Vats Liquor Co., recognized as China’s first publicly traded alcohol distributor and a key partner for premium brands such as Penfolds and DBR Lafite, has reported a significant 81.1% drop in net profit for the previous year. The sharp decline comes amid inventory writedowns and changing consumer preferences that have heavily impacted the company’s bottom line.
According to the company’s 2024 annual report, operating revenue decreased by 6.5%, totaling RMB 9.46 billion (approximately US $1.30 billion). Meanwhile, net income attributable to shareholders plummeted to just RMB 44.4 million (US $6.1 million). This loss was particularly severe in the fourth quarter, when the company recorded a loss of RMB 123 million (US $16.9 million), nearly 94% of the first quarter’s profit, despite the traditionally strong Spring Festival period.
Management attributed the steep decline to provisions for inventory write-downs, an action taken to prevent the overstatement of assets and account for potential devaluation. Notably, even high-profile brands such as Kweichow Moutai faced price depreciation, prompting Vats to bolster its reserves in anticipation of future price volatility.
Vats Liquor, which holds a prominent position in China’s alcohol distribution market, oversees a wide-ranging portfolio that includes baijiu, wines, and spirits. The company distributes through an omnichannel network that includes its own stores, retail outlets, hypermarkets, group-buy platforms, and e-commerce channels.
Wine Sales: Decline Amid Global Offerings
In the wine sector, Vats saw a 13.7% decline in revenue, bringing in RMB 420 million (US $57.5 million) for the year. While volume grew slightly by 1.3% to 2.12 million liters, the overall drop in value reflects the broader market trend. Vats, however, remains one of the top wine importers in China, and its wine division continues to be a key element of the company’s business model, despite representing just 4.4% of total group sales.
The company collaborates with industry experts, including Master of Wine Alun Griffiths, to curate a portfolio of over 500 premium wine labels. Additionally, it partners with major global players like Treasury Wine Estates and Baron Philippe de Rothschild. Vats’ logistics network spans more than 40 warehouses covering 50,000 square meters.
Regionally, East China remained Vats’ largest market, generating RMB 2.90 billion (US $397 million), or 30.7% of the company’s total revenue. However, this was also a 9.2% decrease year-on-year, further reflecting the pressures on traditional sales channels.
E-Commerce: A Bright Spot in a Challenging Year
In contrast, Vats experienced a remarkable surge in its e-commerce segment, where sales jumped 72.9% to RMB 2.09 billion (US $286 million). This marked e-commerce as the company’s second-largest revenue stream, accounting for 22.1% of total sales. The rapid growth in online sales was largely driven by aggressive Spring Festival promotions and an increased demand across digital platforms.
This shift toward e-commerce underscores broader trends in China’s alcohol consumption habits. As Vats noted in its report, corporate alcohol spending is on the decline, while individual consumers and online shopping platforms are becoming more central to the market. In response, Vats is adapting its strategy to align with these changes, diversifying its retail channels, and navigating the competitive pressures of the digital age.
While the downturn in high-end sales poses challenges for the company, the rise in mass-market e-commerce sales offers a potential avenue for future growth. As Vats Liquor continues to pivot its approach to meet evolving consumer demands, it remains one of China’s key players in the alcohol distribution market.
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