Zhongtai International's Li Xunlei: Current Liquor Industry Contraction Strongly Correlated with Real Estate Downturn

On October 28, at the "Harmony of Heaven and Earth" 2025 Chishui River Forum jointly hosted by Xinhua's China Economic Information Service and Kweichow Moutai, major liquor companies and industry experts gathered to discuss the future development of China's baijiu industry. Li Xunlei, Chief Economist of Zhongtai Financial International Limited, stated that the current contraction in the baijiu industry is strongly correlated with the economy being in a real estate downturn cycle and is also affected by the aging population. When discussing the future development trends of China's liquor industry, Li Xunlei outlined three major trends.

First, the shift from quantity growth to quality growth. In his view, the Chinese baijiu industry is currently still in a phase of inventory reduction and adjustment. Liquor companies are flexibly formulating business strategies based on actual conditions. Overall, the strategic tone of most liquor companies highlights a pragmatic orientation of "prioritizing stability, quality, and efficiency." "The baijiu industry is currently in a stage of 'scarce high-quality capacity but overall excess capacity.' By deepening product quality, innovating consumption scenarios, and exploring cultural connotations, the industry's growth can move from 'accumulation of quantity' to a 'leap in quality.' This is not only an inevitable choice to cope with market changes but also a key turning point for the baijiu industry to achieve high-quality development."

Second, the industry's focus is shifting from distilleries to consumers. Li Xunlei pointed out that in recent years, the core consumer base for baijiu has shrunk by 28 million. The so-called core consumer base refers to those aged 30 to 55; this demographic has decreased by 28 million. With the accelerating aging population, this number is likely to decrease further. Facing changes in the consumer base and new consumption trends, liquor companies must build a consumer-centric marketing model. By organizing various consumer interaction activities, they can allow consumers to experience the brewing craftsmanship and brand culture, thereby enhancing consumer brand identification and loyalty, and achieving a shift from a channel-driven to a consumer-driven marketing model.

Third, the sharing of supply chain profits with downstream players. Data shows that the average gross profit margin for baijiu distributors has decreased from 20%-23% in 2019 to around 15%-17% in 2024, while the average net profit margin has dropped from about 8% in 2019 to approximately 3%-5%. Li Xunlei believes that in response to profit changes and pressures such as price inversions faced by liquor companies, they can develop new products and categories to make prices more aligned with the market and accessible to younger consumers.