Luzhou Laojiao Company Limited (stock code: 000568) released its 2026 semi-annual report on the evening of August 25, revealing a sharp decline in first-half performance. The company reported total revenue of 10.472 billion yuan, a year-on-year drop of 36.35%, while net profit attributable to shareholders stood at 4.339 billion yuan, down 43.37%.
The second quarter witnessed an even more dramatic downturn, with revenue falling 65.54% year-on-year to 2.447 billion yuan and net profit attributable to shareholders tumbling 79.45% to just 631 million yuan. The company attributed the disappointing results primarily to "reduced product sales volume during the period."
According to the financial report, revenue from mid-to-high-end liquor products, including the flagship Guojiao 1573, declined 38.86% year-on-year to 9.2 billion yuan, while other liquor categories saw a 10.27% drop to 1.211 billion yuan.
Where to Begin
The substantial earnings decline also pressured the company's cash flow. Net cash generated from operating activities fell 65.68% year-on-year to 2.082 billion yuan in the first half, while the net increase in cash and cash equivalents turned negative at -1.236 billion yuan, compared with a positive 1.786 billion yuan in the same period last year. Additionally, short-term borrowings surged to 3.002 billion yuan by the end of June 2026, up from zero at the end of 2025. The company explained that these borrowings were one-year bank loans obtained to support production and operations.
Industry observers widely believe that the sharp first-half decline, particularly in the second quarter, stems from a direct collision between Luzhou Laojiao's "volume control and price support" strategy and competitors' "price cuts for volume growth" approach. Since the second half of 2025, Luzhou Laojiao has firmly adhered to a "no price cuts for Guojiao 1573" policy. At the 2025 shareholders' meeting held in June 2026, management asserted that the current baijiu industry adjustment is not a short-term cyclical fluctuation but rather a long-term structural transformation, cautioning that the previous "price promotion" playbook cannot be simply replicated.
However, while Luzhou Laojiao chose to defend prices, competitors in the same price bracket took a different path. Fellow strong-aroma baijiu giant Wuliangye launched a "price reduction to secure volume" model in the first half. In May 2026, the wholesale price of the eighth-generation Wuliangye plummeted from 800 yuan per bottle at the start of the month to between 760 and 780 yuan, with terminal selling prices briefly dipping below 810 yuan, hitting a new low. Despite the price pressure, the "trade price for volume" strategy delivered notable results. At the June 2026 shareholders' meeting, management revealed that sales velocity (sell-through) of the core product eighth-generation Wuliangye achieved double-digit year-on-year growth, maintaining the top market share in the 1,000-yuan price segment and recording its best performance in three years.
The sauce-aroma baijiu brand Moutai 1935 also joined the "price reduction for volume" camp. At the start of 2026, Kweichow Moutai lowered the distributor payment price for Moutai 1935 from 798 yuan to 668 yuan per bottle. Following the cut, sales velocity improved markedly. Management at Kweichow Moutai revealed that no additional market supply would be allocated to Moutai 1935 in 2026, and as of August, channel distributors had completed nearly 80% of their contract execution plans, with healthy terminal sell-through.
Why Only These Outcomes Matter
The divergent strategies have yielded starkly different results: Wuliangye saw inventories rapidly decline and sell-through significantly recover; Moutai 1935 achieved stable pricing and volume after the reduction; while Luzhou Laojiao held its wholesale price floor but continues to face sales pressure and an ongoing earnings cleanup. In response to market skepticism, Luzhou Laojiao's management has demonstrated firm strategic resolve. At the aforementioned shareholders' meeting, management stated, "The perception that 'Guojiao won't sell without price cuts' is being broken, and Guojiao products maintain good sell-through even without price reductions." They characterized the volume-control and price-support approach as a strategic choice rooted in long-term development, adding, "Short-term market volatility cannot determine value; long-term competitiveness will gradually materialize over the next three to five years."
As of the close on August 25, Luzhou Laojiao shares were trading at 84.73 yuan, bringing its total market capitalization down to 124.7 billion yuan.