playingcardshuffler| Behind the continuous sharp decline in Jiugui Liquor revenue: Advance receipts continue to decline, channel confidence has not recovered, and high sales expense ratios have not slowed growth.

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Product: research Institute of Sina Finance listed Company

Author: wave Diet / Hao Xian

In 2023, drunken spirits achieved business income of 28.Playingcardshuffler.30 billion yuan, down 30.14% from the same period last year, the first sharp drop in revenue since 2014. In the first quarter of this year, alcoholic liquor revenue fell again by 48.8%, and net profit decreased by 75.56%, once again exceeding market expectations.

After experiencing chaos such as channel pressure, fleeing goods, and price upside down, channel confidence has fallen to rock bottom, and dealers have become cautious in making payments.

From the perspective of advance collection, the advance collection of alcoholic liquor has continued to decline since 2022, falling 36% in the first quarter of this year compared with the same period last year, the cash-to-income ratio is also declining, and the company's adjustment continues.

What's wrong with drunken wine? Revenue has fallen sharply in a row.

Alcoholic wine is a high-end products-based wine enterprises, alcoholic and internal reference series accounted for about 85%. Its ginseng wine for thousands of yuan price with a large single product, is the company's flag (Golden Kirin analyst) ship products. Alcoholic wine covers the mid-range price band of 200 to 500 yuan.

In 2023, the revenue of alcoholic liquor reached 2.83 billion yuan, down 30.14% from the same period last year. All the company's product lines without exception, all declined, including internal ginseng, alcoholic, Xiangquan series fell 38.21%, 27.45%, 68.03% respectively. In terms of sales volume, the total sales of alcoholic spirits decreased by 33.74% last year, of which internal ginseng, alcoholic and Xiangquan fell 32.69%, 17.62% and 74.65% respectively.

Such a sharp decline is rare among listed liquor companies. Last year, revenue of 20 listed liquor companies increased by 15.65% compared with the same period last year, and only two companies, Shunxin Agriculture and Jiugui Liquor, were on the decline.

The continuous decline in alcoholic liquor revenue is mainly due to the problem of channel inventory. The company's channel problems began to be exposed in September 2022, when Hunan Neisheng Liquor sales Co., Ltd. (hereinafter referred to as "Neisheng Liquor sales Company") issued a notice announcing that the quota of the 52-degree 500ml internal ginseng wine signing plan in 2023 would be calculated on the basis of 80% of the actual volume in 2022. At the end of November 2022, the internal ginseng wine sales company once again issued a notice that the total sales volume of 52-degree 500mL internal ginseng wine in 2023 would not exceed 800t. Based on 1147 tons of participating sales in 2022, it is equivalent to a 30 per cent reduction. The actual sales of ginseng wine decreased by 32.69% in 2023.

In 2023, alcoholic wine repeatedly issued a notice to rectify the internal reference market order, and in July of that year, it issued a notice to dealers announcing that it would stop accepting 52 orders for the sale of 500ml internal reference wine from July 10. In October 2023, alcoholic alcohol-related sources revealed to the media that orders for the "alcoholic" series of products would be stopped from October 10. At the same time, the channel side also repeatedly broke out "fleeing goods", "price upside down" and other news.

From 2019 to 2021, the performance of alcoholic liquor experienced explosive growth, with revenue rising from 1.512 billion yuan to 3.414 billion yuan. In retrospect, the explosive growth in the past three years was largely due to channel overstocking. The advance collection of alcoholic liquor is only 207 million yuan in 2019 and has increased to 1.382 billion yuan in 2021.

Liquor companies generally adopt the business model of "payment first and goods later", and the advance payment comes from the payment from the dealer. In this process, the "shareholder ownership" mode of alcoholic wine has played a role in adding fuel to the flames. In 2019, Jiugui Liquor established the Internal reference Liquor sales Company, which is responsible for the sales of the internal reference series. More than 30 high-end liquor "100 million yuan businessmen" across the country jointly funded the establishment, and then introduced big businessmen from outside the province to buy shares, which can not only earn sales profits, but also receive dividends.

