Facing economic headwinds and cautious consumer spending, China's baijiu sector encountered a significant contraction in 2025. As the pivotal Lunar New Year sales period draws near, even leading distilleries are recalibrating their approaches to distribution and pricing.

The year proved difficult not only for international premium spirit brands in China but also for the domestic staple, baijiu. Consumer apprehension regarding both pricing and the broader economic climate contributed to a widespread pullback in demand.

Industry analysts estimate total baijiu sales declined by approximately 15% in 2025. Major players including Kweichow Moutai, Wuliangye Yibin, Luzhou Laojiao, Yanghe, and Xinghuacun Fenjiu all experienced substantial setbacks.

Pressure Mounts for Smaller Distilleries

The strain is particularly evident among smaller producers. Kouzijiao, for instance, forecasts its 2025 net profit to fall within the range of 662 million to 828 million yuan, representing a steep 50-60% drop from its 2024 results—which were already less than half of its 2022 performance.

With the Year of the Horse approaching in mid-February, reversing this downward trend in sales is a top priority for the industry's giants.

Strategic Pivots for the New Year Season

The Lunar New Year represents a critical revenue window for spirit makers. Market leader Kweichow Moutai is implementing a major strategic shift, moving a greater share of its sales, including the highly sought-after 500ml 53-degree Feitian Moutai, to its proprietary e-commerce platform, iMoutai.

This marks an expansion from the previously limited offerings on the platform. Late last year, Chen Hua, Moutai's newly appointed chairman, announced the company would abandon traditional distribution channels starting in 2026.

Overhauling Distribution and Tackling Inventory

Since 2018, Moutai has pursued a strategy of tightening outlet control and managing prices to reclaim a larger portion of its profits. This involved revoking distributor qualifications, reallocating quotas to major supermarkets and e-commerce platforms, and launching the iMoutai platform. However, these measures also led to speculation and stockpiling, eventually causing prices to fall as demand softened.

Industry Data Underlines Sector-Wide Strain

Findings from the China Alcoholic Drinks Association's "2025 Mid-term Research Report on China's Liquor Market" paint a clear picture of the challenges. In the first half of 2025, 58.1% of baijiu companies reported heightened inventory pressure in their sales channels. Over half of distributors and retailers noted an increase in price inversion—where retail prices fall below wholesale costs—and more than 40% of retailers faced cash flow difficulties.

In the first three quarters of 2025, the combined revenue of 20 A-share listed baijiu firms fell by 5.90% year-on-year to 317.79 billion yuan, while their aggregate net profit dropped by 6.93% to 122.57 billion yuan.

Addressing the Inventory Glut

Despite a decline in alcohol consumption beginning in 2022, many producers continued to push stock into distribution channels, triggering price competition that ultimately resulted in lower sales volumes and falling prices throughout 2025.

By autumn 2025, industry trade statistics indicated the average inventory turnover period had ballooned to 1,424 days, a 65% increase from 2024 levels.

In response, producers are now taking corrective actions. These include temporarily halting shipments, managing inventory levels to stabilize prices, refining product portfolios with a greater focus on mid-to-low-end segments, and diversifying into new product categories.

Fostering domestic demand, revitalizing consumption, and pursuing high-quality development have emerged as central themes for the industry in the current climate.