On January 12, a gathering was held in Changsha, featuring the representatives of the leading aromatic liquor brand, Jiu Gui Jiu, known by its stock code 000799.SZThis event served not only as a reunion for various distributors but also as a platform to discuss the ambitious development blueprint for 2025. The overarching theme centered around solidifying their presence in the Hunan market, which serves as their primary operational base.

The timing of this gathering found Jiu Gui Jiu amidst significant personnel changes, as the company had recently appointed Cheng Jun, the former deputy general manager, to replace Zheng Yi as the new general managerCheng expressed a profound sense of familiarity, belonging, and duty as he addressed the attendees, signifying his readiness to step into this pivotal role.

During the meeting, several strategic directions were proposed, such as focusing on local market development, re-evaluating the product value chain, and nurturing consumer demographics

However, despite being the only publicly listed liquor company in Hunan, the actual market share of Jiu Gui Jiu in its home territory leaves much to be desired, indicating a need for deeper penetration.

The historical roots of Jiu Gui Jiu trace back to 1956, with the inception of the Jishou Distillery — the very first workshop-style distillery in Xiangxi Prefecture, HunanThis foundation laid the groundwork for what would later evolve into a brand synonymous with quality aromatic liquor.

In 1977, the Jishou Distillery launched its inaugural product, "Xiangquan." A significant turning point arrived in 1983, when the distillery collaborated with renowned artist Huang Yongyu to create the iconic packaging and brand name, Jiu GuiHuang's artistic touch not only imbued the brand with cultural significance but also marked a pivotal moment in the evolution of ceramic packaging for Chinese liquor.

Between 1988 and 2003, Jiu Gui Jiu embarked on a series of in-depth research initiatives, inviting experts like Qin Hanzhang and Zhou Henggang to refine and solidify the artisan standards of aromatic liquor

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This meticulous focus on craft eventually led to the formal recognition of aromatic liquor as China’s 11th national standard liquor type in March 2021, further solidifying Jiu Gui Jiu’s position as the leading brand in this category.

Despite its illustrious history, Jiu Gui Jiu struggles with a noticeable lack of influence within the Hunan marketIndustry statistics reveal a stark reality: about two-thirds of the local market share is dominated by national brands like Moutai, Wuliangye, Luzhou Laojiao, and Yanghe, alongside rising Hunan-based brands like Wuling and Xiangjiao vying for attention.

According to data from Dongfang Securities, Jiu Gui Jiu reported earnings of 849 million yuan in 2023, a mere fraction of the total 28 billion yuan market size for liquor in Hunan, reflecting a paltry share of only 3% of the provincial marketIn comparison, competitor Gujing Gong Liquor commands a remarkable 30% share in Anhui, with Yanghe and Jin Shiyuan accounting for 23% and 15% respectively in Jiangsu

This disparity underscores the limited regional impact that Jiu Gui Jiu wields, despite its prestigious status as a representative of Hunan liquor.

Frequent personnel changes within the company have raised eyebrows and drawn criticism, with many observers pondering the correlation between this instability and Jiu Gui Jiu’s sluggish performance in recent yearsCurrently, the largest stakeholder in the company is China National Cereals, Oils and Foodstuffs Corporation (COFCO), holding a 31% share, while other key shareholders are primarily investment funds, none exceeding a 5% stake.

Since its debut on the stock market in 1997, Jiu Gui Jiu has seen significant turnover within its upper managementThis includes several distinct phases, such as the Xiangquan era from 1997 to 2002, the Success era from 2003 to 2005, the Zhonghuang era from 2006 to 2014, and the current COFCO era starting in 2015.

Post COFCO takeover in 2016, Jiu Gui Jiu has seen three different chairpersons and three general managers, indicating a substantial turnover rate averaging just three years per leadership position

The vice general manager role has also been subject to frequent changes, with four individuals being appointed since April 2020. The latest leadership shuffle occurred early in 2024 when Gao Feng was appointed chairperson, with Zheng Yi briefly taking over as general manager before reverting back to his previous vice-chairman role, allowing Cheng Jun to return as general manager.

Insiders believe that this persistent cycle of leadership changes may be a crucial factor in the company’s declining performanceFor instance, in the first three quarters of 2024, Jiu Gui Jiu reported revenue of 1.191 billion yuan, plummeting 44% year-on-year, with net profit down 88%, marking a stark low in profits since 2015.

Under Gao Feng's leadership, the company's strategy appears to be shifting from nationwide expansion to a concentrated focus on the Hunan marketSince Cheng Jun’s return, efforts have been made to build relationships with local partners, pushing for deeper engagement within the Changsha market

Recent reports revealed Cheng’s commitments to supporting distributors in leveraging resources and deepening cooperation in Hunan.

Jiu Gui Jiu has categorized its products into three main lines: the Neican series targeted at the high-end market; the Jiu Gui series catering to the mid-tier consumers; and the Xiangquan series aimed at the budget-conscious consumer segmentEach category is designed to cater to varying consumer expectations while still aligning with the company's market strategy.

However, in recent years, these product lines have experienced significant declinesFor 2023, sales revenues for each of these series fell sharply — Neican series by 38%, Jiu Gui series by 27%, and Xiangquan series by a staggering 68%. The downward trend continued into the first half of 2024, with further declines of 61% for Neican, 30% for Jiu Gui, and 18% for XiangquanFinancial data points to a persistent challenge, with total revenue for Jiu Gui Jiuyuan in early 2024 amounting to only 1.191 billion yuan.

The company cites several competitive challenges such as the sluggish overall industry demand and a shrinking appetite for mid-to-high-end liquor products

Additionally, factoring in weaker cash return tendencies from distributors, increased promotional costs, and a lag in adapting their marketing model to fit market changes, the company faces immense pressure on its profitability.

As of the third quarter in 2024, Jiu Gui Jiu holds contract liabilities of 200 million yuan, having decreased by 30% from earlier in the same year, exhibiting a contraction in their operational scopeAddressing this decline appears to be a priority for the newly appointed management team.

Engagements with investors have revealed plans to boost local market performance in Hunan by adopting a more consumer-centric approach through event-driven activities and promotionsCheng Jun underscored that progress has been made over the past year in cultivating consumer relationships and enhancing sales, laying the groundwork for a more robust performance in 2025.

As the company moves into 2025 under the dual leadership of Gao Feng and Cheng Jun, stakeholders are keen to see if this year indeed marks a turning point in Jiu Gui Jiu's decline, reviving the fortunes of a brand that has long been an emblem of Hunan’s liquor industry.