Can Fenjiu’s Nationwide 2.0 and Channel Digitalization Break Its Profit Stagnation?

In the 2025 annual report, Shanxi Fenjiu reported ¥387.18 billion in revenue (up 7.52% YoY) while net profit barely moved to ¥122.46 billion (+0.03%). This divergence appears amid a structural downturn in the Chinese baijiu market, where 20 listed producers saw average revenue fall 5.90% and profit fall 6.93% in the first three quarters.

Revenue Growth vs. Profit Stagnation

The modest profit growth stems from sharply rising costs: operating cost reached ¥97.37 billion (+13.62% YoY), outpacing revenue growth; gross margin fell 1.35 percentage points to 74.85% and net margin dropped 2.27 points to 31.76%.

Sales expense rose to ¥41.02 billion (+10.07% YoY), with advertising alone at ¥26.19 billion (+14.12%). R&D expense increased 17.92%, largely funded by the channel‑digitalization program.

Nationwide 2.0 and the Four‑Level Network

Fenjiu’s “nationwide 2.0” shifts from broad‑scale expansion to deep market penetration. Provincial‑outside revenue hit ¥252.02 billion (+12.64% YoY), accounting for 65.09% of total sales and covering all prefecture‑level markets with over 1.2 million outlets.

The company now operates a four‑level network: >¥20 billion “fortress” markets, >¥10 billion “key” markets, >¥1 billion county‑level pilots, and >¥0.1 billion town‑level boutiques. By the end of 2025, there were 2,926 provincial‑outside distributors (net +71), extending the channel down to county and township levels.

Channel Digitalization – “Five‑Code Integration” and “Fenxiang Benefits”

The digital backbone consists of a “five‑code integration” system linking pallet, box, case, bottle and cap codes, enabling real‑time traceability from factory to consumer and curbing counterfeit or price‑warfare. The “Fenxiang Benefits” platform combines forward‑looking red‑packet incentives with reverse assessments, allowing precise rebate settlement via QR‑code redemption.

In 2025 the system intercepted hundreds of illegal price‑cutting incidents, kept core product pricing stable, and helped e‑commerce revenue reach ¥24.25 billion (+15.21% YoY), ranking first among baijiu flagship stores during the Double‑Eleven festival.

Emerging Tensions and Open Questions

Despite the digital tools, cash‑flow from operating activities fell 25.95% YoY to ¥90.14 billion, and pre‑received liabilities dropped 36.52%, indicating distributor payment pressure. Wholesale agents still contributed 93.5% of sales, while direct‑control channels (own stores, group‑buy, online) accounted for only 6.5%.

Critics argue that the four‑level network may simply shift inventory pressure from provincial distributors to weaker county and township partners, without truly boosting end‑consumer sales. The digital platform, while strong on B‑side control, offers limited B‑to‑C engagement; most consumer‑facing QR‑code interactions remain limited to simple red‑packet rewards rather than actionable demand generation.

Conclusion

Fenjiu’s 2025 report illustrates the broader baijiu industry’s transition from high‑growth to steady‑state competition. Its nationwide 2.0 and channel‑digitalization initiatives provide a valuable case study, but the ultimate test will be whether these investments can convert channel control into genuine sales activation and restore profit growth in a market dominated by inventory pressure and shrinking consumption occasions.