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Although it holds the admission ticket to the first-tier echelon, Xifeng Liquor cannot seem to rest on its laurels during the period of deep adjustment of the liquor industry, and is also under great pressure to achieve the goal of "double 10 billion".

Text/Daily Financial Report Du Kang

Although Xifeng Liquor is known as "one of the four famous Chinese liquors", its development does not live up to its reputation. It only achieved sales revenue of over 10 billion last year, which is more than one step later than the other "three famous liquors". According to public data, Moutai achieved a revenue of 10 billion in 2011, Luzhou Laojiao exceeded the 10 billion mark in 2012, and Fenjiu achieved a revenue of 10 billion in 2019.

In 2023, Zhang Zheng, Chairman of Xifeng Group and Chairman of Xifeng Co., Ltd., stated at the 2023 Global Distributor and Supplier Commendation Conference that Xifeng Liquor's sales revenue reached 10.34 billion yuan, an increase of 23% compared to 8.4 billion yuan in 2022.

In addition, Xifeng Liquor is the only one among the four famous liquor companies that has not been listed. Although it entered the 10 billion camp of liquor companies last year, it still cannot be taken lightly in view of the development of the liquor industry in recent years. It can be said that Xifeng Liquor is under great pressure in the post-10 billion era.

Is the discontinuation of sales of the “old green bottle” intended to increase prices?

On June 30, Shaanxi Xifeng Liquor Marketing Management Co., Ltd. issued a notice that it would stop accepting orders and shipping of old green bottle series products from July 1. Daily Financial Report noted that long before Xifeng Liquor issued the notice of suspension of sales of old green bottle, there were rumors on the Internet that the payment price of grain-exported liquor would be increased.

"The manufacturer has stopped supplying, and now the old green bottles on the market have become inventory. If the demand increases during this period, the price of the stock in the hands of dealers will go up, and the price we pay for the goods will also increase." said a dealer.

Regarding the suspension of sales, some distributors also stated that the payment price for the old green bottle of ration wine will be increased by 15%.

In fact, in addition to Xifeng Liquor, well-known liquor companies such as Moutai have also issued notices to suspend shipments, which is the first time in the development of the liquor industry. As the saying goes, "there must be something wrong when things are abnormal", but the ultimate goal of these liquor companies may not be to raise prices, but to "control supply and stabilize prices."

Judging from the development of the liquor industry in recent years, due to the previous popularity of liquor and the obvious effects of price increase measures, the prices of some famous liquors have exceeded the actual market affordability, and the improvement of market indicators has also caused a certain degree of inventory pressure, which ultimately led to general price fluctuations.

Take Moutai, the industry leader, for example. In the first half of this year, its high-end products experienced continuous price fluctuations, and its main measure was to control supply and stabilize prices. Therefore, the Daily Financial Report believes that the possibility of price increases behind Xifeng's "old green bottle" suspension is not high.

Becoming enemies with dealers?

In addition to the suspension of the "old green bottle", the Daily Financial Report noted that there was news recently that some distributors of Xifeng Liquor were preparing to sue Xifeng Liquor Factory. After the news broke, someone posted a call for "those who are preparing to sue Xifeng Liquor, please line up here" in the comment section of the media that broke the news.

It is not difficult to see that there are indeed big conflicts between Xifeng Liquor and some distributors. If this incident is true, the negative impact it brings is still very large for Xifeng Liquor. Because from some actions of Xifeng Liquor this year, it is also preparing for its fifth IPO, so some negative news at this time, especially the conflicts with distributors, are not conducive to its long-term development.

According to public information, from 2012 to 2018, Xifeng Liquor attempted IPO four times, but all ended in failure.

Xifeng Liquor's first attempt to go public was in 2012, but it was revealed that it had falsified its financial results in 2010, resulting in an actual loss of 420 million yuan that year, thus failing to meet the IPO's rigid requirement of "three consecutive years of profitability". In 2016, despite the help of CITIC Industrial Investment, Xifeng Liquor's prospectus showed that its revenue and net profit were on a downward trend from 2012 to 2014, and its financial executives were also exposed to have misappropriated bank acceptance bills many times.

