On August 14, Kweichow Moutai Co.,Ltd. released its semi-annual report, posting total operating revenue of 90.703 billion yuan for the first half, a 1.47% year-on-year increase, while net profit attributable to shareholders fell 1.95% to 44.517 billion yuan. This marks the first time since 2015 that the company has recorded a decline in half-year net profit. The stock price tumbled following the earnings release, opening sharply lower on August 17 with an intraday drop of as much as 4.59%, before closing down 3.64%.

Two factors drove the selloff. First, the company reported rising revenue but falling profit, with second-quarter revenue down 5.23% and net profit attributable to shareholders down 6.9% year-on-year. Second, both Central Huijin Investment and China Securities Finance Corporation exited the list of top ten shareholders. At the end of the first quarter of 2026, Huijin held 10.3971 million shares (0.83%, the fifth-largest shareholder), and CSF held 4.0375 million shares (0.32%, the tenth-largest shareholder). By the end of the second quarter, both had disappeared from the top ten. From mid-April to mid-June 2026, the stock fell continuously, with a maximum decline exceeding 15%, hitting a new low not seen since September 2024.

After Direct Sales Share Reached 57%: Non-Standard Moutai Under Pressure, First Mid-Year Profit Decline Since 2015

For Kweichow Moutai Co.,Ltd., the most notable development in the first half was the shift in revenue structure. Direct sales channel revenue reached 51.962 billion yuan, up 29.87% year-on-year, accounting for 57.3% of total revenue, continuing to climb after matching wholesale and distribution revenue in 2025. The direct sales channel primarily includes self-operated stores, which serve B-end customers, and the iMoutai digital platform, which targets C-end consumers. The iMoutai platform generated 40.264 billion yuan in alcohol revenue (excluding tax) in the first half, a surge of 274.2% year-on-year, contributing approximately 44% of total revenue. Meanwhile, wholesale and distribution channel revenue contracted 21.58% to 38.697 billion yuan.

This is part of Kweichow Moutai Co.,Ltd.'s "comprehensive shift to C-end" market-oriented reform. The company began building its direct sales channel in 2018, accelerated the effort in 2020, saw direct sales revenue share rise from just 8.49% in 2019 to 22.66% by 2021, and in 2025, direct sales revenue exceeded wholesale and distribution for the first time. The direct consequence of this structural change is margin compression. In the first half, while revenue grew 1.47%, operating costs jumped 21.81%, and gross margin fell 1.74 percentage points to 89.56%, the first time it has dropped below 90% since 2018.

The key variable is "non-standard Moutai" products. These have long served to elevate the product mix, but with the baijiu market downturn, market prices for some non-standard Moutai products have fallen sharply. In January, to ease dealer pressure and digest channel inventory, iMoutai launched several non-standard Moutai products at retail prices significantly below official guidance. Additionally, in March, a consignment system for non-standard products took effect, replacing the previous model where dealers paid upfront to confirm revenue. Now, sales are conducted through the iMoutai app, with dealers earning service fees. Under these combined pressures, non-standard Moutai has experienced both volume and price declines. In contrast, Feitian Moutai has driven growth through iMoutai volume expansion, acting as a ballast for performance. This shift between the two effectively represents a downgrade in the product mix. According to data from Zhongtai Securities research, gross margins in the direct sales channel remained stable in the first half, while wholesale and distribution channel gross margins fell 4.45 percentage points.

Second, the higher direct sales share has led to increased tax burdens. In the first half, taxes and surcharges reached 14.682 billion yuan, up 5.31% year-on-year, further weighing on net profit.

Has Moutai Hit Bottom?

The channel reform has triggered a series of changes, most notably in inventory and contract liabilities. In the first half, inventory rose to 61.317 billion yuan, up nearly 12% year-on-year, while contract liabilities plunged 42% to 3.178 billion yuan. In fact, over the medium to long term, logistics, warehousing, store, and customer service costs for the direct sales channel will be borne by Kweichow Moutai Co.,Ltd. Moreover, with the weakening of the advance payment buffer, real consumer demand will be directly reflected in performance data, potentially amplifying earnings volatility.

For Kweichow Moutai Co.,Ltd., reform has become an imperative. For a long time, growth in the baijiu industry was supply-driven and heavily reliant on distributors. Baijiu manufacturers realized sales through dealer prepayments, while channels captured substantial profits from the spread between terminal selling prices and ex-factory prices. In the current industry adjustment, weak consumer demand and reduced consumption scenarios have led to a breakdown in the pricing system, with channel inventory amplifying fluctuations during the adjustment period. For liquor companies, reducing channel inventory, curbing price speculation, and reaching end consumers directly have become necessary measures.

With direct sales now exceeding 50% of revenue, Kweichow Moutai Co.,Ltd.'s reform framework is largely in place. While enduring the "growing pains" of reform, the company has also reclaimed excess profits previously captured by the channel. Since the start of this year, prices for Feitian Moutai at the company's self-operated stores have been raised four times: in March, the dealer contract price rose from 1,169 yuan to 1,269 yuan, and the self-operated retail price from 1,499 yuan to 1,539 yuan; in July, the iMoutai platform price rose from 1,539 yuan to 1,639 yuan, and the contract price from 1,269 yuan to 1,369 yuan; at the end of July, the self-operated store retail price was further raised to 1,753 yuan. The impact of the July price increases will be reflected in third-quarter results, and combined with the Mid-Autumn Festival peak season, this period will serve as the best test of the reform's effectiveness. The same applies to non-standard Moutai, with iMoutai adjusting retail prices for some products in May. However, it remains to be seen whether non-standard Moutai can achieve both volume and price increases after the transition from distribution to consignment, driving performance growth.