Discount or Die: China’s Alcohol Market Enters a Deflationary Spiral

“If you don’t discount, wine simply won’t sell.”

That line was repeated again and again by alcohol distributors throughout 2025. Now, official data have put hard numbers behind the industry’s lived experience.

According to the National Bureau of Statistics of China, alcohol prices in China fell 1.9% year on year in 2025. From wine to baijiu, the decline was not a short-lived fluctuation but a year-long, structural trend across the sector.

Figures released on Jan. 9 show that in December alcohol prices fell 2.1% year on year and 0.5% month on month. For the full year, food, tobacco and alcohol prices declined 0.7%, while alcohol prices alone dropped 1.9%.

Together, the data paint a clear picture of a market under sustained deflationary pressure. Deflation signals a lopsided economy where supply dwarfs demand. As consumption weakens, businesses spend less, economic activity slows, debt burdens rise, which then causes more deflation. The downward loop, known in economics as a deflationary spiral, feeds on itself once entrenched.

Fine wine prices invert 

In the wine sector, many established brands have been caught in prolonged “price inversion,” with retail prices in China consistently falling below official suggested levels. In some cases, the decline has become structural.

Among Bordeaux’s classified growths, most estates now trade in China below their original release prices. Wu Xianghua, CEO of Fine West — one of China’s top 100 wine importers specialising in fine wine — said that even first-growth names such as Lafite and Latour are now changing hands below their en primeur prices.

“Third- and fourth-growth estates are essentially inverted across the board,” Wu said.

That pressure has fed back upstream. Bordeaux producers have been forced to cut ex-cellar prices, Wu noted, with Haut-Brion seeing the steepest reduction — around 20%. In his view, only a handful of estates have managed to broadly hold their pricing. “So far, only Beychevelle,” he said.

Penfolds and the parallel-import problem

Price disorder has also plagued one of the most recognisable imported wine brands in China: Penfolds.

Across JD.com, Tmall, Sam’s Club and Freshippo, parallel-import bottles priced below official flagship stores have become a long-standing feature — particularly for high-volume labels such as Bin 389 and Bin 407.

On Tmall’s self-operated cross-border channel, Penfolds Bin 407 is currently priced at RMB 577.92. While Penfolds has cut the official retail price from above RMB 1,000 in 2024 to RMB 774 per bottle, the gap with parallel imports remains stark.

Even baijiu is cracking

In baijiu — China’s largest and most resilient alcohol category — price inversion has been even more visible. Industry sources say mainstream brands such as Yanghe and Guojiao 1573 have all seen market prices dip below official guidance.

Even Feitian Moutai, long viewed as price-proof with a recommended retail price of RMB 1,499 per bottle, briefly traded at parity with — and at times below — that level in 2025.

“If you don’t discount, it won’t move”

At the distribution level, price competition has turned brutal. In China’s fast-growing instant retail channels, buying “after coupons” has become standard practice, with some alcohol products selling below distributors’ cost prices.

Because platforms and merchants share the cost of promotions, many sellers describe a no-win choice: opt out and lose sales, or participate and sacrifice margins.

The same dynamic is spreading offline. Dong Huaicheng, General Manager of Medoc1855 Trading Co., Ltd. in Tangshan, Hebei province, told us that even in lower-tier cities, consumers have clear price benchmarks.

“A large local distributor told me that during the New Year holiday, he sold just one case of wine because he refused to discount,” Dong said. “That would have been unthinkable in the past. Today, if you hold prices, you effectively lose the market.”

Margins that once ran two to three times cost have all but disappeared, he added. “Many players are selling at a loss just to get cash back. I can only stay afloat by clearing tail-end inventory.”

Middlemen squeezed out

Why has pricing continued to slide? Chen Ruidong, president of the Chengdu Wine & Spirit Association and a veteran of nearly 30 years in the trade, points to three factors: weak demand, falling consumption power and excess inventory.

With government-related consumption largely gone and the broader economy under pressure, business entertainment has shrunk sharply. Wine has shifted toward household consumption, but weakening incomes and confidence have made buyers increasingly price-sensitive.

Globally, oversupply has compounded the problem. “Wine production is clearly excessive,” Chen said, noting that even traditional regions such as France have been pulling out vines. “At its core, supply still exceeds demand.”

China’s fragmented distribution system has further intensified price wars. Ultra-low pricing on e-commerce platforms, greater transparency, winery-to-consumer sales and direct-sourcing models at instant retail platforms and membership stores such as Sam’s Club have all compressed margins in the middle.

As consumers grow accustomed to cheap wine, Chen expects conditions for intermediaries to remain harsh over the next three to five years.

“I was fortunate to work during the boom years of China’s wine market,” he said. “Today, many distributors work all year and barely make money. Building wealth through wine trading is no longer realistic. In a deflationary market like this, the survivors are likely to be those at the source — or upstream.”