Kuaijishan's share price has doubled, but the national penetration of yellow rice wine should not be overestimated.

Consumption is still bottoming out, the tech sector is fluctuating, and there is hardly any certainty for other market segments.

Even though the market lacks a clear anchor point, capital always seeks the next opportunity. At this moment, targets that can deliver compelling growth narratives often draw a wave of attention and rally first, regardless of whether the narrative will eventually come true.

Recently, the rice wine track, which features small market capitalization and appealing growth stories, can easily trigger consecutive daily limit surges once capital flows in intensively, making it the market focus. Kuaijishan has recorded 4 limit-up gains in 5 trading days, doubling from its August low, while Guyue Longshan has surged by over 40% in the past month.

This round of rally in the rice wine sector is driven by the high growth expectation brought by national expansion.

In the past, the sales radius of rice wine was basically limited to Jiangsu, Zhejiang and Shanghai. Changes have emerged recently: a series of cooperation agreements with large distributors that hold core resources such as Moutai have raised the expectation of national expansion. The logic sounds quite reasonable: the profit margin of baijiu channels has shrunk, so large distributors are looking for new growth drivers; rice wine has a low market base and low competition; large distributors have high-end social circle resources, which can exactly make up for the channel shortcomings of rice wine.

However, for the national expansion of rice wine, the difficulty never lies in channels, but in products. Large distributors can solve the problem of "getting products onto shelves", but cannot solve the problem of "consumers actually buying and drinking them".

After all, it is easy to fill the channel capacity, but difficult to cultivate consumers' consumption habits.

Past historical experience also shows that there are inherent obstacles hindering the national popularization of rice wine consumption.

01

What investors are betting on is the growth narrative

The investment logic for the alcohol sector has shifted.

In the past few years, investors have been betting on the recovery of baijiu in the consumption sector. Even with multiple corrections in the segment, Zhang Kun's E-Fund Select Fund and Liu Yanchun's Invesco Great Wall Emerging Growth Fund have maintained heavy positions in leading baijiu brands including Maotai, Wuliangye and Luzhou Laojiao for consecutive quarters. The logic stated in their quarterly reports is that "the baijiu sector has basically bottomed out, and holds option value driven by the recovery of domestic demand".

However, the recovery has not arrived as expected. In the second quarter, the revenue of listed baijiu companies dropped by 17% year on year, and net profit fell by 21.3% year on year. Without improving performance, stock prices cannot rally either. The CSI Baijiu Index has fallen by another 30% this year, even after it had already halved from its peak.

The expected baijiu recovery has not come, but the rice wine sector has taken the lead to rally. Kuaijishan has notched 4 limit-up gains in 5 trading days, doubling from its August low; Guyue Longshan has also posted a rise of over 40% in the past month.

Institutions attribute this contrast to the shift in the investment logic of the alcohol sector, from "betting on the inflection point of the cycle" to "seeking growth opportunities".

The total combined revenue of the three listed rice wine companies is just over 4 billion yuan, which leaves huge upside elasticity in the high-end baijiu market that is worth trillions of yuan. This means that the rice wine sector has the potential to enter the "1 to 10" acceleration phase and achieve double-digit growth.

The high growth expectation of institutions is mainly fueled by the narrative of national expansion brought by baijiu distributors shifting their focus to rice wine.

Baijiu distributors, who used to make easy profits, suddenly find themselves in the most difficult position in the industrial chain. They are stuck with high inventory, facing inverted product prices, and their capital is occupied, leading to worsening performance. For alcohol circulation enterprises, the revenue of Huazhi Liquor Store has nearly halved in two years, and its net profit turned negative in 2025.

As a result, rice wine has become a new choice for baijiu distributors.

In early September, Kuaijishan signed a strategic cooperation agreement with Sichuan Shengshi Qunyun. The head of this company, Yang Bo, is also the president of the Sichuan Distributors Association of Moutai, who controls more than 5,000 terminal outlets across Sichuan province.

Earlier, Kuaijishan had successively reached cooperation with enterprises including Henan Maowujian Trading, Northeast Baishan Fangda Group, Guangdong Guangxinghu Liquor, and Beijing Sugar & Alcohol Group, covering the central plains, northeast, south China, southwest and other markets that used to be weak for rice wine. Guyue Longshan is not to be outdone: it signed a cooperation agreement with Beijing Sugar & Alcohol Group in May, and reached a tripartite strategic cooperation with Guangdong Yueqiang and Chongqing Agricultural Means of Production in September. Most of these distributors are large operators that hold core resources such as Moutai.

Thus, a smooth new narrative for rice wine has taken shape: the profit margin of baijiu channels has shrunk, large distributors are looking for new growth drivers, rice wine has a low market base and low competition, and the high-end social circle resources held by large distributors can exactly make up for the shortcomings of the rice wine sector.

But can this narrative really be translated into actual performance?

02

Performance runs counter to the narrative

This round of sharp rally of rice wine is backed by the expectation of high performance growth brought by national expansion. However, the half-year performance of listed rice wine companies runs counter to this narrative.

In the first half of the year, the revenue of Guyue Longshan in regions outside Jiangsu, Zhejiang and Shanghai dropped by 10.98% year on year, and the revenue of Jinfeng Wine Industry in regions outside Jiangsu, Zhejiang and Shanghai fell by 13.2% year on year.

