Shede Spirits' profits plummet nearly 90% in two years. Does Guo Guangchang "give up"?

Letting Go is Hard to “Achieve”.

Author | Li Baiyu

Editor | Qujie Business · Wine Aroma Channel

During this year’s Spring Sugar Festival, from the ideological feast of the Yabuli Forum to the immersive experience of the Fifth Old Wine Festival, and the comprehensive rollout of the “One City, Two Exhibitions,” Shede Liquor has “fully unleashed” a series of strategic actions.

However, just before the Spring Sugar Festival began, Shede Liquor released a rather disappointing financial report for 2025. According to the data, revenue was 4.419 billion yuan, a year-on-year decline of 17.51%; the net profit excluding non-recurring items evaporated significantly compared to the historic high in 2023, with a decline of nearly 90% over two years; profitability, cash flow, channel ecology, and inventory structure are all unsatisfactory.

Guo Guangchang has repeatedly expressed high hopes for Shede Liquor and even declared, “We want to build Shede into a world-class liquor brand”; but in the face of continual missed growth targets and accumulating pressures from inventory and production capacity, can Guo Guangchang and Fosun help Shede navigate the industry cycle?

Management Turmoil, Ongoing Operational Pressure

In early March this year, Shede Liquor announced that Wang Yong resigned from his position as Vice President for work reasons and would no longer hold any position at Shede Liquor, although his term was originally set to last until September 20, 2026.

Annual report data shows that Vice President Wang Yong’s salary for 2025 was 812,800 yuan, at the lower end of the executive team’s salary scale; President Tang Huir’s salary was the highest at 2.4958 million yuan, and Chairman Pu Jizhou’s salary was 2.1717 million yuan.

Since Guo Guangchang from Fosun took over at the end of 2020, the management of Shede Liquor has frequently changed, with particularly intense shifts in core positions, covering key roles such as Chairman, Vice Chairman, Directors, Secretary of the Board, Supervisors, Vice Presidents, and Financial Heads. In just two years, the company has experienced “three changes” in the Chairman position alone, and the turnover of Presidents and core executives has also been frequent.

Amid multiple rounds of personnel upheaval, Fosun has maintained a dominant position on the board, with current executives such as Wu Yifei, Huang Zhen, Zou Chao, Zhou Bo, and Qian Shunjian all coming from the Fosun system, indicating deep involvement from the controlling party in corporate governance.

Although Fosun has achieved capital control over Shede, the frequent changes in the executive team reflect the governance challenges faced by the company since Fosun’s takeover, and the “capital empowerment” initially proposed by Fosun has not been realized in performance.

Frequent changes in leadership can lead to a lack of continuity in operational strategies, which ultimately reflects in the performance.

In 2025, Shede Liquor achieved operating revenue of 4.419 billion yuan, a year-on-year decrease of 17.51%; operating profit was 300 million yuan, down 47.05% year-on-year; and net profit excluding non-recurring items plummeted by 50.31%, falling from 1.765 billion yuan in 2023 to 199 million yuan in 2025.

From a product perspective, in 2025, Shede Liquor’s revenue from high-end products continued to decline, while ordinary liquor represented by Tuopai saw slight growth but struggled to support overall profits. The sales revenue of mid-to-high-end liquor for Shede Liquor in 2025 was 3.12 billion yuan, down 23.83% year-on-year, with a gross profit margin decreasing by 1.48%; sales revenue from ordinary liquor was 733 million yuan, with a slight increase of 5.75% year-on-year, but a gross profit margin decrease of 2.17%.

Source: Financial Report Screenshot

Meanwhile, although the company’s sales expenses in 2025 decreased by 10.68% to 1.14 billion yuan, against the backdrop of Shede Liquor’s overall performance decline, sales expenses still accounted for 26% of revenue.

Compared to the “cliff-like” decline in performance in 2024, the drop in Shede Liquor’s performance in 2025 has narrowed. Regarding the persistent decline in performance, Shede Liquor analyzed in the annual report that the white liquor industry as a whole remains in a deep adjustment period in 2025, with intensified market competition, insufficient consumer motivation, and increasing downward pressure on the industry, leading to continued pressure on the sales of white liquor products.

Despite the performance pressure, Shede continues to offer substantial dividends. The dividend payout ratio for 2024 was 40.94%; for the 2025 fiscal year, a cash dividend of 102 million yuan is proposed, accounting for 45.67% of the net profit attributable to shareholders of the listed company, making it a “cash cow” for the Fosun system.

When Will Old Liquor “Fragrance” Return?

Guo Guangchang clearly stated early in Fosun’s acquisition of Shede Liquor that he was optimistic about Shede’s “old liquor strategy”—believing it to be unique and promising, and viewing it as one of the core strategies for driving the company’s long-term growth; however, from the performance over the past two years, the old liquor strategy has failed to reverse the downward trend in revenue from mid-to-high-end liquor products.

The old liquor strategy of Shede is in a predicament, primarily due to vague brand positioning and insufficient mental positioning. Strategic positioning expert and founder of Fujian Huace Brand Positioning Consulting, Zhan Junhao, believes that in consumers’ minds, “old liquor” resembles a category rather than an exclusive label for a specific brand. Many brands are currently producing old liquor; although Shede is also involved, it has not yet formed widespread brand recognition and acceptance in people’s minds, and its brand image and value positioning remain unclear.

Moreover, the chaos in the market has exposed the difficulties in product sales. Due to poor sales performance at the terminal, there have long been “counterfeit liquor” and “open bottle liquor” in the market—distributors scan to obtain marketing funds from manufacturers and then sell at low prices; this not only disrupts the normal market price but also exacerbates the inventory backlog.

