Amid the industry downturn, China's liquor sector needs a fundamental "cognitive transformation" - awakening from the illusion of pursuing high prices and returning to consumption fundamentals.

"Over the past five years, my greatest realization has been the journey from confusion to transformation. Sometimes we're separated by vast mountains and rivers, sometimes just by a thin sheet of paper," said Lei Jun, founder, chairman and CEO of XIAOMI-WR, during his annual speech on September 25th, themed around "change" as he shared his thoughts on innovation and breakthrough. These words serve as a wake-up call for the current liquor industry.

Over the past two years, the industry has entered deep waters, facing simultaneous declines in both volume and prices. In the first half of 2025, liquor production fell 5.8% year-over-year, with nearly 60% of liquor companies experiencing price inversions. More concerning is that the industry's average inventory turnover period has reached 900 days, meaning it takes an average of two and a half years for products to reach consumers from factory shipment.

More critically, consumer demographics are undergoing dramatic generational shifts. Data from the China Alcoholic Drinks Association shows that people born between 1985-1994 have become the new main force in liquor consumption, accounting for 34%; those born after 1995 represent 18% of adult consumers; looking ahead, approximately 83% of incremental liquor consumers will be concentrated among post-95s generations. However, these younger consumers have diversified alcohol preferences, with rich alternatives including wine, whiskey, and craft beer - liquor is no longer their sole choice.

Moreover, rising health consciousness has transformed consumption attitudes, with "drink less, drink better" becoming consumer consensus. The traditional drinking culture of "not drinking means disrespecting me" is increasingly unpopular, and conventional drinking table culture is being deconstructed.

Simultaneously, channel transformation is profoundly impacting the industry. The rise of new channels like e-commerce live streaming, community group buying, and instant retail has disrupted traditional multi-tier distribution systems, making prices more transparent and further compressing liquor companies' profit margins.

Consequently, an increasing number of industry professionals harbor indescribable anxiety about both present and future prospects. Facing industry challenges, Lei Jun's speech reminds us: "Change itself represents hope."

Most importantly, there's a need for fundamental cognitive transformation - the industry must shift from "face consumption" to "substance consumption" value return. Previously, premium liquor largely carried symbolic demands for "status and prestige." According to iiMedia Research data, in 2024, Chinese liquor consumption scenarios saw family gatherings (49.11%) and casual drinking with friends (48.00%) surpass business banquets (42.22%) for the first time as core consumption scenarios, while personal solo drinking climbed to 34.67%. This shift means liquor needs to return to its essence - as a medium for sharing with friends, celebrating with family, or even personal enjoyment.

Price segment movements also confirm this trend. In 2025, optimal sales price points shifted down to 100-300 yuan, while the 800-1,500 yuan premium segment became the most severely inverted range. Consumers are increasingly rational, focusing more on the balance between product quality and price.

When announcing the XIAOMI-WR SU7 Ultra price, Lei Jun once said: "We don't think high prices bring prestige; rather, the value should justify being expensive." The liquor industry needs to reconsider value positioning, shifting from pursuing high prices to providing genuine value. After all, "ultimate cost-effectiveness" is the core secret to XIAOMI-WR's success, offering profound insights for the liquor industry.

Currently, value-for-money has become an important criterion for consumer choice. Liquor consumption is differentiating - premium liquor with brand power still has market demand, but mass consumption pursuing cost-effectiveness is also rising. For liquor companies, this means needing to maintain quality while reassessing pricing strategies to provide products that truly meet consumer needs.

Facing industry adjustments, many traditional liquor companies may feel overwhelmed, but Lei Jun's story tells us: "Being in your fifties is the prime time for ventures; with continuous effort and constant growth, everyone has opportunities to 'defy fate.'"

These words serve as encouragement for the liquor industry with its long history. The liquor sector possesses deep cultural foundations and accumulated craftsmanship - valuable assets in themselves. What the industry needs is not hesitation and timidity, but the spirit of bold innovation.

Change is never too late - only stagnation is feared. Companies that take the lead in reconstructing their value competition systems will ultimately gain advantages in the industry's new cycle. Only by truly converting consumers' rational choices into innovation momentum can the industry create a more resilient new paradigm for Chinese liquor amid the waves of adjustment.