VATS Liquor Store Hit by Baijiu Downturn, Wine Posts Double-Digit Growth

VATS Liquor Store, China’s leading liquor distributor and a key distributor for Penfolds, DBR Lafite, Moutai, and Wuliangye, said first-half profit dropped nearly two-thirds in 2025 as weak demand and falling baijiu prices weighed on results. Its wine business, however, bucked the trend with double-digit growth.

The company, the only liquor distribution firm listed on China’s A-shares, reported revenue of RMB 3.95 billion (US$553 million) for the first six months, down 33.55% from a year earlier. Net profit attributable to shareholders fell 63.75% to RMB 56.2 million (US$7.87 million), according to its interim results filed this week.

Wine Segment Growth

Amid the slump, wine sales provided a rare bright spot. The company said wine revenue rose 10.96% to RMB 246.7 million (US$34.5 million) in the first half, compared with RMB 222.4 million (US$31.1 million) a year earlier.

VATS did not explain the wine revenue increase in its filing. Analysts said the growth may have been aided by the return of Penfolds’ Australian portfolio, which was absent from the Chinese market in the first half of 2024. Beijing lifted punitive tariffs on Australian wine in late March last year, with the first shipments arriving only in June, depressing the comparison base.

VATS distributes Penfolds and Lafite under its wine portfolio and works with Master of Wine Alun Griffiths to curate more than 500 premium wines suited to Chinese consumer tastes. It is also ranked among China’s top 100 wine importers by Vino Joy News.

Dependence on High-End Baijiu

The company attributed its overall downturn to weak economic conditions, policy shifts, and falling consumption demand. VATS relies heavily on high-end baijiu brands such as Moutai and Wuliangye, marketing itself under the banner of “authentic famous liquors.”

But the sharp decline in leading baijiu prices forced the company to book asset impairment losses of RMB 55.8 million (US$7.81 million) in the first half, nearly matching its net profit for the period.

China’s slowing economy has curtailed business banquets, undercutting demand for high-end baijiu. Prices have slipped across the market, raising the risk of further asset write-downs.

Margin Pressure and Layoffs

Profitability weakened further. Gross margin in the baijiu segment slid to 8.70% in the first half, continuing its decline from last year.

Sales expenses dropped 40.48% year-on-year, which the company said reflected a reduction in staff numbers and related payroll costs. The disclosure suggests the firm implemented layoffs during the reporting period.

The company is also testing new channels to revive growth. At an analyst briefing on Aug. 19, VATS said it is moving into on-demand retail, using its stores and supply chain to upgrade services.

The initiative includes digitising and streamlining traditional liquor shops and integrating them into delivery platforms such as Meituan, JD Daojia, and Douyin’s one-hour service. The goal is to create a service loop of “order online, ship from store, deliver in as little as 15 minutes.”