It’s Just Superficially That Young People Don’t Drink

I used to casually attribute the cause to generational shifts, thinking that because young people were drinking craft beer, cocktails, and whisky, baijiu would naturally become marginalized. This conclusion isn’t necessarily wrong, but it’s insufficient to explain the sharp changes seen in Maotai’s latest financial report.

The reason is simple: generational preference changes are gradual; they won’t suddenly crash profits like this in a single quarter. What truly determines the marginal pricing and profit of high-end baijiu is never just whether “people drink it,” but rather “who buys it, what scenario they are in, and why they are willing to pay two thousand or three thousand yuan per bottle.” Often, high-end baijiu sells not its taste itself, but social efficiency, status affirmation, and relationship lubrication. When you are actually at a gathering, many people don’t care if this particular cup is worth the money; what they care about is whether the entire occasion matches this price point.

Kweichow Moutai itself has quite clearly articulated this change. At the national dealer gathering held on 2025-12-28, company management directly mentioned that “the demand from core traditional consumers is weakening,” while also emphasizing the need to find new customer groups and usage scenarios. This statement contains a great deal of information. It is tantamount to admitting that the core buyers who previously underpinned Moutai’s pricing structure are no longer as strong as they once were.

Why is Moutai like a shadow stock of real estate?

Here, by calling it a “shadow stock,” I don’t mean that Moutai’s reports contain a pile of real estate projects, nor do I mean that if real estate drops, Moutai will drop in perfect lockstep. I am more inclined to understand it as a reflection on the demand structure.

Over the past twenty years, many of China’s most prominent, sustained, and extravagant business scenarios were related to the real estate chain. Local government finances rely on land sales; municipal investment vehicles revolve around land assets, developers maintain high turnover rates, and general contractors, subcontractors, building materials, home decoration services, agents, and financial support systems all benefited immensely together. Once this chain was prosperous, business banquets, festival gifting, relationship maintenance, and project coordination would all be significantly amplified. The money wasn’t gradually chipped away from residents’ daily consumption; rather, it flowed out of a system characterized by high leverage, high turnover, and high premium pricing.

In this environment, Maotai is not just liquor; it functions more like a high-end social status symbol. It possesses several characteristics that make it uniquely suited for this role: a powerful brand, an elevated price point, strong recognition, and excellent circulation. Often, whether a bottle costs two thousand or three thousand (yuan), does not alter the budget logic of the gathering; rather, the higher the cost, the better it executes the signal transmission of “I value you,” “I am capable,” and “this event has prestige.”

So, I largely agree with the statement that “Maotai is a shadow stock of real estate,” but to elaborate fully: it does not allude to the houses themselves, but rather the high-end business consumption order created during the era of real estate credit expansion.

This existing order is in decline. The national real estate data disclosed by the National Bureau of Statistics for 2025 is also worrying: Real estate development investment fell year-on-year (YoY) by 17.2%, newly built commercial housing sales area declined by 8.7%, and capital secured by property developers dropped by 13.4%. When the real estate chain contracts, what often disappears first is not basic necessities like food and drink, but rather consumption that has the greatest budget flexibility, prioritizes prestige, and relies heavily on projects and connections to operate. High-end baijiu (Chinese liquor) is exactly caught in this predicament.

What This Annual Report Truly Reveals Is Not Just Weak Performance

The more crucial signal, actually, is that Moutai itself has started changing its narrative.

2026-01-09, Moutai publicly stated at a distributor meeting that “market transformation has become an unavoidable question for Moutai.” It also pointed out thoroughly that the past sales sector’s “non-commercialization” made it difficult for ordinary consumers to purchase wine fairly, conveniently, and genuinely. This statement is quite strong. It suggests that the company is aware that in the previous system, a large portion of the value did not come from genuine consumption needs, but rather from scarcity, artificial pricing structures, status group allocation, and channel premiums.

