CICC: Pessimistic expectations already largely reflected; baijiu industry expected to enter a new phase of structural recovery

CICC released a research report stating that since 2Q25, industry leaders have experienced deep adjustments in both performance and share prices, triggering market concerns over a collapse in baijiu demand and the failure of the business model. CICC believes that the baijiu business model determines the industry's cyclical characteristics of "strong prosperity, slow clearing," and the current adjustment is nearing its end; looking ahead, CICC believes pessimistic expectations have been largely reflected, and with variables such as consumer-facing transformation and expansion of new categories, the industry is expected to move toward a new phase of structural recovery. CICC's main views are as follows: On the model: Strong manufacturers and weak channels naturally amplify cyclical volatility. In the traditional business model, distilleries hold pricing power and quotas and adopt a payment-before-delivery model, while channels bear the financing burden and wholesale price fluctuations. During economic upcycles, channels actively stockpile to obtain greater profits, thereby amplifying industry prosperity, while during downcycles, due to task pressure from distilleries and weak demand, they passively hold inventory and delay financial statement clearing, thus forming "strong prosperity, slow clearing." On the current situation: Clearing has entered its later stage, volume and price are bottoming out, and structural recovery is gradually becoming clear. 1) The magnitude of industry financial statement adjustments exceeds the decline in sell-through, inventory is further destocked, and some brands are the first to stabilize and recover; 2) Leading brands' prices have shifted from passively following declines to actively controlling volume and stabilizing prices, with the wholesale price of standard Feitian recovering from the bottom to around RMB1,700, and the price of standard Wu also stable at around RMB750; 3) Demand remains relatively weak, but the drag from real estate on baijiu consumption is expected to ease marginally. Due to continued divergence in brands, inventory destocking pace, consumption scenarios, and price points, CICC believes this round of recovery is a structural recovery led by top brands, rigid-demand consumption scenarios, and major single products at key price points. On the future: Exploring new growth paths beyond the traditional model. 1) Direct-to-consumer transformation reshapes manufacturer-channel relationships; Moutai accelerated its consumer-facing transformation in early 2026, driving profit and consumption data back to the brand owner; 2) Channel model innovation: Zhenjiu's "Ten Thousand Merchants Alliance," Honghualang's alliance merchant system, and others reduce channel funding and inventory pressure, strengthen terminal operations and interest alignment, and drive the channel's transition from "inventory-pushing driven" to "sell-through driven"; 3) Layout across all price bands, all scenarios, and all channels to achieve high regional market share; 4) Actively promote product innovation in lightweight, low-alcohol, and flavored products, expand and cultivate new scenarios and new consumer groups, and reach new consumer demand. Risks Industry demand recovery falls short of expectations; inventory destocking falls short of expectations; prices decline further; competitive landscape deteriorates; food safety risks.