Evaluation of Luzhou Laojiao's Youth-oriented Strategy and Digital Transformation as Support for Navigating Industry Cycles

Based on brokerage API and public online data, this report evaluates the support of Luzhou Laojiao’s youth-oriented strategy and digital transformation for navigating industry cycles.

1. Support from Youth-oriented Strategy (Strong)

• Product & Generational Alignment: Low-alcoholization adapts to consumer generations. The 38-degree Guojiao 1573 has reached a 10-billion-yuan scale, accounting for approximately 50% of the Guojiao 1573 series [13][15], proving real demand support for high-end low-alcohol flagship products. The company continues to launch lower-alcohol products (28-degree, etc.) and expand scenario-based and online instant retail [6][8][13], targeting Gen Z’s preferences for “light intoxication and diversified scenarios” and aligning with the industry’s generational shift trend.
• Channels & Content: Online instant retail and content matrix (short videos/live streams/interactions) are effective tools to capture incremental scenarios. Emerging channels recorded a 27.55% year-on-year revenue growth and a 4.52 percentage point gross margin increase in the first half of 2025 [8], with online penetration and sales momentum already verified.
• Industry Trends: The low-alcohol liquor market is expected to exceed 74 billion yuan by 2025 with a compound annual growth rate of approximately 25% [6][13], higher than the overall industry. The mid-to-high-end segment (300-800 yuan) is also regarded as a structural growth area [3]. Luzhou Laojiao has first-mover advantages in low-alcohol products and brand strength.

Risks & Limitations: The youth-oriented strategy has a lag from brand cultivation to revenue contribution; young groups have lower acceptance of baijiu, requiring continuous innovation and scenario solidification [2][3].

2. Support from Digital Transformation (Moderately Strong)

• Marketing System Transformation: The company promotes “consumer bottle-opening driven” digital marketing and advocates shifting from channel thinking to consumer thinking [7], achieving results in inventory management, precision marketing, and consumer base building. This sales-momentum orientation helps alleviate channel inventory and price inversion.
• Organizational Guarantee & Computing Power: The company established a digital transformation committee led by the chairman/general manager and built a computing power support system [7]. Online channel growth and instant retail synergy provide a digital foundation for scenario-based sales momentum and inventory turnover.
• Inventory & Price Background: Industry-level inventory pressure and price inversion remain high; industry inventory turnover is approximately 900 days, and price inversion is severe in the 800-1500 yuan price segment [2][5]. Digitalization can accelerate inventory turnover and price control, but it needs more time to take effect at the channel and terminal levels, and the effect remains to be seen.

3. Comprehensive Judgment on Cycle Navigation Capability (Supportable but Needs Time Verification)

• Fundamental Resilience: The company’s ROE is approximately 26.1%, net profit margin 42.11%, with stable cash flow and good liquidity [0], strong cost and expense control, providing a safety cushion for navigating cycles.
• Market Performance: Since early 2024, the stock price has fallen from approximately 172.87 yuan to approximately 119.39 yuan, with a significant maximum drawdown; currently in a volatile pattern, no clear reversal in technicals [0]. This indicates the market remains wait-and-see on cycle pressure.
• Industry Stage: The industry is in the mid-to-late stage/deep water area of the “distiller’s suffering period”, with both inventory and demand under pressure, and financial statements still being cleared [1][5]. Luzhou Laojiao has brand and channel momentum in high-end and mid-to-high-end segments, but short-term performance is still constrained by macro demand and inventory cycles.
• Transformation Rhythm: Youth-oriented and digital transformation require medium-to-long-term cultivation. Short-term focus is on “stable performance, structural adjustment, inventory clearance”; mid-term opens up increments through low-alcohol/youth-oriented strategies and improves sales momentum and channel health through digitalization, which is expected to recover elasticity faster in the latter half of the cycle.

Conclusion

• Management’s judgment on the “era of personal baijiu consumption” and the contraction of consumption scenarios aligns with industry data trends (shrinking government-business demand, high inventory pressure, price inversion, etc.) [1][2][3][5].
• The youth-oriented strategy, relying on 10-billion-yuan low-alcohol flagship products and scenario/channel innovation, has formed a substantial incremental direction and provides strong support for navigating cycles; however, continuous investment and scenario solidification are needed to resist short-term macro demand and inventory cycle shocks.
• Digital transformation plays a key role in improving sales momentum, inventory, and channel health; its effect is more significant in the medium term, and it still needs time to penetrate channels and terminals in the short term.
• Overall, if the company maintains low-alcohol matrix innovation, accelerates online/instant retail, and continues to improve terminal sales momentum over a 2-3 year period, it is expected to recover elasticity faster after fundamental and technical repairs; however, the industry’s deep adjustment period in 2025-2026 will still constrain performance and valuation.

References
[0] Jinling API Data
[1] Sina Finance - Annual Consumption Observation: 2025 Young People Haven’t Abandoned Baijiu (https://finance.sina.com.cn/tech/roll/2025-12-21/doc-inhcpmap5821198.shtml)
[2] 36Kr - Distillers Still Stuck on “Youth-oriented Strategy” in 2026 (https://m.36kr.com/p/3598195273614086)
[3] NetEase - Baijiu Industry Shifts from Uphill to Fork in the Road (https://www.163.com/dy/article/KHPRJTA00530KOKA.html)
[4] Haoyanbao - Food and Beverage Industry Data (https://www.appletree.fund/sydata/)
[5] Caijing.com - “Disappointed” 2025: Baijiu Industry Probes Bottom in Deep Water Area (http://industry.caijing.com.cn/20251222/5131933.shtml)
[6] Xinhuanet - Lowering Alcohol Content to Break Through: Can Low-Alcohol Liquor Support the Industry’s Future? (http://www.xinhuanet.com/food/20250714/39ab5721920a0a4a549fd42a1687e85a08/c.html)
[7] Sina Finance - 2025 “Digitalization Implementation Year”: How Will Luzhou Laojiao Do It? (https://finance.sina.com.cn/stock/relnews/cn/2025-01-10/doc-ineepefw2409145.shtml)
[8] Caifuhao - Luzhou Laojiao’s Path of “Stability” and “Solidity” (https://caifuhao.eastmoney.com/news/20251225084612997494440)
[9] Tencent News - Baijiu Prices Fall Again (https://news.qq.com/rain/a/20251130A071LO00)
[10] Sohu Finance - Shanxi Fenjiu Ranks 4th in Hurun Food Top 100 (https://m.sohu.com/a/968635798_395109)
[11] Luzhou Laojiao ESG Report PDF (http://www.lzlj.com/upload/file/20250521/1747789376467027450.pdf)
[12] Caitongshe - 2025 Food Industry Trends (Source: Global Launch Platform, General Industry Trends)
[13] Caifuhao - New Launch of Luzhou Laojiao’s 38-degree Guojiao 1573 (https://caifuhao.eastmoney.com/news/20251224183617775913110)
[14] Caifuhao - Luzhou Laojiao Builds Low-Alcohol Liquor Matrix (Same Source)
[15] Caifuhao - Luzhou Laojiao’s Low-Alcohol Liquor Matrix and Gen Z Activation (https://caifuhao.eastmoney.com/news/20251225084612997494440)