High Margins, Still Losing: Grace Wine’s New Owner Problem

Grace Wine Holding Ltd, the Hong Kong-listed wine group behind Grace Vineyard, has released its results for the first half of 2026, its first interim report since Yang Lingjiang, founder of China’s largest alcohol retailer 1919, took control of the company.

But despite the change in ownership and an ambitious push beyond wine, Grace Wine remains in the red.

Since Yang’s takeover, the company has moved rapidly to broaden its business beyond its traditional wine operations, setting its sights on baijiu, whisky, craft beer, cocktails and other categories. Yet its latest financial results suggest those investments have yet to bear fruit: in the first half of the year, Grace Wine’s revenue still came entirely from wine.

More strikingly, the company remained loss-making despite achieving a gross margin of more than 75%.

Revenue Falls as Grace Wine Remains in the Red

Grace Wine reported revenue of RMB 15.86 million (US$2.34million) for the first half of 2026, down 15.4% year on year. Its loss for the period narrowed only marginally to RMB 2.90million (US$427,000), from RMB 2.90 million (US$428,000) a year earlier.

In its business review, the company attributed the challenging performance in part to weaker sales of premium wines. Total wine sales fell from 208,000 bottles to approximately 194,000 bottles, while its product mix shifted further toward entry-level wines.

Entry-level wines accounted for 74.8% of sales volume during the period, up from 68.1% a year earlier, but generated just 38.9% of revenue.

Premium wines told the opposite story. They accounted for only 25.2% of volume, down 6.7 percentage points year on year, but still generated 61.1% of revenue, although that share was also down 5.8 percentage points from a year earlier.

Despite declining revenue and a shift toward cheaper wines, Grace Wine managed to improve its gross margin substantially.

Gross profit reached RMB 11.95 million (US$1.76 million), while its gross margin jumped to 75.4%, from 67.2% in the same period last year.

But that unusually high margin was still not enough to push the company into profit.

Selling and distribution expenses reached RMB 4.86 million (US$717,000), while administrative expenses stood at RMB10.09million (US$1.49 million). Combined, the two amounted to nearly RMB 14.96 million (US$2.20 million), comfortably exceeding Grace Wine’s RMB 11.95 million in gross profit.

Administrative expenses were broadly unchanged from a year earlier and consisted mainly of staff costs, professional fees, rent and travel expenses.

The numbers expose the central tension in Grace Wine’s current business: its problem is not the profitability of each bottle it sells, but whether the business can generate enough gross profit to support its cost base.

Diversification Has Yet to Generate Revenue

Founded in 1997 and listed on the Hong Kong Stock Exchange in June 2018, Grace Wine is best known as one of the pioneers of China’s boutique wine industry. It operates wineries in Shanxi and Ningxia and has traditionally focused on the domestic Chinese market.

That identity began to shift following the arrival of Yang Lingjiang.

In December 2025, the 1919 founder acquired a 73.63% stake in Grace Wine through a wholly owned company, becoming the controlling shareholder of the Hong Kong-listed producer.

Yang wasted little time in expanding its ambitions.

In 2026, Grace Wine announced plans to venture into Chinese baijiu, whisky, Japanese sake, craft beer and ready-to-drink cocktails, significantly broadening a business that had historically revolved around wine.

The company subsequently registered a string of subsidiaries in Chengdu, extending its footprint into brewing and production, brand operations, B2B trading, premium alcohol sales, retail, e-commerce and data services.

In March, Grace Wine signed a strategic cooperation agreement with Renhuai, the Guizhou city at the heart of China’s sauce-aroma baijiu industry. The two sides said they would cooperate on product development, brand building and supply-chain integration.

As previously reported by Vino Joy News, Grace Wine deepened that push in July when a wholly owned subsidiary made a strategic investment in Wang Defang, a time-honored Guizhou baijiu brand.

For now, however, none of those moves appears to be showing up on the top line.

Grace Wine’s interim report shows that total group revenue was identical to the wine segment’s revenue from “sales to external customers,” indicating that all revenue generated during the first half still came from wine.

Wang Dehui, a Chinese wine marketing strategist and general manager of Shenzhen Zhide Marketing Planning Co., Ltd., said the figures suggest Grace Wine’s investments outside wine have yet to produce visible returns.

“If the Hong Kong Stock Exchange requires all revenue to be disclosed in the report, then this indicates that many of Grace Wine’s investments have so far generated no revenue and have therefore not reached the stage where they need to be publicly disclosed,” Wang said. “As a result, some of the initiatives it has undertaken may not yet be reflected in its financial statements.”

Could Diversification Dilute the Grace Brand?

The bigger question is not simply when these new businesses will begin generating revenue, but what Grace Wine’s diversification could ultimately mean for the brand itself.

Wang is cautious about the strategy.

He argued that there is little inherent problem with Grace Wine acting as an investor in other drinks businesses, provided those investments remain separate from — and do not undermine — the identity Grace has built as a premium Chinese wine producer.

But he warned against stretching the Grace name across too many categories.

“If Grace Wine is transformed into something that no longer represents a boutique winery, with all sorts of categories operating under the Grace name, then I am 100% pessimistic about it. There is no way that strategy can succeed,” Wang said. “Not only that, it would also dilute the brand value of Grace Wine itself.”

Investors initially appeared willing to bet on Yang’s transformation story.

Grace Wine shares had languished around HK$0.10 during the second half of 2025. After the acquisition was completed and trading resumed, the stock surged as much as 160%. On Jan 14,2026, it had climbed as high as approximately HK$0.97.

The momentum did not last.

Grace Wine’s shares subsequently retreated, falling as low as HK$0.32 intraday on the day the company released its interim results.

For Grace Wine, the market’s focus is now shifting from the excitement surrounding a new controlling shareholder and an ambitious diversification story to a more fundamental test: can those investments turn into meaningful revenue and profit without diluting the wine brand that made Grace valuable in the first place?