The tycoon from Hunan sells liquor and has a net worth of 34 billion.

In the 2024 Hurun Global Rich List, the low-key Wu Xiangdong sits firmly as the second richest man in the liquor industry with a fortune of 34 billion yuan. In 2023, the combined revenue of the two listed companies controlled by Wu Xiangdong, Huazhi Liquor and Zhenjiu Lidu, reached 17.2 billion yuan. However, the fate of the two companies is quite different.

In the liquor industry, private enterprises are already scarce, and those who can control two listed companies are even rarer. There are probably only Guo Guangchang and Wu Xiangdong.

To address the issue of industry competition, in July 2023, after changes in the equity of Jin Hui Liquor, although Guo Guangchang still indirectly holds shares in Jin Hui Liquor, he is no longer its actual controller. Currently, the only liquor listed company controlled by Guo Guangchang is Shede Liquor. Meanwhile, Wu Xiangdong still controls two listed companies related to liquor.

Wu Xiangdong is a low-key tycoon. He was born in Liling, Hunan. Interestingly, if you break down the character "醴" in his birthplace, it contains "曲," "豆," and the radical "酉," which happens to create a glass of wine. This seems to have destined Wu Xiangdong to have a connection with wine.

Having been in the liquor business for decades, Wu Xiangdong first created the sales legend of Jinliufu and then built two listed companies, Huazhi Liquor and Zhenjiu Lidu. The former is the "first A-share liquor circulation stock," and the latter is the "first Hong Kong-listed liquor stock," with a combined market value of 40 billion yuan.

Liquor's second richest man

There are many beverage industry tycoons, but in the liquor industry, due to the nature of the enterprises, there are not many super-rich individuals.

Wu Xiangdong is one of them. Although he rarely appears in public, his financial strength does not allow him to remain low-key.

The 2024 Hurun Global Rich List shows that Wang Junlin, the chairman of Langjiu, has a fortune of 72 billion yuan, firmly holding the top spot in the liquor industry. Wu Xiangdong, with a fortune of 34 billion yuan, ranks 690th on the rich list and is also the second richest man in the liquor industry.

In the 2023 Hurun Global Rich List (as of January 15, 2023), Wu Xiangdong's fortune was 23 billion yuan, ranking 955th. At that time, Zhenjiu Lidu had not yet been listed.

Huazhi Liquor was listed on the ChiNext board of the Shenzhen Stock Exchange on January 29, 2019. Looking back at 2023, the stock price of Huazhi Liquor fell by 40%.

It can be seen that with the listing of Zhenjiu Lidu in Hong Kong on April 27, 2023, Wu Xiangdong began a new wealth story, and the wealth snowball continued to grow.

As of the close of trading on April 26, the total market value of Zhenjiu Lidu was 35.174 billion Hong Kong dollars, approximately 32.56 billion yuan; the total market value of Huazhi Liquor was 7.44 billion yuan, with a combined market value of approximately 40 billion yuan for the two companies.

With a distillery in one hand and a liquor company in the other, in 2023, the combined revenue of these two listed companies controlled by Wu Xiangdong reached 17.2 billion yuan.

The 2023 annual report is the first annual report of Zhenjiu Lidu after its listing. In the annual report, Chairman Wu Xiangdong also had a message, in which he mentioned, "As the helmsman of Zhenjiu Lidu Group, I and the group have always taken brewing fine wine for consumers, spreading joy, and building a better life as our mission."

In 2023, Zhenjiu Lidu achieved operating income of 7.03 billion yuan, a year-on-year increase of 20.10%; adjusted net profit was 1.623 billion yuan, a year-on-year increase of 35.50%.

In terms of revenue and net profit scale, in 2023, Zhenjiu Lidu was comparable to Shede Liquor in the A-share market. Among the 20 listed liquor companies, Zhenjiu Lidu is considered a mid-tier player. However, such a growth trend in performance is considered good, whether compared to the entire listed liquor companies or companies of similar scale.

At the Zhenjiu Lidu investor briefing, Wu Xiangdong summarized Zhenjiu Lidu's 2023 as "strengthening the body and keeping fit."

Zhenjiu Lidu was formed by the integration and development of several liquor companies acquired by Wu Xiangdong, and it operates four main liquor brands: Zhenjiu, Lidu, Xiangjiao, and Kaikoushao.

In 2023, the revenue of Zhenjiu, Lidu, Xiangjiao, and Kaikoushao under Zhenjiu Lidu was 4.583 billion yuan, 1.1 billion yuan, 834 million yuan, and 385 million yuan, respectively, with year-on-year growth rates of 19.9%, 25.1%, 17.0%, and 13.6%.

Among them, Zhenjiu, a sauce-flavored liquor mainly targeting the mid-to-high-end market, contributed approximately 65.2% of the revenue; Lidu, a mid-to-high-end and fragrant liquor, contributed approximately 15.8% of the revenue; Xiangjiao and Kaikoushao, as regional brands in Hunan, contributed approximately 11.9% and 5.5% of the revenue, respectively.

