquires Sands wrote down 2.9 billion, does half-year resigned Hou Xiaohai "take the fall"?

On the evening of March 10th, China Resources Beer, the industry leader, issued a profit warning. The company expects to record an operating profit of approximately 2.92 billion to 3.35 billion yuan in 2025, a sharp decline of 29.6% to 38.6% compared to 4.759 billion yuan last year. This is one of the rare significant profit drops for China Resources Beer in the past five years.

The plunge in net profit is not due to its core beer business but results from an impairment of goodwill amounting to 2.79 billion to 2.97 billion yuan. This impairment stems from the acquisition of Guizhou Jinsha Jiaojiu Distillery Co., Ltd. (referred to as “Jinsha Jiuye”) three years ago, in which China Resources Beer invested 12.3 billion yuan.

This billion-dollar acquisition, once regarded by former CEO Hou Xiaohai as the core of the “beer + white liquor” dual-drive strategy, has now become the biggest burden dragging down the financial report. In the second half of 2025, the new board chairman Zhao Chunwu, who succeeded Hou Xiaohai, took a one-time large impairment to clear the overvalued bubble of Jinsha Jiuye. This “financial cleanup” operation seems to be a signal that Hou Xiaohai, who left the company six months ago, was pushing for aggressive acquisitions, and it prompts the outside world to reconsider whether China Resources Beer is subtly reversing or shrinking its “beer + white liquor” strategy in the “post-Hou Xiaohai era.”

Behind the 2.9 Billion Yuan Impairment of Jinsha Acquisition

This profit warning from China Resources Beer straightforwardly reveals the cost of crossing into the white liquor industry.

The company explicitly states that the profit decline is mainly due to recognizing an impairment of approximately 2.79 billion to 2.97 billion yuan in goodwill related to Jinsha Jiuye. In financial terms, goodwill impairment means the company admits that the premium paid during the acquisition was too high and that the future earnings prospects of the target asset have significantly decreased.

Rewinding to January 2023, China Resources Beer acquired a 55.19% stake in Jinsha Jiuye for 12.3 billion yuan, setting a record for the largest M&A deal in the white liquor industry. At that time, Jinsha Jiuye was at its peak, with revenue reaching 3.641 billion yuan in 2021 and net profit exceeding 1.3 billion yuan. However, after China Resources took control, Jinsha Jiuye’s performance plummeted like a roller coaster.

Financial data shows that in 2023 and 2024, the revenue of China Resources Beer’s white liquor business shrank to 2.067 billion and 2.149 billion yuan respectively, with EBIT (earnings before interest and taxes) barely maintaining at 120 million to 130 million yuan. In 2025, the downward trend worsened, with first-half revenue dropping 34% year-on-year to 781 million yuan, and EBIT even turning into a loss of 152 million yuan.

This dramatic decline in performance directly affected Jinsha Jiuye’s product sales. As Jinsha Jiuye’s core flagship product, the “Summary” series, targeted at the mid-to-high-end sauce-flavor liquor market, was a major revenue driver before the acquisition. But as the craze for sauce-flavor liquor waned, “Summary” faced serious channel inventory backlog and price inversion. Under the pressure of distributors rushing to clear inventory and recoup funds, terminal transaction prices repeatedly fell below suggested retail prices. Mid- and low-end products like “Jinsha Huisha,” aimed at mass consumers, also failed to sustain sales in the fiercely competitive market.

In stark contrast to the white liquor business’s deep slump, China Resources Beer’s main business remains relatively resilient. Despite macroeconomic pressures, CR Snow Beer maintains a high market share domestically and steadily advances in premiumization (such as promoting the Heineken brand). While growth has slowed and the business is now in a stock competition phase, it remains a stable cash cow for the company. However, the profits earned from its core business have been largely swallowed by nearly 3 billion yuan in goodwill impairment, raising questions in the capital market about China Resources’ ability to integrate cross-industry assets.

Regarding the reasons for the impairment, China Resources Beer attributes it to “weak demand in the white liquor market and shrinking consumption scenarios leading to reduced consumer demand.” While this macroeconomic reality of industry deep adjustment is unavoidable, applying the deep distribution logic of beer rigidly to white liquor, which relies on circle marketing and brand heritage, reflects a mismatch in mode and a lack of adaptation, which also contributed internally to Jinsha Jiuye’s performance collapse.

Post-Hou Xiaohai “Beer + White” Strategy: Where to Go

China Resources Beer’s “beer + white liquor” strategy bears the strong personal imprint of Hou Xiaohai.

During Hou Xiaohai’s later tenure, facing industry saturation and low profit margins in the beer sector, he aggressively expanded into white liquor. From acquiring a 40% stake in Shandong Jingzhi Liquor, to investing in Anhui Jinzhi Liquor as the second-largest shareholder, and to the 12.3 billion yuan controlling stake in Jinsha Jiuye, Hou sought to quickly assemble a white liquor empire covering sauce, complex, and sesame aromas through capital acquisitions. He publicly aimed to achieve channel sharing and brand synergy between beer and white liquor, creating a “new leader in beer” and “explorer of white liquor new world” in a dual-track approach.

However, in late June 2025, Hou Xiaohai suddenly resigned as executive director and chairman of China Resources Beer. Ironically, in his departure announcement, the 2025 semi-annual report still showed an impressive net profit of 5.789 billion yuan. Just half a year later, the nearly 3 billion yuan goodwill impairment exploded, turning Hou Xiaohai’s white liquor strategy into a difficult mess.

His successor as chairman is Zhao Chunwu, an internal veteran with expertise in beer and market operations. The new CEO, Jin Huanquan, with a strong background in auditing and discipline inspection, signals a shift from “aggressive expansion” to “prudent risk control,” indicating a fundamental change in China Resources Beer’s strategic direction.

In the half-year period under Zhao Chunwu’s leadership, the company’s internal actions have become more conservative and pragmatic. Zhao openly admitted that “after two years of promoting the dual empowerment of beer and white liquor, the overall effect has not met expectations.” He pointed out that the core issue lies in the mismatch between the existing beer distribution system and the high-end white liquor strategy.

Against this backdrop, the large-scale, one-time goodwill write-down of Jinsha Jiuye is not just a financial adjustment but a phased “settling of accounts” by the new management for Hou Xiaohai’s “beer + white” era. By shedding historical burdens and significantly lowering future performance baselines, Zhao’s team clears obstacles for future lean operations. This also reflects that the new leadership has become less optimistic about quickly revitalizing white liquor assets through integration.

Besides Jinsha Jiuye, China Resources’ other two white liquor brands are also struggling. Jinzhi Liquor, after consecutive losses from 2022 to 2024, still projects a net loss for 2025. Jingzhi Jiuye’s nationwide expansion has stalled, remaining mainly in Shandong.

Faced with industry downturns and internal integration challenges, China Resources Beer is moving toward strategic contraction in the post-Hou Xiaohai era. In the foreseeable future, Zhao Chunwu is likely to reduce further investments in white liquor and refocus core resources on the more certain high-end beer business. Cost control and halting aggressive expansion in the white liquor sector will be the main themes.