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After the position of general manager remained vacant for 17 months, the candidate for general manager of Shuijingfang was finally determined.

Shuijingfang recently announced that it has appointed Hu Tingzhou, who was born in 1975, as the company's general manager from July 15. This is also the eighth general manager (including two acting general managers) appointed by Shuijingfang since it entered the Diageo era in 2010. In the 17 months before Hu Tingzhou took office, the general manager position of Shuijingfang was successively exercised by Ai Enhua and Jiang Leifeng. After Hu Tingzhou became the "new coach" of Shuijingfang, his identity as the former president of Yuyuan Group attracted much attention and was considered "contributing to the implementation of Shuijingfang's ongoing high-end strategy."

In the industry's view, after Diageo took over, Shuijingfang failed to adapt to the Chinese liquor market, and missed the opportunity to develop in the high-end market. Frequent personnel changes will make it difficult for channel partners to follow firmly. As Shuijingfang continues to adjust its channel and product layout and speed up inventory reduction, it may usher in a turning point.

Eight General Managers of Diageo

Public data shows that in 2000, Quanxing Co., Ltd. and Quanxing Distillery jointly invested in the establishment of Chengdu Shuijingfang Co., Ltd. to develop the "Shuijingfang" brand. Diageo, one of the world's largest foreign liquor companies, took a fancy to Shuijingfang and used it to enter the Chinese liquor market. From 2006 to 2013, Diageo completed 100% control of Quanxing Group in four times through its subsidiary Diageo Highlands Holding BV (hereinafter referred to as "DHHBV"). During this period, Quanxing Group was renamed "Shuijingfang Group", and Shuijingfang also divested the mid- and low-end Quanxing Daqu. In 2018 and 2019, Diageo made two more tender offers, and its shareholding ratio in Shuijingfang Co., Ltd. reached 63.14%. According to Tianyancha, Shuijingfang Group, which is wholly owned by "DHHBV", is currently the major shareholder of Shuijingfang Co., Ltd., holding 39.72% of the shares.

Before Diageo took over, Huang Jianyong served as the general manager of Shuijingfang for nearly 9 years. Since Shuijingfang entered the Diageo era in 2010, the general manager has changed frequently, and has experienced two foreign general managers, Ke Mingsi and Da Mi, as well as Fan Xiangfu, Wei Yongbiao and Zhu Zhenhao.

After the cross-border "marriage", Shuijingfang's performance has been declining, with operating income falling from 1.8 billion yuan in 2010 to 364 million yuan in 2014, and losses in 2013 and 2014. In October 2015, Fan Xiangfu, who had worked for Carlsberg and Diageo for many years, replaced Dami as the general manager of Shuijingfang. Shuijingfang's operating income increased from 855 million yuan in 2015 to 2.819 billion yuan in 2018. In June 2018, Fan Xiangfu succeeded Chen Shouqi as chairman.

"Shuijingfang's frequent personnel changes, management and operating team changes, and market policy changes will leave channel partners at a loss," said Xiao Zhuqing, an independent commentator on China's wine industry.

Since March 2023, the selection of Shuijingfang's general manager has not been finalized, and Ai Enhua and Jiang Leifeng have successively performed the duties of general manager. According to media reports, at the 2023 annual shareholders' meeting held in June this year, Shuijingfang Chairman Fan Xiangfu responded to the frequent changes in senior executives and explained, "We have realized that there are major defects in our talent system. In the future, we will recruit senior executives with strong stability and long tenure." Fan Xiangfu said that the new general manager's work includes three directions: achieving the company's annual sales profit target; strictly implementing the strategic goals set by the company's board of directors' strategic committee; and ensuring the stability of Shuijingfang's organizational structure and personnel.

Xiao Zhuqing told the Beijing News that Hu Tingzhou has accumulated more than 25 years of management experience in the food and beverage, consumer goods and service industries. According to him, the company's board of directors and management believe that Hu Tingzhou, with his rich management experience and profound industry insights, is the ideal candidate to lead Shuijingfang to achieve long-term and healthy development.

"Hu Tingzhou took the position of general manager at a prime time. He has certain experience and resource accumulation value for the implementation of Shuijingfang's ongoing high-end strategy." Cai Xuefei, general manager of Zhiqu Marketing and wine industry analyst, analyzed to the Beijing News reporter.

