Why do many excellent enterprises collapse at their peak growth?

Many businesses fail not because their leaders are unaware that changes are taking place, but because when changes arrive, the company is still growing.

Revenues are still rising, customers are still buying, and the team still believes in the old methods. Everything appears normal.

Yet the real danger lies in this: the very variables that the company's growth depends on are quietly shifting.

At its 2025 shareholders' meeting, Moutai stated that the baijiu industry is experiencing a "superposition of three cycles" — the macroeconomic cycle, the industry adjustment cycle, and Moutai's own operational cycle.

But what truly deserves the attention of every entrepreneur is not "how Moutai judges cycles", but a far more critical question: how can a company recognize that the methods that once made it successful are no longer working?

I. What Moutai truly assesses is not the cycle, but the transformation of its growth formula

Moutai's judgment is not "the baijiu industry is about to decline". That would be far too simplistic a conclusion.

What they truly identify is this: The chain that once drove industry growth is breaking.

Every industry and every company has an "implicit growth formula" — a sequence of interconnected cause-and-effect relationships.

Over the past two decades, the baijiu industry's growth formula roughly followed this path:

Consumption upgrading → Increased demand for business banquets → Channel expansion → Distributor stockpiling → Price increases → Corporate growth

Every link in this chain was tightly interlocked. As business banquets grew more frequent, demand for premium baijiu rose. As channels expanded, products reached wider markets and sales increased. When prices went up, distributors were willing to stockpile because they could profit from holding inventory. The more prices rose, the greater the demand for stockpiling, and the faster the company grew.

This was a self-reinforcing cycle.

Most companies across industries operate with similar formulas.

A manufacturing company might follow:

Low-cost manufacturing → Price advantage → Channel expansion → Scale growth

A real estate company might follow:

Land dividend → Financing leverage → Rapid development → Sales growth

A consumer goods company might follow:

Traffic dividend → Advertising investment → User growth → Scale expansion

The problem is not whether these formulas were correct in the past. They once worked.

The real issue is: when the key variables within the formula begin to change, can the leader actually perceive it?

The Moutai management team highlighted several signals at the shareholders' meeting:

Business banquet scenarios are diminishing. The places where people once drank baijiu are disappearing. Distributors are finding it harder to make profits and face mounting inventory pressure. Consumer mindsets are also shifting — a 22-year-old young person said, "I don't oppose baijiu, but I dislike the culture of toasting to flatter successful people at the dinner table."

Individually, none of these signals seem like major issues. But taken together, they point to a single conclusion:

Multiple variables along the growth chain are malfunctioning simultaneously.

Consumption upgrading continues, but business banquets are no longer the primary driving force. Channel expansion persists, but distributors can no longer afford to stockpile. Prices still rise, yet the logic behind price increases has reversed — previously "higher prices lead to more stockpiling", now "price hikes result in unsold inventory".

When the core growth variables of an industry are changing one after another, companies must remain alert: this may no longer be a simple cyclical fluctuation, but a fundamental restructuring of the growth logic.

That's why Moutai made a decision: in the fourth quarter of 2025, it will no longer push excess inventory onto its distribution channels. The trade-off is a sharp decline in quarterly revenue and profits. But management describes this as "trading short-term performance adjustments for long-term healthy development".

This decision illustrates one critical point: Moutai's management has determined that the old growth formula may no longer be viable. Continuing to rely on outdated methods will only delay problems, not solve them.

This is the distinction between strategic judgment and operational management.

Management means: how to perform better under the existing formula.

Strategy means: does the formula itself still hold true?

II. Why do peers who observe the same phenomena fail to reach the same conclusion?

Did Moutai's judgment stem from an information advantage?

No. Competitors' data, reports, and market research may not be any less comprehensive than Moutai's.

The real issue is not "whether you have information", but "how you interpret that information".

Differences in strategic judgment capabilities do not come from the quantity of information, but from gaps in three core competencies.

The first competency: can you spot anomalous signals instead of only focusing on normal indicators?

Most corporate meetings revolve around "normal metrics" — sales figures, profits, market share. These are standard performance signals.

What truly matters are the signals that defy expectations: a regional market with three consecutive quarters of slowing growth, an unusual drop in sales velocity for a product line, or a persistent rise in the inventory-to-sales ratio across a distribution channel.

These anomalous signals are faint in their early stages. But if you dismiss them as "noise" and wait until they accumulate into a full-blown "trend", it will already be too late to reverse course.

Outstanding companies ask: "Which small signals could foreshadow a major problem?"

Moutai's management shared a specific detail at the shareholders' meeting: a 22-year-old young person saying "I don't like the culture of toasting to flatter successful people". This seems like an individual opinion, but it could signal a much larger issue — the new generation of consumers is changing their acceptance of baijiu drinking scenarios. If you only fixate on sales data, you will never notice this signal.

The second competency: can you challenge the assumptions that once made you successful?

Every leader has a "success formula" — the method that allowed their business to grow. That formula was valid in the past.

The problem is that while the formula still appears to be working, it's difficult to accept that it is about to become obsolete.

We grew last year, so why wouldn't we grow this year? Distributors are still placing orders, so why would channel momentum be declining? The data hasn't dropped yet, so how could the growth logic have shifted?

True strategic sensitivity means that even when "everything still looks good", you begin to question the logic that once drove your past success.

The third competency: can you embrace information that makes you uncomfortable?

Most organizations have a natural tendency: seek out information that confirms their correctness, and ignore data that might prove them wrong.

This tendency grows stronger as organizations expand. Employees avoid reporting news that their leaders don't want to hear. Real problems get repackaged as "challenges", "opportunities", or "areas for optimization". By the time information reaches the leader, it has often been filtered and altered.

