news

Image source: Photo taken by reporter Zhang Jian of Meijing (file photo)

On the morning of August 26, Jiangsu liquor company Jin Shiyuan held an online first half performance briefing. Chairman Gu Xiangyue, Secretary to the Board Wang Weidong, Deputy General Manager Hu Yuewu and other company executives attended the meeting and responded to topics such as the company's recent rumors of "selling wine with deposits", the slowdown in revenue growth, the year-on-year decline in contract liabilities, and the layout of the market outside the province.

Regarding the "deposit to sell wine" news circulating on the Internet, Wang Weidong said that such news is a malicious attack on the company. He said: "It is a normal business behavior for the company to participate in their (note: financial institutions) internal procurement bidding activities, and it is reasonable for them to introduce high-quality customers to the company, but the direct purchase of wine by financial institutions and the introduction of customers to purchase wine have never contributed to the company's revenue by 0.5%."

The reporter of Daily Economic News·Jiangjinjiu noticed that in response to the decline in the company's revenue growth rate, Gu Xiangyue said that it was mainly affected by the decline in the growth rate of industry demand.

Image source: Webpage screenshot

On contract liabilities: no longer requiring dealers to make advance payments outside of normal orders

In the first half of this year, Jin Shiyuan achieved revenue of 7.304 billion yuan, a year-on-year increase of 22.36%, and achieved net profit attributable to shareholders of 2.461 billion yuan, a year-on-year increase of 20.08%.

As of the end of June this year, Jin Shiyuan's total contract liabilities balance was 627 million yuan, a decrease of approximately 73.86% from 2.40 billion yuan at the end of last year, and a significant decrease compared to 1.017 billion yuan and 1.129 billion yuan in the same period of 2022 and 2023.

Regarding the decline in contract liabilities, Jin Shiyuan previously responded in an interview with the reporter of "Daily Economic News·Jiang Jinjiu" that it was mainly due to "fierce competition in the industry, reducing the pressure on dealers and not requiring too much payment."

At the performance briefing, Gu Xiangyue further explained that the company's sales mainly adopts the payment first, then delivery model, and the disclosed contract liability amount is the amount of money received and awaiting delivery. The company will not give cash discounts for this kind of prepayment in normal settlement.

"As manufacturers cannot achieve better efficiency and benefits than merchants by prepaying for goods, we no longer require dealers to make prepayments outside of normal orders... On the one hand, the company's supply guarantee capabilities have been enhanced, shortening the cycle from payment to delivery; on the other hand, dealers themselves have also increased their safety reserves, making it easier to place orders during the off-season," Gu Xiangyue explained.

Generally speaking, contract liabilities are regarded as a reservoir for the revenue of wine companies. Under the premise that the contract liabilities were greatly reduced in the second quarter, some investors questioned whether Jin Shiyuan's annual sales target could be successfully achieved. In June this year, Jin Shiyuan disclosed in the "2024 Annual "Quality Improvement, Efficiency Increase and Return" Action Plan Announcement" that the operating target for 2024 is a total revenue of about 12.2 billion yuan and a net profit of about 3.7 billion yuan.

In response to investors' concerns, Gu Xiangyue said that there is no necessary connection between contract liabilities and sales performance. Current accounting standards require that revenue be recognized based on whether control of goods has been transferred... The company's current operating conditions are normal and sales are in line with expectations.

In terms of channel inventory, according to Gu Xiangyue, the company's channel inventory is basically the same as the same period last year, and is in a benign and controllable state. According to Wang Weidong, the company has cancelled the prepayment requirements other than ordering, and will further reduce channel inventory at the right time.

Talking about the market: The price range of 100~300 yuan still has a long growth cycle

In the first half of the year, there was a clear differentiation in sales volume of Jinseyuan’s low-, mid- and high-end products.

In terms of price, in the first half of the year, Jinseyuan's special A+ products with an ex-factory guide price of more than 300 yuan (tax included, the same below) had revenue of 4.654 billion yuan, a year-on-year increase of about 22%; the special A products with an ex-factory guide price of 100 to 300 yuan had revenue of 2.216 billion yuan, a year-on-year increase of about 26%.

In the past two years, liquors priced between 100 and 300 yuan have gradually become popular. In Jinshiyuan's view, as the consumption concept of high-end groups has become more rational, the price fluctuations of famous liquors are just adjustments to the price structure, which will not have a big impact on the industry.

Image source: Announcement screenshot

"At present, the price range of 100 to 300 yuan in the country is continuing to grow and expand. Benefiting from the 'high potential' of the Guoyuan brand, products such as 'Elegant' and 'Single Opening' are cost-effective and are just in the expanding price range. According to the current market share and market expansion, it is predicted that there will be a relatively long growth cycle in the future." said Gu Xiangyue.

At the same time, Jinshiyuan's revenue from products in categories B, C, and D, with factory prices below 50 yuan, as well as other products, all declined to varying degrees. At the performance meeting, Wang Weidong said that products below category B include low-end "Jinshiyuan" brand products and some "Gaogou" brand products, and the company is actively adjusting such products.

For a long time, Jiangsu Province has always been the main contributor to Jinshiyuan's performance. At the performance briefing, an investor brought up the topic of out-of-province layout again. He asked the management: "If Jinshiyuan is prepared to continue to invest in out-of-province for 3 to 5 years without making a profit. What are the differences in employee assessment standards for the in-province and out-of-province markets for the team? Will the price control of alcohol be looser outside the province?"

In response to this, Gu Xiangyue said that the revenue indicators in the out-of-province market have a larger weight, while the in-province market pays more attention to the balance between revenue and efficiency.

"The company has adopted a variety of price control measures. The first is differentiated product management, with different specifications for some products within and outside the province; the second is to select partners carefully, adhering to the idea of ​​'recruiting excellent merchants and nurturing large merchants'; the third is to formulate budget investment policy intensity according to local conditions, combine digital marketing methods, and improve the effectiveness and pertinence of market order control, etc." said Gu Xiangyue.

Daily Economic News