news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

Author: Taylor, Editor: Xiaoshimei

As of July 15, among the semi-annual performance forecasts released by four A-share listed wine companies, only one turned a profit. This was due to a series of cost-cutting and efficiency-enhancing measures such as reducing costs and expenses, which effectively reduced operating costs and expenses.

Specifically, Weilong shares expects to achieve a net profit attributable to shareholders of 6.78 million yuan to 10.65 million yuan during the reporting period, turning losses into profits year-on-year; ST Tongpu expects to achieve a net profit attributable to shareholders of -27.50 million yuan to -24.50 million yuan during the reporting period, reducing losses by 61.44% to 65.65% year-on-year; Mogao shares expects a loss of 12.8378 million yuan in the same period last year; CITIC Niya Watch expects to achieve a net profit attributable to shareholders of listed companies of -4.50 million yuan to -5.50 million yuan in the first half of the year, compared with a profit of 6.214 million yuan in the same period last year.

In the past few years, the outside world has placed almost all its enthusiasm, interest, and even financial and material resources on the liquor industry, but few people have noticed that domestic wine has almost collapsed.

In 2023, the output of wine enterprises above designated size nationwide was 143,000 kiloliters, a year-on-year decrease of 33.18%, and a decrease of nearly 90% from the peak of 1.38 million kiloliters in 2012.

According to data from the China Alcoholic Drinks Association, the total sales revenue of wine enterprises above designated size nationwide last year was only 9.09 billion yuan, down 80% from the peak of 46.454 billion yuan in 2016. Even worse is the profit. Last year, the total profit of enterprises above designated size was only 220 million yuan, a record low, and a 95% drop from the peak of 5.2 billion yuan in 2015.

In 2023, the number of domestic wine companies above a certain scale decreased by 15 to 104, a decrease of 57% compared with the peak of 244 in 2017.

The restriction on the consumption of three public officials in 2012 was a watershed. The entire Chinese liquor industry, including baijiu, suffered a huge baptism. The difference is that baijiu is recovering after a short-term adjustment and creating glory again with the logic of brand upgrading. From 2018 to 2023, the revenue of baijiu enterprises above designated size will increase from 536.4 billion to 756.3 billion yuan.

The number of potential wine consumers in China is very limited. The early entry of foreign brands can open up new growth for the industry, and local wine companies represented by Changyu can also benefit from it. The two are in a competitive relationship, but as imported wines become stronger and more fierce, the two sides are gradually shifting to a stock competition relationship. According to data from the China Alcoholic Drinks Association, in 2015, imported wines accounted for only 32% of the Chinese market, but by 2020, this figure had risen to more than 50%.

With domestic wine squeezed by liquor on one side and suppressed by foreign counterparts on the other, it can only survive in the cracks.

Looking back, Chinese wine had several years of strategic opportunities, but unfortunately local wine companies did not seize this hard-earned development window.

In 2020, China's Ministry of Commerce issued an announcement that it will conduct an anti-dumping investigation on imported wines in containers of less than 2 liters originating from Australia starting from August 18, 2020, and will impose a five-year anti-dumping duty on Australian wines from March 28, 2021, with tax rates ranging from 116.2% to 218.4%.

Prior to this, Australian wines competed at low prices in China through subsidies, causing a serious impact on the domestic wine industry. Data shows that by 2019, Australian wines accounted for the highest proportion of China's wine imports, reaching 35%. The tax increase on Australian wines directly frustrated the momentum of imported wines. According to customs data, the scale of China's imported wines fell sharply in 2020 and remained low in the following years.

The absence of imported wines will theoretically directly release market space, which is a golden opportunity for local wine companies. However, judging from the actual performance later, domestic wine companies represented by Changyu obviously failed to seize this opportunity. On the one hand, the unexpected outbreak of the epidemic disrupted the economic order and brought development obstacles to enterprises; on the other hand, and more importantly, local forces themselves have limited capabilities and are not ready to replace foreign capital.

In March this year, China's Ministry of Commerce issued an announcement, announcing that it would stop imposing anti-dumping and countervailing duties on imported wines originating from Australia from March 29. At the same time, Serbian wines are also planning to enter the Chinese market with lower or even zero tariffs, and China and France have announced that they will continue to deepen their ties in the fields of grape cultivation and winemaking.

All this information indicates that foreign wine brands are about to make a comeback, and that domestic companies will face greater competitive pressure. The only hope left in the industry now is that history will repeat itself, that is, foreign brands will continue to open up the market as in the past, while domestic brands will continue to "free ride" behind them. However, based on the actual situation, this idea is unlikely to be realized.

On the one hand, unlike the vast world with great potential twenty years ago, today's Chinese wine market has become a stock market, or even a shrinking market. Without the support of red wine culture and consumption habits, and against the backdrop of cultural revival and cultural confidence in Chinese society, it is difficult to see major development in the short term.

On the other hand, even if the market is on the rise, domestic wines may not be able to expand. The China Alcoholic Drinks Association has previously conducted statistics, and the average price of imported wines in 2021 was 25.23 yuan/L, while the average price of domestic wines has reached about 33.7 yuan/L. With neither brand advantages nor price advantages, how can they participate in market competition?

Disclaimer

The content of this article related to listed companies is the author’s personal analysis and judgment based on the information disclosed by listed companies in accordance with their legal obligations (including but not limited to interim announcements, regular reports and official interactive platforms, etc.); the information or opinions in the article do not constitute any investment or other business advice, and Market Value Observation shall not bear any responsibility for any actions arising from the adoption of this article.