With the joint efforts of manufacturers and distributors, the price of internal reference wine has risen to 564 tons in 2020 and 996 tons in 2021. From the price point of view, the ex-factory price of internal ginseng wine soared from about 500 yuan to more than 1000 yuan.

However, after a large number of goods are sold in the channel, the terminal sales do not keep up, and in the case of high channel inventory, there are chaotic phenomena such as "fleeing goods", "price upside down" and so on.

From 2022, the contract debt (advance collection) of alcoholic liquor began to decrease significantly, and it has dropped to 285 million yuan in 2023, returning to the level before 2020. After going through a round of overloading, the willingness of dealers to make payments has dropped sharply.

It is worth mentioning that alcoholic liquor dealers were still growing last year, rising by nearly 12% to 1774 from 1586 the previous year.

Contract liabilities continue to decrease "internal reference" performance is still not satisfactory in the first quarter

At present, the adjustment of alcoholic liquor is not over, and its revenue fell by 48.8% in the first quarter of this year. In an institutional survey at the end of April, management disclosed that the performance of "internal reference" in the first quarter was not very satisfactory.

The price of one batch of internal reference is about 850yuan, and the subsidy price of two bottles of internal reference of 52 degrees 500ML in JD.com platform alcoholic wine flagship store is 1699 yuan, and the subsidy price of each bottle is 849.5 yuan, which is lower than the price of one batch, and it is still in an upside down state.

In the first quarterly report, the company said that "channel customer confidence is still in the repair stage, consumer demand for sub-high-end products still needs to be restored", the current core work is to "restore stability of main product prices, repair channel profits and confidence."

As reflected in contract liabilities, contract liabilities continued to decrease to 235 million yuan in the first quarter, down 36 per cent from the same period in 2023. The income-to-cash ratio dropped to 64.43% from 78.82% in the same period last year, while the cash flow from business activities began to net outflow. There are still no signs of improvement in the core indicators.

On the other hand, the stock of alcoholic liquor continued to soar, rising to 1.59 billion yuan by the end of the first quarter. The total production capacity of Jiugui Liquor is 12000 tons, compared with 9141 tons in 2023, with a capacity utilization rate of only 76 per cent. At present, the company is still expanding production, the first phase of the production zone three will be put into production in 2024, and the second phase of the production zone will be under construction. After all production, the production capacity will be increased by 10800 tons. In the case of declining production and sales, as the new production capacity is put into production, the utilization rate of alcoholic liquor capacity will also decline sharply.

For a long time, in order to implement the high-end strategy, alcoholic liquor has maintained a high expense rate, with a sales expense rate of 25.28% in 2022, ranking fifth. In 2023, it increased by nearly 7 percentage points to 32.22%, second only to rock shares (rights protection). This makes the net interest rate as low as 19.36%.

The rate of sales expenses in the first quarter of this year rose to 33.94% from 26% in the same period last year. Despite a sharp drop in revenue, the company still chose to maintain a high cost, which undoubtedly further lowered its net profit, resulting in a sharp drop of 75.56% in net profit in the first quarter.

In fact, there have been cases of channel and product problems in the liquor industry before, and Yanghe shares are a typical example. Yanghe's adjustment has begun in 2019. Compared with wine companies of the same size, the current growth is still weak. Shuijingfang is another reference case. Shuijingfang and Jiugui Liquor are both medium-sized and sub-high-end wine companies and have also experienced rapid growth. After the epidemic in 2020, Shuijingfang's channel problems were first exposed, and the company took the initiative to adjust. After four years, the company only increased slightly by 6% in 2023. In the first quarter of this year, revenue increased by 9.38%, and it is still trapped in the dilemma of low-speed growth. No one knows how long Jiugui Liquor will need to be adjusted this time.