Regaining high-end

The frequent replacement of senior executives at Shuijingfang is closely related to the problems it has encountered, including the fact that the company once insisted on high-end products and neglected the layout of mid- and low-end products.

As early as 2000, when Shuijingfang was listed, it attracted widespread attention because of its price of more than 500 yuan per bottle, while the market price of Maotai was more than 200 yuan. "As a new brand at that time, Shuijingfang seized the opportunity of the times, quickly stood out in the fierce market competition, and has initially established a firm foothold in the country." Debon Securities said in a research report. Data also shows that in 2006, Shuijingfang's high-end wine revenue accounted for nearly 90% of its wine revenue.

However, Shuijingfang did not achieve a continuous rise in performance, especially after 2012, when the liquor industry took a sharp turn from the "golden decade" and entered a deep adjustment period. High-end liquor was the first to be affected, and many famous liquor companies lowered their prices to protect the market. In the view of industry insiders, Shuijingfang, which focuses on the high-end route, insisted on not reducing the price of high-end liquor. On the one hand, it faced inventory backlogs, and on the other hand, the single product matrix brought development problems. Although Shuijingfang also launched Zhenniang No. 8, which cost more than 300 yuan at the time, it was still unable to turn the tide for a while. This was one of the reasons for the sharp decline in the company's liquor business revenue from 2012 to 2014.

As people's consumption level increases, leading liquor companies have already begun to layout the high-end market and improve their product layout. Today's high-end positioning has risen from the price range of 400 to 500 yuan 20 years ago to the price range of more than 1,000 yuan. Although Shuijingfang insisted on high-end products in the early stage, its subsequent pricing system has never been able to go further, "which also made it miss the opportunity to enter the top camp of liquor." Xiao Zhuqing said.

After 2021, Shuijingfang tried to regain its high-end positioning, including the release of a new version of the collection priced at 1,000 yuan and a new version of Jingtai priced at the second-highest level, hoping to return to the high-end track, and at the same time release a new version of Tianhao Chen, positioning itself in the mid-range price range. However, Shuijingfang's recent investor activity record announcement mentioned that Jingtai and Collection are facing challenges, and high-endization is one of the company's strategies, and high-end products require time to cultivate and penetrate. Shuijingfang said it will continue to maintain the offline cost investment of Shuijingfang Collection, while striving to increase the proportion of Jingtai and Collection in the product structure.

"Shuijingfang has high hopes for its collection, but the sales and performance of the collection series from 2021 to 2022 were lower than previous market expectations." "The new version of the collection is still in the incubation period and there is a lag in the effectiveness of the investment in expenses," Guotai Junan Securities previously stated in a research report that with the warming of external demand, the new collection is expected to resume sales, and Shuijingfang still has the potential to return to the high-end.

Expected to reach a turning point

High inventory has been a common problem in the liquor industry in recent years, and Shuijingfang is no exception. In 2021, Shuijingfang's inventory pressure continued to increase. By the end of June 2022, inventory rose to 2.321 billion yuan, accounting for 38.9% of total assets. The 2022 annual report shows that Shuijingfang's inventory is about 2.443 billion yuan, an increase of 11.19% year-on-year.

Destocking has become an important task for Shuijingfang. Shuijingfang's 2022 annual report mentioned that the main goal for the fourth quarter of 2022 and the first quarter of 2023 is to reduce social inventory and resume operating income growth from the second quarter of 2023.

Through continuous destocking measures such as promoting sales, controlling inventory and raising prices, Shuijingfang mentioned in its investor research report released in April 2024 that the company's dealers' inventory is currently controlled within 2 months, which is at a relatively reasonable level. Next, it will continue to promote sales to destock and increase the turnover rate of store inventory.

In a research report in May 2024, China Merchants Securities stated that Shuijingfang had recovered somewhat after clearing its inventory. From the perspective of mid-to-high-end business banquets, Shuijingfang cleared its inventory after April and May this year, its internal potential energy increased, and its opening and sales also exceeded expectations.

In addition, Shuijingfang also focuses on the full price layout, including plans to increase the share of products in the 200 yuan price range by enriching the product line. "With the continuous enrichment of product structure and the strengthening of channel power, Shuijingfang is expected to get out of the predicament." Xiao Zhuqing said.

Beijing News reporter Qin Shengnan

Editor: Zhu Fenglan

Proofread by Liu Jun