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Source: Times Finance Author: Xing Wenwen

Image source: Qinghai Spring official website

"Why is Tinghua wine so delicious?"

In the elevator of a residential complex in Haizhu District, Guangzhou, a poster of Tinghua Wine with the above sentence printed on it is particularly eye-catching. Its promotional points include "unprecedented tasting goodness" and "drinking value", as well as the fact that it has hired three Nobel Prize winners as chief scientists to guide the company's R&D team.

Resident Xinlin (pseudonym) was surprised when she saw the advertisement. "Tinghua wine is back? And it's so expensive?"

Tinghua Liquor was launched at the end of 2020 and quickly became popular. Its premium package is priced at 58,600 yuan per bottle (for export only), and it is truly a "sky-high-priced liquor". In addition, with overwhelming advertising, the story of "an old man making liquor in a dream", and the invitation of "Nobel Prize" winners and many cooking masters to promote it, Tinghua Liquor has attracted a lot of attention.

However, on March 15 this year, Tinghua Liquor was exposed by CCTV's 3.15 Gala for suspected illegal advertising, and the fierce momentum was put on hold. Tinghua Liquor and related products were ordered to stop selling by local regulatory authorities. According to media reports, Tinghua Liquor's airport billboards and experience store signs in many parts of the country were removed or covered overnight.

Today, Tinghua Liquor has started a new round of marketing in an attempt to regroup. However, Tinghua Liquor's parent company, ST Chuntian (600381.SH), is still mired in continuous losses.

Its 2024 semi-annual report released on August 1 showed that its net loss during the period expanded from 50.5907 million yuan in the same period last year to 59.8699 million yuan. However, the company's liquor segment had revenue of 50 million yuan, a year-on-year increase of 45.95%.

150,000 elevator posters were put up and the store fully resumed operations

Xinlin lives in a residential complex located in Pazhou Street, surrounded by many high-end office buildings, where many Internet giants such as Tencent, Alibaba, and Sanqi Interactive Entertainment have settled.

"This area is home to tens of thousands of high-paid people." On July 31, she told Times Finance that the Tinghua wine advertisement was only put up in the past two days. Not only Xinlin, but netizens in Beijing, Guangdong, Sichuan, Jiangsu, Shandong and other regions have posted on social media that they saw Tinghua wine advertisements in elevators.

Tinghua Liquor's recent elevator advertisement. Source: Provided by the interviewee

"Tinghua wine has been rectified so quickly? It's still the familiar formula, the familiar 'Nobel'." A Sichuan netizen posted the Tinghua wine advertisement he shot on Xiaohongshu.

Tinghua Liquor has indeed "re-emerged". Recently, media reported that the Tinghua Liquor brand will put up more than 150,000 elevator posters, covering high-end buildings in 32 major core cities, and will soon launch advertising plans in multiple airports.

A person from the securities department of ST Chuntian also told the media that Tinghua Liquor has currently placed advertisements in more than 80 elevators. As the second half of the year enters the peak season for alcohol consumption, the company will gradually increase its investment in publicity in media, airports and other channels.

According to Times Finance, the posters released by Tinghuajiu in the elevator are printed with the "Focus Elevator Poster" logo, and Focus Media (002027.SZ) is a leading domestic building media company. Its 2023 annual report shows that as of March 31, 2024, the company covers many major cities across the country and owns a total of approximately 1.962 million elevator poster media devices.

Breaking the circle through crazy marketing has always been the strategy of Tinghua Liquor, but what surprised most consumers is that less than 5 months after "3.15", Tinghua Liquor's comeback was so rapid and its offensive was so fierce.

On March 15, CCTV's 3·15 Gala exposed Tinghua Liquor's suspected illegal publicity and other issues. According to CCTV reports, reporters visited a Tinghua Liquor experience store, where advertisements showed that Tinghua Liquor has the effects of improving immunity, improving sleep, and ensuring male erectile function. The store staff said that Tinghua Liquor has powerful functions and makes people's physical condition better and better.

Subsequently, the WeChat public account of Tinghua Liquor was suspended for "excessive marketing and harassment of users". In addition, e-commerce platforms such as Taobao and JD.com have removed products related to "Tinghua Liquor". The market supervision and administration bureaus of Wuhou District, Chengdu and Chaoyang District, Beijing also issued fines to two subsidiaries of ST Chuntian in June, imposing fines of 1.8 million yuan and 800,000 yuan respectively.

So far, there is still no sign of recovery in the online sales of Tinghua Liquor. Not only has the Tinghua Liquor WeChat public account not been restored, but there are no "Tinghua Liquor" related products on the e-commerce platform. But offline, Tinghua Liquor stores have resumed operations.

On April 17, Qinghai Spring issued a notice on its official website stating that after the first phase of self-inspection and rectification work was completed, group purchase sales in various places had returned to normal since April 10, and stores in various places resumed business on April 24.

When Times Finance visited the flagship store of Tinghua Liquor in downtown Chengdu in May, the store clerk said that after inspection, the store officially resumed business on May 6. When introducing Tinghua Liquor, the clerk promoted its purity, the fact that it does not make you drunk, and its good taste and body, and rarely talked about its health benefits.

Tinghua Liquor's flagship store in downtown Chengdu. Photo by Times Finance

In the same month, Tinghua Liquor’s first experience store in Shanghai was officially opened. The store is located in the Bund SOHO, a high-end business building in Huangpu District.

