WHY · Market attribution Q&A

Completed 2026-09-22

Why have valuations in the baijiu sector continued to decline in recent years?

What happened: After peaking in 2021, valuations across the baijiu sector continued to decline overall. The sector's PE-TTM fell from approximately 48–52x in 2020–2021 to around 20x in 2024 and approximately 18x in mid-2025. Although there were periodic rebounds, the valuation midpoint did not return to its previous highs. Listed baijiu companies continued to grow revenue and earnings over the same period, but growth had slowed to approximately 8.12% and 6.67%, respectively, in 2024.

Conclusion: The most likely explanation for the decline in baijiu valuations is the combined effect of a reversion from elevated valuations and downward revisions to fundamental expectations. The industry has shifted from growth driven by rising volume and prices to competition for existing market share, while earnings growth has slowed. At the same time, the market is concerned that business and premium consumption have not recovered sufficiently, and that channel inventory and wholesale-price pressures could weigh on the quality of future revenue. Institutional investors' reduced allocations and shifts in market style have further amplified the valuation compression.

CONFIDENCE

High

The source materials provide evidence across several dimensions: sustained valuation declines, slower earnings growth at listed baijiu companies, weakness in business consumption, pressure on channel inventory and wholesale prices, and reduced fund allocations to baijiu. Together, these support the combined explanation of lower earnings expectations and valuation normalization. However, the precise contribution of each factor to the decline cannot be isolated based on the available materials.

CAUSES

Candidate causes

PrimarySlowing earnings growth prompts the market to lower long-term growth expectations

Profits at listed baijiu companies are still growing, but the industry has shifted from a relatively high-growth phase to one of moderate-to-low growth. Future growth will depend more on price increases, product-mix upgrades, and market-share consolidation. As a result, the market is no longer valuing the sector as a high-growth consumer category and is instead repricing it as a mature, slower-growing one.

Evidence

In 2024, aggregate revenue at A-share listed baijiu companies grew approximately 8.12% year over year, while attributable net profit rose approximately 6.67%—a marked slowdown from the previous double-digit growth rates.
The baijiu sector's PE-TTM fell from approximately 48–52x in 2020–2021 to around 20x in 2024. The decline in valuations substantially exceeded the change in profit growth, reflecting a concurrent downward revision to long-term growth assumptions.
In 2023, baijiu output at above-designated-size producers fell 2.8% year over year, and limited growth in overall industry volume was insufficient to support the sector's previous high-growth narrative.

PrimaryWeak macro demand and a slower-than-expected recovery in business, gifting, and premium dining occasions

Demand for premium and upper-mid-range baijiu is sensitive to business dining, gifting, and corporate-related consumption. Weak macroeconomic conditions and wealth effects have hindered the recovery of demand in higher price tiers relative to mass-market consumption, weighing on expectations for growth in premium and upper-mid-range products.

Evidence

Industry research cited in the source materials indicates that business dining and gifting recovered relatively weakly in 2024, with some premium and upper-mid-range products experiencing sluggish sales and price pressure.
In 2024, total retail sales of consumer goods rose 3.5% and catering revenue increased 5.3%. Overall consumption continued to grow, but this does not demonstrate a full recovery in premium business consumption.
Although premium baijiu companies such as Kweichow Moutai, Wuliangye, and Luzhou Laojiao remain highly profitable, they are still affected by expectations for business-related occasions and wholesale prices.

PrimaryChannel inventory, wholesale prices, and payment-collection pressures weaken expectations for earnings quality

When end-market sales are weak while distributors still need to meet payment and sales targets, inventory may rise, prices may fall below cost, and distributors may become less willing to stock products. The market is therefore concerned that some reported revenue growth may rely on shipments into distribution channels rather than genuine end-market sales.

Evidence

Industry research indicates that distributor inventory has generally increased, alongside destocking needs, prices falling below cost, and pressure to collect payments.
Kweichow Moutai's contract liabilities were approximately RMB 9.592 billion in 2024, down 32.09% from the previous year. The source materials note that the market may interpret this as a decline in distributors' willingness to prepay or as a change in channel policy.
The source materials also note that Moutai's operating cash flow remained very strong. This suggests that channel pressure does not amount to a collapse in the leading company's cash flow, but it does affect market perceptions of future revenue quality.

PrimaryNormalization of the high valuations and core-asset premium seen in 2020–2021

Earlier valuations incorporated premiums associated with ample liquidity, consumption upgrades, institutional crowding into the sector, and the scarcity of core assets. As market conditions and risk appetite changed, valuation multiples reverted to lower levels even as leading companies continued to grow profits.

Evidence

The baijiu sector's PE-TTM fell from approximately 52x in 2020 and 48x in 2021 to around 20x in 2024.
The source materials note that the valuation decline since 2021 was driven not only by fundamentals, but also by market expectations, foreign capital outflows, and style rotation.
The baijiu sector has experienced a long-term decline in its valuation midpoint, rather than a decline driven solely by changes in profits in a single year.