The pressure of unsold inventory ultimately transmits to the company internally, making the inventory issue the most glaring operational risk for Shede Liquor. As of the end of 2025, the company’s inventory book value reached 5.904 billion yuan, nearly doubling from 2.794 billion yuan in 2021, with high inventory occupying a significant amount of liquidity, continuously increasing the operational burden on the company.

In contrast to the high inventory, existing production capacity has not been fully utilized. The financial report shows that the production capacity of the headquarters workshop is 68,000 kiloliters, but the actual production capacity is only 31,161.4 kiloliters, with a utilization rate of less than half.

To solidify the old liquor strategy, Shede Liquor initiated a planned investment of 7.05 billion yuan for capacity expansion projects starting in 2022, which is expected to be fully constructed by 2027, adding approximately 60,000 tons of annual raw liquor production capacity to enhance the company’s raw liquor production and storage capacity and improve product quality.

However, from the perspective of capital investment and project progress, with changes in market consumption, the pace of investment in this project has slowed down as of 2025. In 2025, a total of 181 million yuan was invested, with cumulative investments of 1.839 billion yuan; by the end of 2024, the construction progress of the expansion project was only 30%, and by the end of 2025, it had only slightly increased to 32%, advancing just 2 percentage points in a year.

Source: Shede Liquor

In addition to delays in project timelines, the project also faces a significant capital shortfall. In terms of capital investment, by the end of 2025, the project had cumulatively invested over 1.8 billion yuan, with at least 5 billion yuan still needed for subsequent investments; meanwhile, Shede Liquor’s cash on hand was only 1.51 billion yuan, and whether it can cover the substantial shortfall solely with existing funds and operational cash flow capabilities remains uncertain.

In terms of cash flow, Shede Liquor’s net cash flow from operating activities in 2025 was -523 million yuan, although this was an improvement of 26.08% year-on-year, it still has not returned to positive circulation.

More concerning is that with negative operating cash flow, Shede Liquor’s net cash flow from investment activities was a net outflow of 932 million yuan, a dramatic year-on-year decrease of 386.2%. The company explained in its financial report that this was mainly due to “the increased investment amount for jointly funding the Shede liquor tourism integration project.”

The liquor tourism integration project is the new direction proposed by Shede Liquor, attempting to combine the brewing ecosystem with cultural tourism experiences to create new consumption scenarios. This concept is reasonable, but given the urgent performance and cash flow issues, making substantial investments in a tourism project with a long return cycle warrants cautious consideration.

Record Low Number of Distributors

Currently, one of the prominent issues in Shede Liquor’s channel strategy is the price inversion.

Taking the core product “Pinwei Shede” as an example, its price has been in a state of inversion for a long time. The suggested retail price for this product is 598 yuan per bottle, but according to “Today’s Wine Price” data, the actual transaction price has long been stable at 360 yuan per bottle, dropping to less than 320 yuan per bottle on Pinduoduo. Similarly, another product priced at 800 yuan, “Zhihui Shede,” has seen its market transaction price fall to around 500 yuan.

“In order to quickly recover funds, many distributors have no choice but to sell at low prices, coupled with continuous subsidies from e-commerce platforms impacting prices,” Zhan Junhao pointed out, which has also put Shede Liquor in a dilemma between “de-stocking” and “stabilizing prices.” If they continue to pressure channels to stock up, it may maintain revenue in the short term but will increase inventory pressure and further disrupt the pricing system; conversely, if they actively control inventory to stabilize prices, short-term performance will be significantly affected.

However, Shede Liquor is also increasing efforts to optimize its distributors by reviewing and eliminating inefficient and overlapping distributors, promoting the channel structure toward a more efficient and focused direction, resulting in a decrease in the number of distributors compared to last year.

Data on channel changes reflects this trend. In 2025, Shede Liquor added 378 new distributors but had as many as 516 exit; the total number of distributors at the end of the year was 2,525, a net decrease of 138 from 2,663 at the end of 2024, with the losses mainly concentrated outside of Sichuan Province. From a temporal perspective, 2025 marked the most severe year of channel loss for Shede Liquor since it began disclosing distributor data, with a noticeable contraction in the channel system.

Source: Financial Report Screenshot

From the financial report, Shede Liquor primarily adopts a sales model centered on regional agents, supplemented by self-operated e-commerce. Although the growth of the e-commerce channel was impressive, in 2025, e-commerce revenue accounted for less than 20%, and has not formed an effective replacement for traditional channels. Meanwhile, the company’s contract liabilities were 147 million yuan, down 11% year-on-year, reflecting low willingness among downstream distributors to pay for inventory, and market confidence still needs to be restored.

Chinese liquor industry independent commentator Xiao Zhuqing believes that the frequent changes among Shede Liquor’s distributors are due to two reasons: on one hand, Shede Liquor has strengthened market order management, and any distributor engaged in cross-region sales, price dumping, or maliciously extracting fees will be punished, potentially losing their distributor qualifications; on the other hand, the reduction in liquor consumption scenarios due to the broader economic environment, combined with the impact of online sales on offline sales, has caused some distributors unable to quickly adapt to exit the historical stage.

However, in Xiao Zhuqing’s view, the turnover of liquor distributors is a normal phenomenon, and Shede Liquor is working hard to implement a To C strategy, striving to create a real closed loop where consumers are willing to buy, and channel partners are willing to sell.