From ¥10B to its first loss: VATS met the baijiu winter

VATS Liquor, founded in 2005, listed on ChiNext on January 29, 2019 — China's first listed liquor-distribution company. The model was a franchise chain selling authenticated premium baijiu, holding the inventory itself. Revenue climbed from ¥3.738 billion in the first listed year to ¥10.121 billion in 2023, the first liquor chain past the ¥10 billion line. The bet was that China's banquet and gifting spirits would keep their price.

The winter arrived in 2025: Mid-Autumn and National Day baijiu demand fell 20–30% year on year, industry inventory stretched to about 900 days of turnover, and the retail price of Feitian Moutai dropped 36.15% from 2022, channel prices breaking below ¥2,000. FY2025: revenue ¥5.895 billion, down 37.7%; a loss of ¥369 million — the first since listing, with only Q1 profitable. Baijiu, over 90% of sales, fell nearly 40% to about ¥5.3 billion, and the gross margin on it collapsed from 12.97% in 2022 to 4.90%.

The loss was written: large inventory impairment provisions and goodwill impairment as prices fell below book value; inventory came down from ¥3.259 billion to ¥2.384 billion and operating cash flow turned positive at ¥752 million; headcount fell from 2,573 in 2022 to 1,447, selling expenses down 42%. Yet VATS opened 417 franchise stores against the trend — over 200 of the new VATS Select format — and set a 2026 target of 1,000 more Select doors, more proprietary brands, and a shift from distributor to brand operator.

VATS kept opening 417 franchise stores against the trend, betting on proprietary brands and a shift from distributor to brand operator, despite a first loss of ¥369M.

A distributor holds inventory of a falling asset: as Moutai's price slid, stock bought higher had to be written down, and baijiu gross margin collapsed from 12.97% to 4.90%.

Demand vanished at the same time: banquet and gifting consumption fell 20–30% over the holidays, and industry inventory hit about 900 days — the whole channel was overstocked.

The moat was authentication in a branded world: when famous-baijiu prices invert, the certified chain's margin evaporates and what is left is the cost of the stores.

VATS grew to ¥10 billion holding premium baijiu inventory and selling authentication. When prices inverted, the inventory became a write-down: revenue down 38%, a first loss, gross margin 4.9%.

What remains is a leaner distributor with positive cash: ¥752 million of operating cash flow, inventory cut by ¥875 million, expenses down 40-plus percent, and 417 new doors opened into the wind. The 2026 plan pushes proprietary brands and instant-retail Select stores — a bid to stop being a price-taker on other people's labels. But the winter is industry-wide: 900-day channel inventory and falling famous-baijiu prices do not end when one distributor finishes destocking. Whether VATS can become a brand operator before the next impairment is the open question.