Exceptional companies establish mechanisms to actively seek out uncomfortable information.

They understand that comforting information gives you peace of mind, but uncomfortable information keeps you aware and grounded.

III. Another critical issue leaders must consider: why brands cannot automatically transcend cycles?

Moutai claims that "brands are what help you transcend cycles".

Many business owners repeat this mantra: "We have a strong brand, so we are safe."

Yet in reality, many companies with "strong brands" still collapse. Or even if they survive, their brands gradually become outdated in consumers' minds.

A brand is not the same thing as brand equity.

Brand awareness means "people know who you are". Brand equity means "people see you as irreplaceable".

Having widespread recognition does not mean you deliver irreplaceable value to consumers. A 30-year history is not an inherent moat. If consumers say "so what?", your brand's history is nothing more than your own nostalgic memory, not a capability to secure future choices.

Many companies don't lack a brand — their brand only exists in their internal historical archives, not in the future decision-making of consumers.

A brand transcends cycles not through past accumulation, but through three sustained capabilities:

First, the ability to explain the past: why did consumers choose you back then?

You must clearly articulate the unique value that made consumers choose you in the past. Was it product quality? Channel coverage? Brand image? Or industry dividends? If you can't explain "why we succeeded before", you will struggle to determine "whether we can continue to succeed in the future".

Second, the ability to explain the present: why do consumers still choose you today?

This is far more challenging. The reasons consumers choose you today may no longer be the same as in the past. Once you were chosen because "there was no other option", now you might only be chosen out of "habit". Once you were chosen for "status expression", now you might only be chosen as a "quality guarantee".

If your brand remains stuck on explaining "why we succeeded in the past" without understanding "why we are chosen today", you are losing touch with your consumers.

Third, the ability to explain the future: why will the next generation of consumers still choose you?

This is the hardest question. The needs, scenarios, preferences, and values of the next generation of consumers could be completely different. Your brand value needs to be reinterpreted in a new context.

Moutai's management specifically addressed "youth appeal" at the shareholders' meeting, emphasizing that "we cannot pursue youth appeal just for the sake of it" — they understand that it's not as simple as selling products to younger people. What they truly need to do is translate their brand value into language that the next generation of consumers can understand and identify with.

These three capabilities form the real foundation for a brand to "transcend cycles". It's not about "30 years of history", but the ability to continuously answer why consumers choose you.

IV. Five questions leaders must ask themselves regularly

Reading this far, you might be thinking: Moutai is Moutai, and I am me. Our industries differ, our scales are different.

This line of thinking is completely reasonable. How Moutai assesses cycles is not the key point.

The critical issue is how you assess your own company.

The diagnostic framework below is designed specifically for business leaders. It is not industry analysis, nor competitor research — it is a tool to help you clearly see whether your growth logic still holds.

First question: Over the past ten years, what core variables has my company's growth truly depended on?

Don't just say "great products" or "strong team". Name specific factors: was it channel expansion? Industry dividends? Policy windows? Stable large-client orders? List the core variables that actually drove your growth.

Second question: Which of these variables are currently changing?

Don't assume "they should still be there". Verify them. Are distributors still willing to actively stock inventory? Is the industry dividend period still ongoing? Are policy windows still open? Are your large clients still growing?

If a variable has changed, how much impact does that have on your overall growth formula?

Third question: Which practices that once made me successful are now becoming rigid habits?

The methods that once made you successful now make you feel comfortable. But comfort easily becomes a shackle.

For example: you used to drive growth through channels, and now you still rely on pushing inventory to distributors to maintain performance. You used to win orders through relationships, and now you still passively wait for connections. You used to compete on price, and now you still engage in price wars.

Identifying inertial thinking is the first step to breaking free from it.

Fourth question: If I were starting my business from scratch today, would I still choose my current model?

This is the hardest question. Because it requires you to temporarily set aside all your existing investments — sunk costs, team size, organizational inertia — and objectively assess: given today's market environment, does my current model still make sense?

If the answer is "no", then what you are doing now may no longer be appropriate, yet you continue doing it. This is path dependence, the greatest strategic risk for any enterprise.

Fifth question: When which signals appear, must I adjust my strategy?

Many companies lack a "strategic exit mechanism" — they don't know when to stop, when to pivot, or when to abandon certain paths. By the time performance plummets and they recognize the problem, it's already too late.

Set trigger signals in advance: when changes in a core variable exceed expectations, when a key assumption is proven invalid, or when a new trend's growth hits a threshold, automatically initiate a strategic review.

These five questions have no standard answers. But there is a world of difference between asking them and never asking them at all.

Final Thoughts

Returning to the initial question: why do many outstanding companies collapse precisely when their growth is strongest?

It's not because their leaders don't realize the world is changing. It's because while growth persists, there is no sufficient reason to change. Performance is still rising, profits are still growing — so why would you say "the old methods no longer work"?

That's why the greatest danger for a leader is not when a crisis strikes. It's when the company is still growing, but the underlying growth logic may have already shifted.

Companies that achieve sustained growth are often not the ones that react fastest when crises arrive. They are the ones who, when everything appears normal, can pause and ask themselves: "Are the factors that once made me successful still here today?"

This question is the starting point of strategic review. You don't need to know the answer immediately, but you must keep asking it continuously.

The greatest strategic risk for a company is not choosing the wrong direction — it's persisting in the wrong direction while still trying to justify why your past success worked.

This article is from the WeChat public account "Zhu Yi", authored by Zhu Yi, and published with authorization from 36Kr.