China’s first publicly traded liquor distribution company just reported its first annual loss since going public, underscoring mounting pressure in the country’s baijiu drinks market.
Vats Liquor Store posted 2025 revenue of RMB 5.90 billion (approximately US$819 million), down 37.7% year-on-year. Net loss attributable to shareholders reached RMB 368.8 million (about US$51 million), marking a sharp reversal from prior years.
Quarterly data showed a steady deterioration in performance, with VATS Liquor Store remaining profitable only in the first quarter before slipping into losses for the rest of the year.
Baijiu downturn drives decline
Vats Liquor Store is one of China’s largest alcohol distributors, with a portfolio spanning baijiu, wine and spirits. Its business is built on a “guaranteed authenticity” positioning, supported by long-term partnerships with leading producers including Moutai, Wuliangye, Fenjiu, DBR Lafite and Penfolds.
Its distribution network covers franchise stores, retail outlets, key accounts, group-buying channels and e-commerce. In recent years, the company has also integrated its offline network with instant retail platforms but its Wu Xiangdong has publicly complained about e-commerce giants’ steep discounts and vicious price wars.
The company attributed the decline in revenue and profit to a deep adjustment cycle in the baijiu sector, characterised by more rational consumption, pressure on pricing systems and rising inventory risks, alongside an ongoing reshaping of the competitive landscape.
Baijiu remains Vats’ core business, accounting for more than 90% of total revenue. In 2025, baijiu sales reached RMB 5.39 billion (about US$748 million), or 91.4% of total revenue. However, the segment was also the main drag on performance, with revenue falling 38.49% year-on-year and volumes dropping 45.10% to 4.35 million litres.
Vats Liquor Store’s performance reflects broader challenges in China’s baijiu distribution market. Weaker consumer demand and reduced business-related consumption have weighed on sales, while limited supply control by some producers has led to elevated inventories in distribution channels. The resulting oversupply has triggered price inversions in some brands, leaving distributors under pressure as higher volumes translate into thinner margins.
In 2024, the company also disclosed inventory impairment provisions, which further weighed on profitability. These provisions — set aside to reflect potential declines in inventory value — suggest that parts of its baijiu stock are facing devaluation pressure.
Wine shows relative resilience
By contrast, Vats’ wine business delivered a more stable performance.
In 2025, wine revenue reached RMB 402.6 million (approximately US$56 million), down 4.17% year-on-year. However, sales volumes rose 17.34% to 2.49 million litres, indicating good depletion under price pressure.
As a result, wine’s contribution to total revenue increased to 6.83% in 2025, up from 4.44% the previous year.
Regional and channel pressures intensify
Regionally, East China remained Vats’ largest market, generating RMB 2.44 billion (about US$339 million), or 41.35% of total revenue, though down 16.01% year-on-year.
E-commerce ranked second, contributing RMB 1.25 billion (around US$173 million), or 21.16% of total revenue, but saw a steep decline of 40.38%.
The sharp drop highlights intensifying price competition in online channels. Compared with more flexible market participants, authorised distributors such as Vats may have less room to engage in deep discounting or aggressive clearance sales, leaving them at a disadvantage in highly competitive environments.
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