Behind the dual growth in revenue and net profit, Qingdao Beer’s mid-to-high-end market faces a siege

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Interface News reporter | Zhang Rui

Interface News editor | Ren Xuesong

On the evening of March 26, Qingdao Beer (600600.SH) released its 2025 annual report. During the reporting period, the company achieved operating revenue of RMB 32.473 billion, a year-on-year increase of 1.04%; net profit attributable to shareholders was RMB 4.588 billion, a year-on-year increase of 5.6%; net profit attributable to shareholders after deducting non-recurring items was RMB 4.13 billion, a year-on-year increase of 4.53%; net cash flow from operating activities was RMB 4.593 billion, a year-on-year decrease of 10.91%; EPS (fully diluted) was RMB 3.3632.

Although profit performance lagged behind forecasts from many brokerages, against the backdrop of a 1.1% year-on-year decline in industry production, Qingdao Beer’s sales still grew against the trend by 1.5% to 7.648 million kiloliters. It outperformed the overall market on the sales front. At the same time, its profit growth rate was significantly higher than its revenue growth rate, which also shows that the company still maintains the ability to improve profitability.

In terms of shareholder returns, Qingdao Beer plans to distribute approximately RMB 3.206 billion “cash gifts” to shareholders, with cash dividends of RMB 2.35 per share (including tax). The dividend payout ratio is as high as 69.87%. A dividend ratio close to 70% for two consecutive years places it at a relatively high level among A-share consumer goods companies, to some extent reflecting the company’s steady cash flow position.

However, with the backdrop of double growth in both revenue and net profit, how exactly is Qingdao Beer’s growth “in substance”? The widening loss in the fourth quarter and the setbacks in the mid-to-high-end market provide two perspectives.

Source: Qingdao Beer official website

Fourth-quarter losses widen; offseason operations raise concerns

Looking only at the fourth quarter, the company’s net profit attributable to shareholders for the quarter was a loss of RMB 0.686 billion, further expanding compared with the loss of RMB 0.645 billion in the same period of 2024. Interface News reviewed prior-year financial reports and noted that from 2019 to 2025, Qingdao Beer has recorded losses in the fourth quarter for seven consecutive years.

The company’s gross margin in the 2025 fourth quarter was 24.72%, down 1.51 percentage points year-on-year, and also fell sharply by 18.84 percentage points quarter-on-quarter. By contrast, the company’s full-year gross margin was 41.84%, up 1.62 percentage points year-on-year. The stark contrast highlights the fragility of offseason operations: while the company achieved a gross margin increase through product mix optimization across the full year, this advantage was almost completely offset in the fourth quarter.

Liquor industry analyst Xiao Zhuqing pointed out that beer consumption is highly seasonal, with the fourth quarter being the traditional offseason. Qingdao Beer’s mid-to-high-end product structure upgrade mainly relies on the on-premise consumption channel (restaurants and night venues), leading to significant fluctuations in both production capacity utilization and gross margins during the offseason.

The fourth quarter is already the consumption offseason, and combined with factors such as pressure on on-premise channels and concentrated year-end expense spending, the losses are amplified. This also means that the profitability improvement achieved through product mix optimization has not yet been effectively converted into an ability to smooth out seasonal fluctuations.

Changes in contract liabilities provide another angle to observe. As of the end of 2025, Qingdao Beer’s contract liabilities were RMB 7.674 billion, down 7.68% from RMB 8.313 billion at the end of 2024. As a core leading indicator reflecting channel confidence, a decline in contract liabilities often means that distributors’ willingness to prepay for inventory replenishment cools down earlier, reflecting a slower pace of sell-through at the end market and increased pressure to clear inventory.

This is consistent with the company’s year-on-year decrease of 10.91% in net cash flow from operating activities in 2025 — the latter is precisely driven by changes in advance payments, which led to a year-on-year decrease in cash received from sale of goods. Offseason losses combined with a decline in channel confidence create a double test of Qingdao Beer’s operating resilience.

Source: Interface Picture

Mid-to-high-end growth faces headwinds; regional markets are squeezed from the north and south

If the losses in the fourth quarter reflect the fragility of Qingdao Beer’s seasonal operations, then competitive pressure in the mid-to-high-end market is about its long-term growth foundation.

In 2025, Qingdao Beer’s flagship brand sales grew 3.5% year-on-year to 4.494 million kiloliters. Sales of products above mid-to-high end grew 5.2% year-on-year to 3.318 million kiloliters. Based on these figures, the share of total sales is approximately 43.4%. The sales of white beer ranked first in the industry’s white beer category; the sales of the Classic series and the Ultra-high-end series reached record highs.

The company has continued to push on the product front, launching a number of new products throughout the year, such as light-dry (light dry) beer, jasmine white beer, and Sakura white beer, trying to hold its mid-to-high-end position through more granular product categories.

