China’s largest wine producer, Yantai Changyu Pioneer Wine Company Limited, has made headlines with a surprising financial loss in its third-quarter results for 2024.
This marks the company’s first loss since going public in 2000, signaling a significant downturn amidst a challenging economic environment. With a net loss of RMB 2.88 million (USD 403,864), Changyu’s performance reflects shifting consumer behavior and the broader economic uncertainty that has affected the wine market in China.
A Challenging Financial Picture
According to Changyu’s Q3 report, the company’s operating income fell by 19.11% year-on-year, totaling RMB 675 million (USD 94.79 million). This reduction in revenue, combined with a severe 95.44% decrease in net profit attributable to shareholders, underscores the challenges facing China’s wine industry. The company’s net profit for the quarter stood at only RMB 2.78 million (USD 390,384), revealing a drastic reduction in profitability.
The reported net loss for Changyu, RMB 2.88 million, reflects the company’s results when excluding non-recurring gains and losses such as investment income and government subsidies. This focus on operational earnings indicates a troubling downturn in the company’s core profit-generating capacity.
Decline in Demand and Tough Market Conditions
The timing of this loss is particularly notable, as Q3 has historically been a peak season for wine sales in China. The company’s revenue has been on a steady decline since early 2024, with total revenue over the first three quarters down 21.56% year-on-year, reaching RMB 2.197 billion (USD 308.52 million). Net profit similarly dropped by 47.25%, totaling RMB 224 million (USD 31.46 million). Changyu’s General Manager, Sun Jian, acknowledged these difficulties in May, describing the market environment as “unfriendly,” with no immediate signs of improvement.
Other Chinese wine companies are also feeling the strain. Tonghua Grape Wine Co., Ltd. posted a net loss of RMB 31.61 million (USD 4.44 million) for the first three quarters, while CITIC Niya Wine Co., Ltd. saw a dramatic 94.69% drop in net profit, with revenue also down by 36.92%. These results highlight the broader downturn in China’s wine sector.
Import Decline and Consumer Preferences
According to customs data, China’s wine imports have also faced pressure. Although total wine imports rose slightly following the resumption of Australian wine imports in March, the value and volume of imports from major wine-producing countries—France, Chile, Italy, and Spain—dropped significantly. For instance, imports from France, China’s largest source of wine imports, declined by 9.8% in value to USD 389.22 million and 15.9% in volume, totaling 38.40 million liters.
Changyu has traditionally benefited from strong brand recognition, but consumers are now more selective, comparing price and quality across local and imported wines. Industry analysts suggest that Changyu’s domestic offerings are facing stiff competition from imported wines, which often offer greater value for money. This shift in consumer behavior is a critical factor in the company's current challenges.
Inventory Woes and Competitive Pressures
High inventory levels have also compounded the issues facing Changyu. The company’s 2023 annual report shows a substantial increase in selling expenses, totaling RMB 1.24 billion (USD 174.64 million), a 20.49% rise over the previous year. The fourth quarter of 2023 saw an especially sharp increase in revenue, partly due to a strategic stocking approach in anticipation of the high season. However, high stock levels carried into 2024 have put additional strain on distributors, further hampering the company’s profitability.
Changyu’s distribution reach, though extensive, is not as dominant as Baijiu brands in China. The reentry of Australian wines has intensified competition, as these wines aim to capture market share from established domestic players like Changyu. The increased presence of Australian wines is likely to put further pressure on Changyu’s market position.
Looking Ahead
Changyu’s Q3 results present a challenging outlook for the company, particularly given its ambitious goal for 2024: achieving RMB 4.7 billion (USD 660 million) in operating income. With only 50% of this target met in the first three quarters, the company will need to make significant adjustments to regain momentum. Changyu’s extensive domestic and international operations may provide the flexibility to adapt, but the competition, evolving consumer tastes, and broader economic challenges remain substantial obstacles.
Source: Vino-Joy