What were the previous rules

The most core rule in the Baijiu industry used to be not “how much was actually sold at the terminal,” but rather “getting the product out first, and making the accounts look good first.”

Manufacturers push goods onto distributors, who then move them down to lower-level channels. This allows revenue and profit to be recorded on reports prematurely. As long as wholesale prices remain stable and inventory can still be absorbed, everyone assumes this logic is sound. On the surface, it appears that the brand is expanding; in reality, many times, it is the channel preempting future sales for the manufacturer.

This model is viable, relying on three prerequisites. First, the industry is still expanding, and distributors are willing to commit for the long term; second, the pricing structure remains stable, leading everyone to believe that the goods can eventually be successfully sold out; and third, brand strength is sufficient so that inventory buildup will not immediately turn into a crisis.

So previously, what the Baijiu industry feared most was not slow sales, but price instability (or “price erosion”). Once prices start to drop/are unstable, distributors lose confidence, and inventory shifts from being “good-looking on paper” to being “strikingly visible in the warehouse.”

Why Did Wuliangye Stand Out?

I think Wuliangye will stand out/step up this time, based on at least three reasons.

First, the industry has truly entered a period of deep adjustment. Wuliangye clearly states in its annual report that the baijiu sector will enter a comprehensive and deep adjustment phase—the “deep water zone”—in 2025, and the overall development landscape of the industry is undergoing accelerated evolution. Furthermore, it itself admits that it must proactively align with market adjustments and actively help alleviate pressure and difficulties within distribution channels.

Secondly, the former methodology is starting to undermine itself. It was stated very clearly in the preliminary accounting error correction announcement that the company reviewed its 2025 business model and, based on the principle of prudence (or conservatism), adjusted the accounting calculations related to recognizing some of the 2025 business revenue. In other words, those seemingly perfect reports previously generated by relying on channels and confirmation timing can no longer be taken as the truth.

Third, governance pressure is also increasing. The annual report summary stated that the Chairman was absent from the board meeting because he could not perform his duties normally. Furthermore, external media also disclosed at the end of February that custodial measures were taken against him. Given this situation, it is even less likely that the company can continue to postpone old issues; rather, historical burdens are more prone to being exposed all at once.

So, this time’s “shake-up” isn’t because Wuliangye suddenly became particularly assertive; rather, it’s that it can no longer avoid shaking things up. The old rules have been stretched to their breaking point, and continuing to maintain superficial prosperity will only make the underlying deficits much larger.

Changes Before and After Financial Reports

What is most noteworthy this time is not the total figure for any given year, but that the three sets of reports disclosed for 2025 have been revised simultaneously. The correction announcement clearly stated that the items adjusted pertain to parts of the consolidated balance sheet and consolidated income statement for Q1, semi-annual, and Q3 of 2025, and do not affect the cash flow statement.

First, look at the most core revenue and profit:

This set of numbers is very striking. Revenue has been revised downwards three times, each time approaching a “halving.” The profit reduction is even more severe. Especially in the semi-annual report, net profit attributable to owners dropped directly from 194.92 billion yuan to 46.24 billion yuan—it almost completely stripped away the sense of prosperity that was previously there.

If you look at the changes in the balance sheet, it becomes clearer that these are not just minor definitional tweaks or cosmetic adjustments:

I am more concerned about “Other Current Liabilities.” Its elevated value at all three disclosure points suggests that some items from the past were indeed masked within the channel and settlement cycle/process. In other words, this isn’t simply a decline in profit; rather, both revenue recognition and the underlying channel strategy are being revealed simultaneously.

When viewing the full-year 2025 report alongside

What Comes Next

In the short term, the baijiu industry will look worse, but also more realistic.

Based on the restated Q4 2025 and Q1 2026 reports, the statements will be more “straightforward” than before, but also tougher to look at.

More importantly, the industry will gradually shift from focusing on “who has better distribution power” to determining “who can genuinely sell the wine directly to the consumer.” Wuliangye has outlined this direction in its annual report: traditional channels, e-commerce, group buying, direct sales to corporate clients, end-point optimization, and consumer nurturing—all point towards achieving more direct sales movement.

The road ahead won’t be easy. Once the old rules are dismantled, distributor inventory pressure will become more pronounced, manufacturer profit fluctuations will increase, and the intermediate players in the industry that rely on price differences and information asymmetries for revenue will also face greater difficulties.

What I Pay More Attention To

What is truly worth watching regarding this matter is not how much Wuliangye dropped this time, but whether it has the guts to admit: that many of the impressive figures over the past few years were never built upon genuine consumer spending.

If we view white liquor as a mature industry, it is highly unlikely that it will revert to a state characterized by uncontrolled expansion, artificial supply suppression, or unjustified price hikes. The sector will undergo deeper differentiation; while leading brands will maintain their position, growth will slow down, and corporate financial reports will reflect genuine business performance rather than speculative narratives.

For investors, this is not pure bad news. The drawback is that the high-growth era, which was sustained by the old order, is unlikely to return; but the upside is that when looking at financial reports in the future, we won’t constantly have to suspect whether goods were stuffed into channel warehouses again.

References

• Yibin Wuliangye Co., Ltd. 2025 Annual Report Summary
• Yibin Wuliangye Co., Ltd. 2025 Annual Report Full Text
• Announcement from Yibin Wuliangye Co., Ltd. Regarding Correction of Previous Accounting Errors
• Yibin Wuliangye Co., Ltd. 2026 First Quarter Report
• Wuliangye’s Revenue and Net Profit Both Decline in 2025, the First Time Since 2015!
• Wuliangye Surprises Investors: Net Profit Slips Over 70% in 2025, But Jumps Greatly in Q1 2026

Writing Notes

Original Prompt

Analyzing the causes and consequences of Wuliangye’s poor performance. What were the previous industry norms? What is the subsequent development? And why did Wuliangye challenge the status quo?

Summary of Writing Concepts

• First, lock down the 2025 report and the prior accounting adjustments to demonstrate that this is not normal volatility, but rather a recalculation of metrics definitions.
• Restrict the concept of “old rules” to the existing logic: channel inventory pressure, immediate booking upon shipment, and using inventory for reporting purposes.
• Explain Wuliangye’s actions as the result of being pushed by industry adjustments, channel pressures, and corporate governance pressures simultaneously.
• The focus later should be on how the industry will move toward actual consumption/real sales, consumer centrality, and more direct distribution models.
• This article deliberately avoids a cross-comparison between Wuliangye and Moutai, nor does it include short-term stock price predictions; the main thread focuses solely on changes in rules/regulations.