Company Reports

Chinese baijiu sales have deteriorated since the second half of 2024, and the sector has lagged the broader market. An aging population and falling per capita drinking rates point to a shrinking pool of buyers, prompting us to reassess competitive strength across our coverage.

Following a soft first quarter, Luzhou Laojiao's earnings deteriorated further in the second quarter, with revenue and net profit declining 66% and 79% year on year, respectively.

Luzhou Laojiao, founded in 1955 from a group of 36 ancient brewing workshops dating back to the Ming and Qing dynasties, is one of the top three premium baijiu distillers in China. As the original rich-flavored baijiu distiller, the company enjoys a rich legacy that few other baijiu producers have. We believe Laojiao’s hard-to-replicate aged cellars, classic brewing technique, and centuries of history of producing quality products have established a strong competitive advantage in brand strength and pricing power. Its extensive distribution network and deepening cooperation with distributors have also fortressed its competitiveness, allowing it to generate economic profits well into the future.

Luzhou Laojiao's earnings weakened sharply in the fourth quarter of 2025, with revenue and net profit tumbling 62% and 96%, year on year, respectively. The softness extended into the first quarter of 2026, as revenue and net profit fell a further 14% and 19%.

Luzhou Laojiao, founded in 1955 from a group of 36 ancient brewing workshops dating back to the Ming and Qing dynasties, is one of the top three premium baijiu distillers in China. As the original rich-flavored baijiu distiller, the company enjoys a rich legacy that few other baijiu producers have. We believe Laojiao’s hard-to-replicate aged cellars, classic brewing technique, and centuries of history of producing quality products have established a strong competitive advantage in brand strength and pricing power. Its extensive distribution network and deepening cooperation with distributors have also fortressed its competitiveness, allowing it to generate economic profits well into the future.

Despite continued sectorwide demand weakness, our recent channel checks indicate steady sales volume for leading baijiu brands during the Lunar New Year period, with lower inventory levels compared with a year ago.

Luzhou Laojiao, founded in 1955 from a group of 36 ancient brewing workshops dating back to the Ming and Qing dynasties, is one of the top three premium baijiu distillers in China. As the original rich-flavored baijiu distiller, the company enjoys a rich legacy that few other baijiu producers have. We believe Laojiao’s hard-to-replicate aged cellars, classic brewing technique, and centuries of history of producing quality products have established a strong competitive advantage in brand strength and pricing power. Its extensive distribution network and deepening cooperation with distributors have also fortressed its competitiveness, allowing it to generate economic profits well into the future.

Our channel checks continue to indicate persistent weakness in baijiu demand, with the sector facing double-digit revenue declines ahead of the Lunar New Year holiday. However, performance varies across segments—premium baijiu, led by Moutai, is showing signs of modest demand improvement.

Luzhou Laojiao, founded in 1955 from a group of 36 ancient brewing workshops dating back to the Ming and Qing dynasties, is now one of the top three premium baijiu distillers in China. As the original rich-flavored baijiu distiller, the company enjoys a rich legacy that few other baijiu producers have. We believe Laojiao’s hard-to-replicate aged cellars, classic brewing technique, and centuries of history of producing quality products have established a strong competitive advantage in brand strength and pricing power. Its extensive distribution network and deepening cooperation with distributors have also fortressed its competitiveness, allowing it to generate economic profits well into the future.

Luzhou Laojiao's third-quarter revenue and net profit fell 10% and 13% year on year, respectively. The declines are broadly in line with second-quarter trends, despite decelerating premium baijiu demand in July-August, amid soft consumer sentiment and fewer business occasions.

Our channel checks continue to indicate persistent weakness in China's consumer sentiment and elevated inventory levels for Baijiu. Golden Week sales for the sector declined by 20%-30% year on year, and inventory levels have increased by about one month.

Luzhou Laojiao's second-quarter performance weakened, with revenue and net profit falling 8% and 11% year on year, respectively. Persistent macroeconomic challenges and policy headwinds from alcohol restriction measures have intensified demand pressure across the broader baijiu sector.

Luzhou Laojiao, founded in 1955 from a group of 36 ancient brewing workshops dating back to the Ming and Qing dynasties, is now one of the top three premium baijiu distillers in China. As the original rich-flavored baijiu distiller, the company enjoys a rich legacy that few other baijiu producers have. We believe Laojiao’s hard-to-replicate aged cellars, classic brewing technique, and centuries of history of producing quality products have established a strong competitive advantage in brand strength and pricing power. Its extensive distribution network and deepening cooperation with distributors have also fortressed its competitiveness, allowing it to generate economic profits well into the future.

Luzhou Laojiao posted year-on-year growth in revenue and net profit of 3% and 2%, respectively, in 2024, followed by increases of 1.8% in revenue and 0.4% in net profit for the first quarter of 2025. The firm has committed to minimum payout ratios of 65%, 70%, and 75% for 2025-27, respectively.

Luzhou Laojiao, founded in 1955 from a group of 36 ancient brewing workshops dating back to the Ming and Qing dynasties, is now one of the top three premium baijiu distillers in China. As the original rich-flavored baijiu distiller, the company enjoys a rich legacy that few other baijiu producers have. We believe Laojiao’s hard-to-replicate aged cellars, classic brewing technique, and centuries of history of producing quality products have established a strong competitive advantage in brand strength and pricing power. Its extensive distribution network and deepening cooperation with distributors have also fortressed its competitiveness, allowing it to generate economic profits well into the future.

Amid China's macroeconomic and consumption headwinds, our baijiu coverage trailed the broader market in 2024, falling 19% on average, compared with a 13% rise in the Shanghai Composite Index.

China’s leaders announced greater measures to loosen monetary policy and for more proactive fiscal policy in its Politburo meeting on Dec. 9. The Hang Seng Index jumped 3% toward the end of the trading day on the announcement. Large-cap ADRs that are indicative of China’s consumer confidence such as Alibaba and Pinduoduo saw their shares increase 7% and 10%, respectively. However, we are still waiting for specific policy details before assessing whether the policies will be effective in lifting consumption and ensuring economic growth doesn’t slow further.

Near-term headwinds in the macroeconomy have weakened baijiu demand and the sector’s profitability, with slower year-over-year sales growth across all segments in the third quarter versus the previous quarter. We expect the cyclical weakness to persist in the next 1-2 quarters, and we remain selective, with a preference on premium and leading brands given their relatively resilient demand.

Luzhou Laojiao, founded in 1955 from a group of 36 ancient brewing workshops dating back to the Ming and Qing dynasties, is now one of the top three premium baijiu distillers in China. As the original rich-flavored baijiu distiller, the company enjoys a rich legacy that few other baijiu producers have. We believe Laojiao’s hard-to-replicate aged cellars, classic brewing technique, and centuries of history of producing quality products have established a strong competitive advantage in brand strength and pricing power. Its extensive distribution network and deepening cooperation with distributors have also fortressed its competitiveness, allowing it to generate economic profits well into the future.

Wide-moat Luzhou Laojiao’s second-quarter revenue and net profit rose only 11% and 2% year over year, respectively, tracking below our full-year estimates. We think this was largely due to demand headwinds for its subpremium brand Jiaoling, while sales growth of its flagship brand National Cellar 1573 and mainstream brand Tequ should continue to see double-digit sales growth over 2024. A transitory hit from higher taxes, including sales tax and income tax, has dampened the firm's bottom line for the quarter, but this is related to the production schedule and we expect it to be normalized on an annualized basis. Excluding the tax hit, we estimate Laojiao’s second-quarter net profit should have grown 11% from a year ago, in line with peer Wuliangye.