NEWS
KPMG RELEASED MID-YEAR BAIJIU OUTLOOK WARNING WIDENING MARKET POLARISATION
By Staff Reporter
29-6-2026
Credit: Unsplash
KPMG China and the China Alcoholic Drinks Association (CADA) jointly unveiled their 2026 Mid-Term Baijiu Market Report at the Sichuan International Wine Expo, flagging resilient growth for national premium liquor giants while warning that regional mid-tier distillers will face mounting margin pressure from new consumption tax rules.
Drawing on first-half industrial statistics, listed liquor firm financials and cross-channel consumer surveys, the report frames 2026 as a year of sharp structural divide for China’s baijiu sector, valued at over RMB 600 billion.
Early-year data signals mild recovery after a tough 2025 downturn. Twenty A-share listed baijiu firms recorded a mere 0.7 percent year-on-year revenue dip and a 1.75 percent net profit fall in Q1 2026, far softer than the steep double-digit declines seen across last year.
Large-scale baijiu output fell 1.7 percent annually, a marked improvement from 2025’s 7.2 percent contraction.
Yet the upturn is unevenly spread across the supply chain. More than 86 percent of surveyed producers reported squeezed profit margins, with just 5.9 percent posting margin expansion.
Regional mid-tier brands bear the heaviest strain, stung by a 1 June consumption tax policy that closes loopholes around affiliated sales subsidiaries, a long-used tactic to cut tax costs.
Without the pricing power of national top-tier brands, local distillers have little buffer against tighter fiscal oversight.
Premium national players including Kweichow Moutai, Wuliangye and Langjiu remain insulated amid the industry shakeout.
Steady demand for high-end gifting, banquets and collectible vintage lines sustains their cash flow and pricing stability, backed by expansive nationwide exclusive store networks and tight channel control.
Consumer shifts are reshaping competition. Rational spending has replaced indiscriminate premium buying, with cost-performance now the top purchase consideration for most buyers.
Casual small-scale social drinking and daily self-consumption have overtaken large corporate banquets as core demand drivers.
Young post-95 consumers and female drinkers stand out as key growth groups, boosting sales of mini-sized, low-alcohol baijiu formats for light social occasions.
Liquor operators are also accelerating cooperation with instant delivery platforms to capture on-demand retail traffic, supplementing traditional specialty stores and mainstream e-commerce.
Nongxiang (濃香）, qingxiang（清香） and jiangxiang （醬香）flavour profiles have solidified as the market’s three dominant pillars, with regional producers leaning into unique local taste identities to stand out amid crowded mid-price segments.
Meanwhile, premium baijiu exports hold steady across Hong Kong, Southeast Asia and North America, fuelling the liquor’s global cultural footprint.
Industry sentiment for the second half of 2026 remains subdued. Some 68.5 percent of polled manufacturers expect further market cooling, with only 2.1 percent forecasting a sharp rebound.
CADA Deputy Secretary-General Liu Zhenguo urged the sector to abandon reckless capacity expansion and cut-throat price competition.
The joint report outlined three sustainable growth paths: classic product iteration, upgraded offline retail spaces and scenario-targeted marketing.
KPMG analysts advised smaller regional distilleries to adopt niche branding, deepen local banquet channel coverage and streamline inventory to survive ongoing consolidation, predicting market share will keep flowing to top national brands through 2027.
(the writer can be contacted at: info@thewinechronicle.com)
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