The parent company's revenue increased but profits did not, and its losses continued to widen

Tinghua Wine is owned by Qinghai Spring Medicinal Resources Technology Co., Ltd. (hereinafter referred to as "Qinghai Spring"), which mainly engages in the wine and beverage fast-moving consumer goods business and the health business mainly based on Cordyceps sinensis grass products. In June 2015, Qinghai Spring went public through the shell of Xiancheng Mining, becoming the "first Cordyceps stock".

Although Tinghua wine is a hot topic, its volume is still very small.

ST Chuntian's 2024 semi-annual report disclosed that its liquor business had revenue of 50 million in the first half of the year, a year-on-year increase of 45.95%. ST Chuntian said that the company's liquor business is still small and profitability has not yet been fully formed. As of now, Tinghua Liquor has 34 distributors and 16 experience stores in 25 cities including Beijing, Chengdu, and Tianjin.

Wine industry expert Ouyang Qianli told Times Finance that there are many buyers of Tinghua wine, most of whom buy it for curiosity, while those who stay buy it because they recognize the quality and brand.

Perhaps due to the massive publicity campaign of Tinghua Liquor, ST Chuntian's marketing expenses have remained high in recent years. Financial report data shows that ST Chuntian's sales expenses from 2021 to 2023 were 56 million yuan, 123 million yuan, and 171 million yuan, respectively. In 2022 and 2023, sales expenses accounted for nearly 80% of operating income. In 2020 and 2019, when Tinghua Liquor was not fully listed, ST Chuntian's sales expenses did not exceed 50 million yuan.

In the first half of this year, Tinghua Liquor, which was at the center of controversy, has reduced its marketing activities, with sales expenses of 83.5146 million yuan, a decrease from the same period last year.

The financial report shows that in the first half of this year, ST Chuntian achieved revenue of 138 million yuan, a year-on-year increase of 28.82%, of which the wine and beverage business segment had revenue of 50.001 million yuan, a year-on-year increase of 45.95%; the revenue of the big health business segment was 85.5034 million yuan, a year-on-year increase of 23.98%; the net loss was 59.8699 million yuan, compared with a loss of 50.5907 million yuan in the same period last year.

Since 2020, ST Spring's revenue has continued to increase, but the increase in revenue has not increased profits, and it has been in the red for four consecutive years. Including the first half of this year, ST Spring's cumulative losses have reached 1.185 billion yuan.

At the end of April, ST Chuntian was officially labeled "ST" because its non-GAAP net profit in its financial reports was negative for three consecutive years, and its 2023 financial report was issued with an unqualified audit report with an emphasis on major uncertainties by Daxin Accounting Firm. This undoubtedly exacerbated the market's concerns about its operating conditions.

However, ST Chuntian has enjoyed a brief "spring" in the secondary market. Since the end of June, ST Chuntian's stock price has taken off, with 12 daily limits recorded in the 16 trading days from July 11 to August 1, with a cumulative increase of 61.39%.

The price is 5860 yuan, and the terminal transaction price is as low as 2450 yuan

In the relatively mature domestic liquor market, Tinghua Liquor, which wanted to break out of the crowd, chose to take an unconventional approach. In just four years since its launch, Tinghua Liquor has maintained a high profile, but has also been subject to controversy.

Zhang Xuefeng, chairman of ST Chuntian and chief designer of Tinghua Liquor, announced that Tinghua Liquor was brewed in 2020 after the R&D team spent four years and thousands of trial production adjustments after an old man told them in a dream.

In terms of pricing, Tinghua Liquor is also "very courageous". The premium packaging is priced at 58,600 yuan/bottle (for export only), and the standard packaging is priced at 5,860 yuan/bottle. The former is still much higher than the collectible 50-year-old Moutai liquor (the current wholesale price is nearly 30,000 yuan/bottle).

In Ouyang Qianli's opinion, Ting Huajiu's move was a risky one.

"In the liquor industry, positioning means price. If you can surpass the current number one pricing, you will have a chance to enter the market. This operation has occurred many times before Tinghua Liquor." Ouyang Qianli said that Tinghua Liquor is now seeking added value in terms of health and technology, and has a place in the market. At the same time, high-end liquor can also be extended to have the attributes of luxury goods, collectibles and even financial products.

But in fact, the terminal transaction price of Tinghua wine is much lower than 5,860 yuan. A Tinghua wine distributor told Times Finance that a standard box (4 bottles) is sold for 9,800 yuan. Based on this calculation, the transaction price of a bottle of Tinghua wine is 2,450 yuan/bottle, which is also far lower than the current settlement price of 3,989 yuan/bottle for standard Tinghua wine distributors.

On May 9, the distributor settlement price of the standard bottle of Tinghua Liquor was adjusted to 3,989 yuan per bottle. Image source: Qinghai Spring official website

What is the actual sales situation of this unique liquor product? ST Chuntian recently revealed some information in its reply to the inquiry letter from the Shanghai Stock Exchange.

ST Chuntian said that after the "315 incident", the company took the initiative to suspend the operation of relevant products in order to cooperate with the inspection of the market supervision and management department and carry out self-inspection and self-correction. Therefore, from March 16 to April 30, 2024, the company's wine business only sold to some old customers. The sales volume in March was 1,335 bottles and the sales amount was 5.1163 million yuan, a year-on-year decrease of 43.26% and a month-on-month increase of 62.87%; the sales volume in April was 156 bottles and the sales amount was 425,600 yuan, a year-on-year decrease of 90.77% and a month-on-month decrease of 91.68%.

Regarding the advertising situation of Tinghua Liquor and when the product will resume sales on online platforms, Times Finance contacted ST Chuntian’s securities department, but no response was received as of press time.

With the full launch of this wave of advertising, can ST Chuntian take off again by riding on the strong momentum of Tinghua Liquor's return?