A review of the financial reports shows that high-end products were the main driver of Zhenjiu Lidu's revenue growth in 2023, increasing by 33.1%. However, the revenue foundation of Zhenjiu Lidu still lies in mid-to-high-end and mid-to-low-end products. Among them, the revenue scale of mid-to-high-end products was the largest, at 2.754 billion yuan; mid-to-low-end products were 2.361 billion yuan; and high-end products were 1.916 billion yuan.

In 2023, Huazhi Liquor achieved operating income of 10.121 billion yuan, a year-on-year increase of 16.22%; net profit attributable to the parent company was 235 million yuan, a year-on-year decrease of 35.78%; and the net profit attributable to the parent company after deducting non-recurring gains and losses was 179 million yuan, a year-on-year decrease of 46.86%.

Wu Xiangdong's wealth is mainly supported by Zhenjiu Lidu.

From the "liquor game" that started with Jinliufu

It can be said that Wu Xiangdong's wealth comes from liquor, and liquor has also been a part of his life. From learning to drink, to selling liquor, to accumulating initial wealth through Jinliufu, and then acquiring liquor companies... now, holding two listed companies in the industry is truly rare.

It took Wu Xiangdong many years to acquire these two "first stock" companies. The starting point of the story goes back to the 18-year-old Wu Xiangdong.

The prospectus shows that Wu Xiangdong was born in 1969 and started working at the age of 18. He worked at the Agricultural, Industrial, Commercial and Trade Company in his hometown of Liling, Hunan for two years, and then went to study at the Hunan Foreign Trade School for two to three years before directly entering the Xinhualian Group.

The actual controller of Xinhualian Group, Fu Jun, is also Wu Xiangdong's brother-in-law. In Wu Xiangdong's eyes, Fu Jun is his "guide". The Xinhualian Group once covered various sectors including real estate, mining, chemical industry, ceramics, finance, and liquor. The prospectus states that Wu Xiangdong is one of the founders of Xinhualian Group, but he only worked there for 4 years.

Wu Xiangdong's involvement in the liquor industry began with a product called "Chuanjiu Wang" under the Wuliangye brand. Gradually, his "liquor empire" expanded. With the help of Fu Jun, Wu Xiangdong established his own brand - Jinliufu. The production of the first bottle of Jinliufu at the Wuliangye distillery at the end of 1998 marked the addition of a unique OEM model to the liquor industry.

Jinliufu commissioned Wuliangye for production (OEM), while Jinliufu was responsible for brand management and marketing. One party had production capacity and wanted to expand revenue, while the other had a demand for branding but lacked production capacity. As a result, Jinliufu became the first liquor brand in China to adopt an OEM model.

In an era where TV marketing could determine a company's performance, Jinliufu also mastered this wealth code and even brought in the then national football team coach Milutinović as the brand's spokesperson, launching the "Chinese people's lucky liquor - Jinliufu" advertisement.

From OEM to TV marketing, this was a clever move for Wu Xiangdong. According to a report by Huaxia Times, from 1998 to 2005, in just 7 years, Jinliufu's annual sales exceeded 2.9 billion yuan.

When Jinliufu's success shone in the liquor industry, Wu Xiangdong accumulated wealth and his ambitions grew. According to a report by Shandong Business Daily, starting from 2001, Wu Xiangdong began to extend his business upstream and embarked on an acquisition spree. By 2009, more than ten distilleries had been acquired by Wu Xiangdong, including Hunan Xiangjiao, Anhui Linshui, Shaanxi Taibai, Jiangxi Lidu, and Guizhou Zhenjiu.

Zhenjiu, located in Huichuan District, Zunyi City, has a close connection with Guizhou Maotai. In the 1970s and 1980s, Maotai conducted experiments in off-site production, which led to the creation of Zhenjiu - known as "off-site Maotai" and a "rare treasure in liquor".

While extending upstream, Wu Xiangdong also expanded downstream. In 2005, he established Huazhi Liquor Trading Company, engaging in liquor distribution business. In simple terms, Huazhi Liquor Trading Company is a major distributor, acting as a bridge between major liquor companies and consumers.

After Huazhi Liquor Trading Company and Zhenjiu Lidu went public, Wu Xiangdong's story with liquor took another step. Currently, Wu Xiangdong is the actual controller and chairman of the board of directors of Huazhi Liquor Trading Company and Zhenjiu Lidu.

The liquor business is not doing well

Like traditional liquor companies, Zhenjiu Lidu is engaged in the production and sales of liquor. Huazhi Liquor Trading Company is involved in liquor distribution business, mainly selling liquor for others. How has the liquor business been in the past year? Wu Xiangdong, who is at the helm of these two companies, probably has the deepest insight.

The liquor industry has generally faced issues of high inventory and price inversion over the past year. Zhenjiu Lidu has also encountered similar problems as reported in the media. Its annual report mentioned seeking to maintain the inventory held by distributors at a healthy level.