In other words, what Maotai is currently doing fundamentally means it is attempting to shed its “financial attributes,” reduce its dependency on gift-giving consumption, and dismantle its historically closed consumer segments. By moving toward ‘iMaotai’, direct-to-consumer channels (D2C), and emphasizing service and genuine needs, this effort is not merely channel reform; it is about establishing a new pricing foundation for the next stage.

This also explains why the company could still maintain positive growth during the first three quarters of 2025, but then suddenly turned negative for the full year. Previously, it was buoyed by momentum, brand recognition, and channels, but it could not sustain that through the fourth quarter. Old demand is declining, and new demand has not fully taken over/picked up, so naturally, the profit statement looks poor in the interim.

Rethinking This Stock

I don’t think Moutai is done for just because of this. Its brand, region, process, and supply constraints are still there; the moat doesn’t crumble overnight. There’s another important data point in the annual report: the company expects cumulative cash dividends of 650.33 billion yuan in 2025, which accounts for 79% of net profit attributable to owners. This is already very much like a cash cow machine.

But the challenge also lies here. Previously, the market was willing to give Moutai a high valuation because the core premise was that it was both a branded consumer product and operated like a highly predictable growth engine. Now that the growth component begins to weaken, the valuation anchor shifts in another direction: moving away from a high-growth consumption leader, and slowly drifting toward defensive assets characterized by lower growth rates, high dividends, and strong cash flow.

This is not the same thing for investors.

If you still look at it with the mindset of “earnings will always be double digits, wholesale prices will always be stable, and business demand will always be there,” it can be difficult to reconcile. Because the most lucrative demand from the old era truly declined along with real estate. But if you view Moutai as a super cash-flow asset that is going through de-bubbling, anti-speculation measures, and returning to its true consumption base, then it operates under a completely different valuation logic.

In Conclusion

Therefore, my current understanding of this matter is quite different from what it used to be.

It is true that young people are not drinking baijiu, and it is also true that the culture of celebratory drinking has strong historical cyclical characteristics. However, the more critical point is that the era which placed high-end baijiu on a pedestal was never sustained by ordinary people drinking it in daily life. Instead, it was propped up by an entire system: real estate credit expansion, ballooning corporate banquets (business entertaining), and distorted consumption driven by status/face. After the decline of the property market, baijiu will obviously not disappear immediately. But the segment of demand that is most profitable, least concerned with cost-effectiveness, and indifferent to high prices is no longer as robust as it once was.

For Moutai’s stock, the 2025 annual report will likely not be merely an ordinary performance fluctuation, but rather the beginning of a shift in its valuation narrative. Going forward, we cannot rely solely on brand loyalty; we must also assess the speed of genuine consumer uptake and determine whether channel reforms can successfully transform the past demand—which was propped up by temporary mechanisms/schemes—into a more sustainable consumption foundation.

References

Author’s Notes

Original Prompts

Analyzing the A-share listed baijiu company Maotai’s 2025 financial report data reveals a decline in net profit for the first time. Previously, the understanding was that young people don’t drink baijiu, and China’s so-called “drinking culture” is mostly a historical product. The latest understanding suggests that this historical product is real estate, and Maotai baijiu belongs to the shadow stocks of real estate. Since real estate has now declined, corresponding business banquets are no longer frantic, meaning this derivative product (baijiu) is not as needed anymore. Baijiu’s net profit remains high; for business banquets, they don’t care if the price is two thousand or three thousand—what they want is the “face” (prestige).

Writing Outline Summary

• Use the summary of Moutai’s 2025 annual report, disclosed on 2026-04-17, to firmly establish “the initial decline in profit” as the key trigger point.
• Instead of stating the main judgment as “young people don’t drink baijiu,” focus on the structure of business demand behind high-end liquor.
• In the middle section, use three sets of official real estate data (development investment, sales area, and available funds) to explain why the real estate downturn will first hit high-end banquet budgets.
• Separately added