Kuaijishan is the only exception, which achieved high revenue growth in regions outside Jiangsu, Zhejiang and Shanghai. This is related to the company's product innovation: Kuaijishan is the most aggressive rice wine enterprise in product innovation, it launched the "One Day One Smoked" sparkling rice wine to target young consumers, and its Lanting G20 and Lanting Guochao series are positioned for high-end baijiu banquet scenarios, breaking away from the traditional old jar image of rice wine, and serving as its core products for investment attraction in markets outside its traditional base.

However, along with product innovation, the surging sales expenses of Kuaijishan are also a non-negligible driver for its revenue growth in non-local markets.

In the first half of the year, the revenue of both Kuaijishan and Guyue Longshan stood at around 800 million yuan, with little difference between the two, but the sales expenses of Kuaijishan were 1.8 times that of Guyue Longshan in the same period, indicating that its growth in non-local markets is also highly related to marketing investment.

Can marketing drive the sustained growth of non-local markets? According to a research report on the rice wine industry released by securities firms, rice wine products are mainly driven by novelty-seeking demand, the taste of rice wine still needs to be accepted by consumers, and the repurchase rate is relatively low. JD consumption data also shows that the repurchase rate of rice wine is about 22%, while that of craft beer is 45%. This means that rice wine in non-local markets also faces the difficulty of shifting consumers from "trying for the first time" to "repurchasing".

The core proposition for the national expansion of rice wine is whether it can form sustained repurchase across the country, which is exactly what large distributors cannot solve. Large distributors only bring channels to solve the problem of "products getting onto shelves", but cannot solve the problem of "consumers actually drinking them". After all, the case of sauce-flavor baijiu is still fresh in our memory.

Around 2020, alcohol distributors saw the high profits of Moutai channels and believed that sauce-flavor baijiu would be the trend of the next decade. A large number of large distributors poured into the sector, making full payment in advance, locking in goods, and underwriting new products, pushing the sales revenue of sauce-flavor baijiu from 155 billion yuan to 210 billion yuan.

However, while the channel capacity can be filled, consumption habits are hard to cultivate. A large part of this round of growth of sauce-flavor baijiu was just the transfer of inventory in the channels, with goods stranded in the circulation links, failing to form a real consumption closed loop.

In contrast, the inventory turnover of healthy baijiu channels is generally 2 to 3 months, but the channel turnover of a large number of second- and third-tier sauce-flavor baijiu brands has extended to more than half a year. If end consumers do not buy and drink the products, the production side will inevitably face pressure. A large number of small and medium-sized sauce-flavor baijiu brands withdrew from the market, and more than 70% of small and medium-sized sauce-flavor baijiu enterprises in Moutai Town have suspended operations.

With the lesson of sauce-flavor baijiu ahead, it is not difficult to see the nature of this round of rice wine rally: the stock price boosted by piles of cooperation agreements with large distributors is not reliable. The key still lies in whether rice wine has a real consumption base to support its national expansion.

03

Inherent obstacles for national expansion

The narrative of rice wine expanding to northern markets and going national emerged as early as more than a decade ago. But after years of development, the revenue of the three listed rice wine companies from regions outside Jiangsu, Zhejiang and Shanghai still accounts for less than 30% of their total revenue, and the non-local revenue of two of the three companies is even declining.

The reason why rice wine has been unable to expand out of Jiangsu, Zhejiang and Shanghai is that there are inherent obstacles hindering its national popularization.

China has huge regional differences, and it is hard to cater to the tastes of all consumers across the country. The climate in Jiangsu, Zhejiang and Shanghai is humid, and rice wine helps dispel dampness and drive away cold. It also pairs well with Jiangnan cuisines, enhancing the taste and flavor of dishes, so it is deeply loved by local consumers. However, rice wine has a bitter taste, which makes it difficult to fit the taste preferences of most consumers across the country.

In comparison, baijiu performs better in this aspect. It has evolved into multiple flavor types, with 12 confirmed flavor types so far. Even if consumers do not like one of them, they can choose from the other 11.

Taste is only a temporary issue, and rice wine is being improved as well. This will bring some incremental growth, but the bottleneck for its national expansion goes far beyond that.

First of all, rice wine lacks replicable mass consumption scenarios. Alcoholic products always rely on consumption scenarios to survive: beer pairs with barbecue, baijiu pairs with banquets, and whisky fits bar scenarios. In contrast, the scenarios for rice wine are limited to warming wine in winter and drinking it while eating crabs on the Double Ninth Festival, with low consumption frequency and strong regional attributes.

Furthermore, rice wine is at an obvious disadvantage when competing with baijiu for market share. The mainstream price range of rice wine is concentrated at 20-50 yuan. If a product category is anchored at a low price range, it cannot enter the business banquet and gift-giving scenarios, which are exactly the two most profitable scenarios for the alcohol sector.

At present, the PE ratio of leading rice wine enterprises has exceeded 60 times, which is comparable to the valuation of the baijiu sector in its most prosperous years. But this also means that the high valuation of rice wine can only be supported by tangible achievements in national expansion. Judging from the current situation, the difficulty is quite high.

This article is from the WeChat official account "Insight Finance", written by Yang Yang, and published with authorization from 36Kr.