"The competition in the liquor industry is constantly changing. I believe that the four key elements for liquor companies to stand out from the competition are brand, production capacity, distribution channels, and team. The group has formulated clear strategies around these four key elements and is effectively implementing them with great determination and action," Wu Xiangdong said in his address in Zhenjiu Lidu's annual report.

The liquor industry has entered a new adjustment period. Liquor sales are not doing well, a problem faced by both large and small liquor companies. Under the trend of squeezed growth in the industry, profits are concentrating towards the industry giants, while the days are getting tougher for small and medium-sized liquor companies.

Whether Zhenjiu Lidu can "stand out" remains to be seen in the long run. However, it is true that the liquor business has not been doing well in the past two years. As the "gold medal service staff of famous liquor factories", Huazhi Liquor Trading Company has the most say in this matter.

In Huazhi Liquor Trading Company's revenue structure, liquor is the absolute mainstay, accounting for nearly 93% of the revenue in 2023, while wine and imported spirits accounted for 4.8% and 1.4% respectively. Both of these businesses saw a decline in revenue, with only liquor showing growth, at a rate of 20%. This was the main driving factor for the revenue growth of Huazhi Liquor Trading Company in 2023.

Wu Xiangdong has long proposed that Huazhi Liquor Trading Company should "permanently serve as the gold medal service staff of famous liquor factories". In other words, Huazhi Liquor Trading Company mainly cooperates with famous liquor factories to distribute their products, with liquor being the most important.

According to the prospectus, in the first half of 2018, the Guizhou Maotai series accounted for 46.52% of the revenue of Huazhi Liquor Trading Company, while the Wuliangye series accounted for 39.70%. In the performance briefing held in April 2021, Wu Xiangdong stated that the sales revenue of Maotai and Wuliangye still accounted for around 70% of the total revenue of Huazhi Liquor Trading Company.

In the past two years, Huazhi Liquor Trading Company has not disclosed the proportion of Maotai and Wuliangye in its revenue in its annual report.

In its annual report, Huazhi Liquor Trading Company stated that it has established long-term and stable cooperative relationships with well-known domestic and foreign brewing companies and large liquor distributors, distributing products including Feitian Maotai, ordinary Wuliangye, and other well-known liquor brands.

However, the profit margins for selling these premium products are not very high. According to the prospectus, in the first half of 2018, the gross profit margins for selling Feitian Maotai, 15-year and 30-year Maotai vintage liquors were 33.67%, 9.23%, and 10.31% respectively, while the ordinary Wuliangye had a margin of only 10.05%.

Higher profit margins come from products developed in cooperation with Huazhi Wine Company and famous wineries. During the same period, the gross profit margins of the Guizhou Maotai (Gold) and Lotus series customized by Huazhi Wine Company reached 56.84% and 45.65% respectively.

In its 2023 annual report, Huazhi Wine Company mentioned that it had cooperated with domestic wine enterprises to develop a variety of wines, including Guizhou Maotai (Gold), Lotus Wine, Diaoyutai Premium Wine (Iron Cap), Gujing Gong Jiu 1818, Hutou Fen Jiu, Xi Jiu Jiu Cang 1988 (Gilded), Jinjiu Gui, Jin Neican, and Laigao Huai's work 1989, among others. Huazhi Wine Company is the general distributor of these products.

In 2023, the gross profit margin and net profit margin of Huazhi Wine Company further decreased on the basis of a significant decline in 2022. According to data from Oriental Fortune Choice, from 2021 to 2023, the gross profit margins of Huazhi Wine Company were 20.96%, 14.03%, and 10.75% respectively, and the net profit margins were 9.22%, 4.29%, and 2.39% respectively.

Huazhi Liquor Company informed the market that in 2023, the prices of most liquor products are under pressure, and the company has proactively adjusted its product structure to meet market demand, resulting in an increase in the proportion of high-end liquor sales compared to the previous year. Due to changes in market demand, the gross profit margin of some high-end liquors has decreased. The promotion efforts for premium liquors have increased, leading to a year-on-year decrease in the gross profit margin.

Guoyuan Securities analysis indicated that the fluctuation of high-end liquor prices and changes in product structure have affected the gross profit margin of Huazhi Liquor Company. Further analysis by Dongfang Securities suggested that the proportion of Puwu liquor sales by Huazhi Liquor Company has increased, while the prices of eighth-generation Puwu liquor have inverted, putting pressure on the gross profit margin.

The poor sales of high-end liquor products by the company have naturally affected distributors. Additionally, in recent years, Guizhou Maotai has vigorously transformed its distribution channels, with the proportion of direct sales continuing to rise, which naturally also affects traditional distributors.

Although Zhenjiu Lidu and Huazhi Liquor Company are two separate businesses, they both operate in the liquor industry and are closely related to the cyclical changes in the industry.