In 2017, Xifeng Liquor was caught up in a "corruption storm" again. Former general manager Zhang Suoxiang and former deputy general manager Gao Bo were sentenced for embezzlement and bribery, and distributors Hao Hailu and Ding Jimin were sentenced for obtaining original shares through bribery. A year later, Xifeng Liquor once again attempted an IPO. Although there were no problems with the prospectus and senior executives, a test report showed that a vintage wine under Xifeng Liquor had plasticizers that exceeded the standard by three times. Xifeng Liquor eventually appeared on the list of CSRC's initial public offerings that were suspended for review.

However, as for the rumor that the distributors are going to sue Xifeng, the Daily Financial Report believes that there is no smoke without fire. This is because similar incidents have occurred in the industry before. In 2022, there was news that dozens of distributors collectively sued Guotai Liquor.

As for Xifeng Liquor, a distributor once said: "Xifeng Liquor is the mother who gives you milk and the father who delivers the goods. After harvesting leeks, you will be promoted and transferred to another job. If you can't solve the problem, you will be replaced. The new official will not care about the old accounts, and will kill the donkey after it has done its work. He will demolish the bridge after crossing it and turn his back on the person." He also said that if there is an alliance to sue Xifeng Liquor, he will join it.

In short, no matter how the conflict between Xifeng Liquor and its distributors will eventually be resolved, it should always be remembered that the relationship between distributors and enterprises is complementary, not a relationship between leeks and sickles.

Pressure in the post-10 billion era

Last year, Xifeng Liquor finally joined the 10 billion camp, but during the deep adjustment period of the liquor industry, it does not seem to be able to sit back and relax, and the pressure is also great.

First of all, unlike Moutai and Wuliangye, which set up a high-end image and then pushed down to bottled liquor, Xifeng Liquor's strategy is "from low to high". Since Xifeng Liquor has been confined to a corner for a long time, and consumers have long had the old impression that Xifeng Liquor is low-end, it has been difficult to promote it in the high-end market.

Liquor KOL Jiugui Zhang once said that there are three pitfalls in China's high-end liquor, one of which is Hong Xifeng. It's not that the quality of the liquor is bad, but the price is too high and the brand power is not enough to support the high price. Hong Xifeng's quantity and price control measures have performed relatively well in the Shaanxi market, but have performed averagely in other regions.

Secondly, Xifeng Liquor's nationalization process is slow. Liquor industry analyst Cai Xuefei once said that compared with the tens of billions of sales of other liquor companies, Xifeng Liquor does have problems such as a low proportion of high-end products, over-reliance on the market in Shaanxi Province, slow development of markets outside the province, insufficient market dominance of the manufacturer, and the need to improve market cultivation.

Daily Financial Report learned that the market of Xifeng Liquor is currently mainly concentrated in Shaanxi, and the sales proportion in other provinces is still unknown. According to the prospectus disclosed by Xifeng Liquor, from 2015 to 2017, the sales revenue of Xifeng Liquor in markets outside Shaanxi accounted for 24.28%, 28.95% and 29.35% respectively.

Finally, there is the impact of OEM on the brand image of Xifeng Liquor. Previously, Shaanxi Qinhuang Yuyan Xifeng Liquor Marketing Co., Ltd., which was sued by Huang Bo, was the main company of its OEM products. Although Zhang Zheng promoted the main brand of Xifeng Liquor after taking office in 2019, focusing on Red Xifeng and Old Green Bottle, while cutting off OEM products, promoting channel reform, and reducing dependence on big merchants. But to this day, nearly 40% of Xifeng Liquor's sales still come from OEM.

Obviously, these are the problems that Xifeng Liquor must optimize or solve after entering the 10 billion yuan mark.

In addition, from the current development of the liquor industry, "involution" is also a topic that the industry cannot avoid. The "involution" among liquor companies is different from the "price reduction and quality improvement" that is prevalent in other consumer industries. Although they do not raise prices to reduce inventory, they have all set the winning field in the high-end market. As a result, the industry phenomenon of liquor becoming more and more expensive, gross profit margins becoming higher and higher, and advertising becoming more and more frequent has emerged. Therefore, in this environment, whether Xifeng Liquor can "volume" requires more efforts.

On July 8 this year, at the Xifeng Liquor 2024 First Half Marketing Work and Second Half Work Deployment Conference, it was announced that the sales target task had been completed in the first half of the year, and that full efforts would be made in national market construction, manufacturer relationship building, team building, and brand internationalization. This year has been defined by Xifeng Group as the "Year of High-Quality Innovation and Development". Whether it can continue to maintain its upward momentum in the future is worthy of long-term attention from the industry.