Since December 2023,Wuliangye has implemented a combination of strategies to address price inversion and weakening demand,including price increases,reduction in supply,inventory control,and channel reorganization:

1) The contract plan volume for distributors in 2024 was reduced by 20% compared to 2023.

2) Starting from February 5,2024,the ex-factory price of the regular Wuliangye was increased by 50 yuan,from 969 yuan to 1019 yuan.

3) After the Spring Festival in 2024,the company suspended shipments to focus on digesting channel inventory.

4) Distributors were mobilized to rectify the market for low-priced gray market goods.

Under this set of price-supporting measures,Wuliangye basically met the operational target of "double-digit steady growth" in the first half of 2024—achieving a revenue of 50.648 billion yuan,a year-on-year increase of 11.3%; and a net profit attributable to the parent company of 19.057 billion yuan,a year-on-year increase of 11.86%.

This is also directly reflected in the stock price.After the New Year's hype,Wuliangye's stock price has almost unilaterally declined,falling more than 21% from its annual high in May to the present.As of the close on September 5,Wuliangye's stock price was reported at 119.55 yuan per share,with a market value of 644 billion yuan.

Growth has shown signs of fatigue.

In February 2022,Zeng Congqin,then general manager,took over the "helm" of Wuliangye from Li Shuguang.Compared to the comprehensive innovation during Li Shuguang's tenure,"stability" has been a frequently mentioned word since Zeng Congqin took office—In 2022,he described the work results as "stable progress and improvement"; the overall tone of work for 2023,he summarized as "stability first,progress in stability,improving quality and efficiency,and making more contributions"; as for 2024,it remains "consolidating and strengthening the stable development trend,with total operating income continuing to maintain double-digit steady growth."Objectively speaking,amid a weakening demand and a squeeze-growth industry trend,Wuliangye's performance is still commendable,with revenue increasing from 66.2 billion yuan in 2021 to 83.3 billion yuan in 2023,indeed achieving double-digit growth annually.

However,comparisons can be revealing.

As seen in Figure 1,when compared to its own past performance,Wuliangye's growth rate has been continuously declining,with the revenue and net profit attributable to the parent company growth rates of 12.58% and 13.19% in 2023 already less than half of those in 2019.When compared to the industry,Wuliangye's growth rate far exceeded that of Kweichow Moutai in 2019,the gap narrowed in 2020 and 2021,and by 2022,Wuliangye's growth rate had been completely surpassed by Kweichow Moutai,even falling behind Shanxi Fenjiu and Luzhou Laojiao.

The slowing pace of growth indicates a fatigue in Wuliangye's expansion,which also reflects the main contradiction for Wuliangye: the conflict between maintaining the brand strength of the product and the profit levels of distributors,and the pressure of management performance assessments.

Let's look at this in detail:

Wuliangye's revenue composition consists of two major series: one is the "Wuliangye products," namely the main brand Wuliangye "1+3," including the core product Pǔ Wǔ,the ultra-high-end 501 Wuliangye,the classic Wuliangye,and the sub-premium low-alcohol Wuliangye,and customized Wuliangye; the second is "other alcoholic products," which focus on the mid-to-high-end series of wines,including Wuliang Spring,Wuliang Special Brew,Wuliang Chun,and Jianzhuang.

Managers have found through research that Wuliangye's growth mainly depends on Wuliangye products,especially the core product Pǔ Wǔ,whose quantity and price have risen together.The basis for achieving this simultaneous increase in quantity and price lies in the consumption upgrade driven by economic growth and the improvement of income levels.

For example,during the period from 2015 to 2019,when Wuliangye raised prices most frequently,the demand structure for high-end liquor shifted towards mass consumption.At the same time,the continuous growth of residents' disposable income drove a sustained increase in mid-to-high-end consumption demand and a clear trend of consumption upgrade.Pǔ Wǔ thus became the only leader in the thousand-yuan price range,following the cycle of price increases,capable of absorbing the overflow benefits of Moutai and serving as an efficient substitute for sub-premium liquors,squeezing competitors both above and below.

However,by 2020,influenced by factors such as the pandemic,consumption gradually shifted from upgrading to downgrading,and the foundation for Wuliangye's simultaneous increase in quantity and price was no longer there.Consequently,the contradiction between controlling quantity and stabilizing prices,which was previously hidden by the industry's simultaneous increase in quantity and price,became more apparent.

As seen in Chart 2,Wuliangye chose to prioritize performance growth.In 2022 and 2023,Wuliangye did not raise the ex-factory prices again but opted to increase production volumes.The production volume of "Wuliangye products" grew by 18.95% and 18.77% year-on-year,respectively,and the sales volume grew by 12.33% and 17.99% year-on-year,respectively.The results speak for themselves,with Wuliangye experiencing severe price inversion in both 2022 and 2023.

