Global AI Boom Claims New Victim: Chinese Liquor Giant
Chinese liquor giant Kweichow Moutai has surprisingly recorded a 1.95% decline in net profit to 44.5 billion yuan, equivalent to US$6.6 billion (Rp 117.48 trillion), in the first half of this year. The decline in financial performance marks the wavering dominance of the premium baijiu company amid China’s economic transition, which is now more focused on the technology and artificial intelligence (AI) sectors.
The profit decline in the first six months is the first to occur since 2014. The disappointing result also follows a 4.5% drop in annual net profit in 2025, which was the first annual decline in the company’s history based on Wind Information data.
Moutai’s sluggish performance is closely linked to the weakening of China’s macroeconomic conditions, where second-quarter growth was recorded as the slowest since the fourth quarter of 2022. In addition, urban fixed asset investment, including real estate and infrastructure that once served as the main field for liquor consumption in business lobbies, also fell 5.7% in the first six months due to anti-corruption crackdowns and tightening developer debt.
Fund Manager at Ba Luo Fund, Ye Yuhua, explained that the shift in economic focus to the high-end technology sector means new industry players no longer have the tendency to consume baijiu like workers in the property sector. “This is an irreversible trend. Baijiu has become a saturated market,” he said.
The decline in business performance has directly hit Moutai’s share price on the stock market. The company’s shares fell 5.7% year-to-date as of Tuesday, marking an annual downward trend for four consecutive years.
Latest reports also show that Chinese state fund entities, namely Central Huijin and China Securities Finance, have exited and are no longer in the list of the company’s top 10 largest shareholders.
Independent Stock Analyst Dongfang Li assessed that the exit of these giant institutional investors sends a danger signal regarding the weakening bargaining position of the company’s products. “The most significant signal from the latest financial report of this baijiu company is that Moutai’s value in business negotiations is shrinking,” he explained. “The market is shifting from the traditional economic logic of stable growth to high growth potential and global competitiveness brought by technological innovation,” he added.
Nevertheless, Li noted that Moutai’s extraordinarily high gross margin of 90% and stable dividend distribution remain attractive to the remaining institutions. However, he also highlighted that Moutai’s market value has now been overtaken by technology companies, such as memory chip maker CXMT, which listed last month with a market capitalisation 2.5 times larger than Moutai.
On the other hand, analysts from investment bank Citi and research firm Morningstar assess that the current performance decline is more due to a transition period in sales strategy from wholesale to direct-to-consumer, rather than simply weakening demand. Citi even maintains a “buy” rating for Moutai shares with prospects of improving sentiment rotation towards high-quality consumer stocks.
Both institutions project that Moutai will return to profit during the Mid-Autumn Festival in the third quarter. The increase in seasonal sales combined with two rounds of product price increases this year is expected to push the company’s net profit to grow again with a compound annual growth rate (CAGR) of 8% from 2025 to 2030.
Regarding current real market sentiment, Global Capital Investment Strategy Expert at China Asset Management, Wenjie Ding, stated that the majority of investors are still taking a wait-and-see approach before injecting their funds. This is clearly reflected in ETF data that continues to show constant net outflows from various food and beverage companies with significant baijiu weightings throughout this year.