However, this growth in the mid-to-high-end space is encountering increasingly severe competition and encirclement.

For imported brands, leveraging China Resources Beer’s distribution network, Heineken’s sales in China grew by nearly 20% in the first half of 2025. In less than five years, China has risen to become Heineken’s second-largest market worldwide. Heineken has moved from traditional on-premise night-venue channels into mainstream channels such as restaurants and supermarkets, directly taking market share in regional markets like Fujian.

For domestic brands, Yanjing Beer has continued to step up product innovation and marketing, accelerating its penetration into the mid-to-high-end market. In the first half of 2025, the revenue share of mid-to-high-end products already exceeded 70%. Carlsberg China, meanwhile, relies on a “local brand + international brand” dual-track strategy. In the first half of 2025 alone, it rolled out nearly 30 new products, covering craft beer, beer with tea, and even non-beer areas. Its market share rose from about 6% in 2017 to 9% in the first half of 2025.

At the regional level, Qingdao Beer also faces a “squeeze from the north and south” situation. In the North, in traditional advantageous Yellow River region markets, although Qingdao Beer consolidates its core base through refined operations, it still needs to respond to Yanjing Beer’s continued expansion in North China and surrounding areas. In the South, the company must both deal with Carlsberg’s long-term deep cultivation in Southwest China and guard against the step-by-step encroachment by China Resources and Heineken in East China and South China.

In its annual report, the company candidly states that in strategic southern markets it needs “to focus on breakthroughs, deepen regional engagement, and steadily increase market share.” In Xiao Zhuqing’s view, under the current competitive landscape, “whoever can capture new scenarios such as convenience stores, community group-buying, and e-commerce livestreaming will win in the mid-to-high-end 2.0 upgrade.”

From the company’s own practice, it has maintained growth for years in the emerging channel of instant retail. This year’s first half, Meituan Flash Sales volumes grew 60% year-on-year. But this track is also a battleground for major brands, and whether it can truly be converted into substantive advantages for regional markets remains to be seen.

Source: Qingdao Beer official website

In addition, 2025 is a year of frequent management reshuffling for Qingdao Beer. At the end of 2024, Huang Kexing stepped down as chairman upon reaching retirement age, and was succeeded by former president Jiang Zongxiang. In May 2025, the board completed adjustments to the next term of senior management. Later that year-end, Qingdao Beer Group Co., Ltd. completed an increase in registered capital, from about RMB 1.34 billion to RMB 1.63 billion.

However, on the evening of the day the 2025 financial report was released, the company announced that its marketing president, Cai Zhiwei, resigned due to internal adjustments in work division, and Li Hui took over. Li Hui was born in 1978 and belongs to the company’s mid-career generation. He has previously handled work such as strategic investment, innovation marketing, and market development research, and has a background in digital transformation and marketing. A core executive appointed for less than a year leaving office on the day the annual report was released — regardless of the specific reasons — inevitably draws external attention to the continuity of the company’s marketing strategy.

In response, Xiao Zhuqing analyzed that 2024–2025 is the industry’s “big year for personnel changes.” Top liquor companies generally seek new development opportunities by adjusting leadership. This is a normal generational transition rather than strategic wavering.

Additionally, in October 2025, Qingdao Beer had announced its plan to acquire 100% equity interests in Jimo Huangjiu Brewery Co., Ltd. for RMB 665 million, attempting to enter the huangjiu sector to enrich its product line. But this diversification attempt ultimately did not materialize. The company later announced it would terminate the acquisition, because the delivery and closing prerequisites were not met, and the target company’s shareholders had multiple instances of asset freezes. The relevant shareholders were included in the list of persons subject to enforcement. Although the acquisition did not go through, to a certain extent this incident reflects the real obstacles Qingdao Beer faces in expanding into non-beer businesses, and it also indirectly shows the company’s cautious attitude toward risk control for acquisition targets.

In 2026, the questions Qingdao Beer faces are quite specific: how to improve profitability during the offseason, so that the effectiveness of the full-year structural upgrade is not swallowed up by losses in the fourth quarter? How to rebuild channel confidence and stop the decline in contract liabilities and turn it upward? How to hold its mid-to-high-end share under the competitive pattern of being squeezed from both the north and south, while also finding new incremental space?

In its annual report, the company states that it will fully push the “Five New” business — new products, new channels, new customer groups, new scenarios, and new needs — to expand markets both at home and abroad. At the same time, it will accelerate digital transformation and promote green manufacturing. As of the end of 2025, the company has created 30 national-level green factories and 36 factories that use 100% renewable energy electricity. Whether these arrangements can be transformed into core capabilities to get through the cycle still needs to be tested over time.

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