Managers have reported (in the article "Over 80% of liquor companies may face price inversion,is Wuliangye also unsellable?"),that in 2023,the suggested retail price for Wuliangye's P5 was 1499 yuan per bottle,but during the 618 promotion period,the price of this liquor in Wuliangye's flagship stores on Tmall,Taobao,and JD.com approached around 1000 yuan,and some stores even sold it for only 859 yuan per bottle after receiving billions in subsidies,nearly halving the suggested retail price of 1499 yuan.

Price inversion inevitably squeezes channel profits,and Wuliangye has to work hard to ensure "reasonable channel profits." The combination of price increases,volume reduction,and supply control mentioned at the beginning of the article aims to achieve this.

However,in terms of results,the effectiveness is not very significant.

In the official flagship store of JD.com,the price of the eighth generation "P5" 52-degree 500ml is 999 yuan,which is lower than the newly adjusted ex-factory price; the price with Pinduoduo's billion-yuan subsidy is 872 yuan,and today's liquor price data shows that the wholesale price of this product on September 5th was 960 yuan.

In late July,UBS Group released a research report on the Chinese liquor industry,downgrading Wuliangye's rating from "Buy" to "Neutral." UBS believes that due to the significant expansion of liquor companies in the past three years,the downward pressure on retail prices of high-end liquor will intensify this year and next year.If the company still does not adjust the product supply in the premise of weak consumer demand,Wuliangye's wholesale price may fall by 17% next year.

How to regain the rhythm?

Consumer demand supports the lower limit of prices,and value demand pushes up the upper limit of prices.Setting aside the industry-wide issues of liquor consumption demand,Wuliangye needs to fully recognize its value to reverse the price inversion and regain a steady growth rhythm.

In short,only by achieving the return of brand value can Wuliangye truly break through.

Speaking of the brand,Wuliangye's heritage goes without saying.Wuliangye's ancient cellars date back to the Yuan Dynasty,and Li Shizhen recorded in "Compendium of Materia Medica": "Distilled spirits are not ancient methods,but were first created in the Yuan era," which has an unshakable heritage and tradition.After the founding of the People's Republic of China,from 1952 to 1989,Wuliangye won awards in four consecutive sessions of the five national wine appraisal meetings,and was listed among the first batch of "Eight Famous Liquors"...

The gap with Kweichow Moutai in Guizhou is essentially due to the departure from its own narrative framework,where the logic of product channels was "dimensionally reduced" by investment logic.Under the investment logic,the value of Wuliangye was not fully recognized,and thus it lost the status of the top brand.

Since Zeng Congqin officially took office as chairman,Wuliangye has placed brand building in a prominent and important strategic position.Specifically,it can be summarized as three "deep plowings":

Deep plowing in brand culture construction.Promote the in-depth development of "Cultural Wuliangye" and accelerate the construction of Wuliangye as a holy land of Chinese liquor culture and a world-class liquor enterprise portal area;

Deep plowing in brand characteristic creation.Strengthen the research on the characteristics of the five-character culture and the harmonious and beautiful culture,explore the unique connotations of "Harmonious and Beautiful Wuliangye",highlight brand characteristics,innovate brand expression,and enhance brand tension;

Deep plowing in brand communication innovation.Continuously occupy positions in major events and platforms to enhance the reputation and influence of the Wuliangye brand.

These have further increased Wuliangye's sales expenses.

In the first half of this year,Wuliangye's sales expenses reached a new high of 5.366 billion yuan,a year-on-year increase of 24.21%,which is 1 billion yuan more than the first half of last year.Among them,promotional expenses were 3.441 billion yuan,with a year-on-year increase of more than 31%.The financial report explained that this was because the company increased market investment to boost the confidence of merchants,and the expenses included channel construction,team building,consumer cultivation,etc.

Of course,the expenditure is not without effect.In June,the World Brand Lab released the 2024 "China's 500 Most Valuable Brands" list and analysis report,which showed that Wuliangye ranked 15th on the list with a brand value of 449.872 billion yuan,with a brand value increase of 10.16%,and was rated as the best performing brand of 2024.

However,for Wuliangye,the more important issue is not the above "high-level guidance",but how to regain the discourse power of quality value.After all,the brand is an interpretation of the existing reality rather than a prediction,it is post-experimental rather than a priori,and it needs to be logically convincing.This requires Wuliangye to reshape consumer perception,which is by no means an easy task,but it is difficult yet correct.