SecondaryReduced institutional allocations and shifts in fund flows amplify valuation compression

Baijiu was a long-standing major holding for public funds. As investor preferences shifted toward dividend stocks, technology, and other growth or cyclical sectors, baijiu's relative performance weakened, and institutional selling further compressed valuation multiples.

Evidence

Active funds' allocation to baijiu fell from approximately 10.12% at the end of 2020 to approximately 4.11% at the end of 2024.
The source materials explicitly note that fund flows amplified short- and medium-term valuation compression, although those flows may also have been a response to falling share prices and deteriorating fundamental expectations.

SecondaryShifts in consumer price tiers and structural oversupply

Consumption has not disappeared across the board; it may instead be shifting away from premium gifting and business consumption toward mass-market banquets, at-home drinking, and price tiers where value for money matters more. Meanwhile, an excess supply of upper-mid-range and some mid-to-high-end products has intensified inventory and price competition.

Evidence

Industry research indicates that some business gifting and family banquets have shifted to lower price tiers, while weddings, group drinking, and mass-market price tiers have been relatively stable.
The source materials note that sales in some price tiers around RMB 400 have held up relatively well, while premium and upper-mid-range products have been affected by weakness in business-related occasions.
The industry's supply issue is more accurately characterized as structural oversupply by brand, channel, and price tier, rather than general physical overcapacity across the entire industry.

UncertainAnti-corruption measures, restrictions on government and business consumption, and policy uncertainty raise the risk discount

Policy measures and restrictions on government and business consumption can affect market perceptions of the stability of demand for premium baijiu and the risks facing the industry. However, the available materials do not establish that there has been a single, sudden policy shock in recent years comparable to the one in 2012 that was sufficient to trigger a sharp, sector-wide collapse.

Evidence

Historically, restrictions on government consumption led to a deep correction in the baijiu industry, and the market continues to incorporate related policy risks into valuations.
The source materials explicitly state that this downturn did not involve a clear, single policy shock comparable to the one in 2012, and that baijiu consumption has become more market-oriented.
Accordingly, this factor is better viewed as a source of risk premium and valuation discount than as the sole primary cause of the current downturn.

ASSETS

Related securities

A · 600519

Kweichow Moutai

A premium baijiu leader. Earnings and cash flow remain strong, but wholesale prices, business consumption, and changes in contract liabilities affect market perceptions of growth quality and valuation.

A · 000858

Wuliangye

A premium baijiu leader with significant exposure to business and gifting consumption; affected by macro demand, wholesale prices of core products, and the sector's valuation decline.

A · 000568

Luzhou Laojiao

A premium baijiu producer affected by business consumption, wholesale prices, and the industry's shift to slower growth.

A · 600809

Shanxi Fen Wine

A representative upper-mid-range baijiu producer. Its brand and product mix are relatively strong, but it remains affected by the sector-wide valuation compression and competition across price tiers.

A · 002304

Yanghe

An upper-mid-range baijiu producer sensitive to business consumption, channel inventory, and pressure in the upper-mid-range price tier.

A · 600702

Shede Spirits

An upper-mid-range baijiu producer more exposed to channel inventory, wholesale prices, and weakness in business-related occasions.

A · 000799

Jiugui Liquor

An upper-mid-range baijiu producer sensitive to demand in the upper-mid-range segment, channel inventory, and changes in the pricing system.

A · 600779

Shui Jing Fang

An upper-mid-range baijiu producer affected by weak business consumption and channel inventory pressure.

A · 000596

Gujing Gongjiu

A regional baijiu leader. Regional banquets and mass-market consumption provide some resilience, but it remains affected by the sector's declining valuation midpoint.

A · 603369

Jiangsu King's Luck Brewery

A regional baijiu producer. Regional banquets and mass-market consumption are relatively stable, but the company faces a decline in risk appetite across the industry.

Caveats

Valuation multiples and historical percentile rankings are not directly comparable across different baijiu indices, Shenwan industry classifications, closing dates, and earnings measures.
Some evidence on channel inventory, wholesale prices, and distributor pressure comes from industry surveys or media samples and may be subject to sampling bias; it may not fully represent the entire industry.
Listed baijiu companies continue to grow earnings, and leading companies such as Kweichow Moutai have strong operating cash flow. The valuation decline should therefore not be described as a collapse of the baijiu industry as a whole.
Inventory reported by listed companies includes base liquor, semi-finished products, and liquor held in storage for long periods. Financial statement inventory should not be equated directly with unsold inventory at the point of sale.
Reduced fund allocations may have contributed to falling valuations, but may also have followed deteriorating fundamental expectations and declining share prices. The available source materials cannot establish the strict causal sequence.
The source materials support an overall attribution but do not allow precise quantification of the respective contributions of macro demand, channel pressure, valuation normalization, and fund-flow shifts to the sector's decline.

Research sources

This page was generated by AI with web research from a user-submitted prompt and shared publicly by the submitter. It is not investment advice.

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