Dialogue with Shuijingfang General Manager Hu Tingzhou: The turning point in the Baijiu industry is not far away; the key lies in three things.

How Hu Tingzhou’s FMCG Experience at AI Hu Influences Shuijingfang’s Strategy

Three Key Events Determine When the Turning Point Will Come

A year after launching new approaches around branding, products, and channels, Shuijingfang General Manager Hu Tingzhou publicly reviews the progress of the company’s strategy. He believes that, although the industry is still adjusting, some key changes have already occurred.

When Hu took over Shuijingfang, the Baijiu industry was already in a turbulent “deep water” phase. Reflecting on the past year, he admits to Xiaoshidai that he faced unexpected challenges. While there is room for improvement in the company’s short-term performance, the overall pace of strategy implementation and key initiatives remains aligned with the original plan.

Recently, Hu Tingzhou had his first exclusive interview with Xiaoshidai since taking office, discussing the five-year strategic progress, review, boundaries between FMCG and Baijiu, Diageo’s support, and more. Let’s listen to his latest insights.

Structural Strategic Adjustments

As one of the “Six Flowers of Sichuan Liquor,” Shuijingfang is a representative player in the mid-to-high-end strong aroma Baijiu segment. Its museum, “Shuijing Street Distillery Ruins,” showcases 600 years of brewing craftsmanship, using rare old fermentation pits. Known as “China’s No.1 Baijiu Distillery,” it remains an active heritage site and a distinctive brand symbol.

For a long time, the company focused on a single brand, with core products like “Shuijingfang Zhen Niang No. 8” and “Shuijingfang Jing Tai Classic.” In the first three quarters of 2025, despite fluctuations, overall gross margin remained high.

Like many competitors, Shuijingfang has faced headwinds in recent years. With a sharp decline in business banquets and pressures from social inventory and price inversion, the 300-800 yuan mid-to-high-end brands have experienced stronger impacts. In contrast, high-end Baijiu has shown resilience due to its collectible value.

In assessing the company’s situation, Hu identified two main challenges:

First, the difficulty of executing a single-brand strategy across the entire price spectrum. Previously, the company relied on “Shuijingfang” to cover the 300–1380 yuan range. “A single brand finds it hard to effectively serve both the high-end and mass markets at the same time,” he explains.

Second, the restructuring of the Baijiu purchase decision chain. Hu notes that in business banquets, the buyers and drinkers are often separate, with limited decision-making power for consumers. As Baijiu consumption shifts toward social gatherings with friends and family, the decision authority returns to drinkers, and companies need to establish deeper emotional connections with consumers directly.

Based on these challenges, last year Shuijingfang clarified its strategic focus on branding, products, and channels. The company adopted a dual-brand strategy: “Shuijingfang” targets the mid-to-high-end 300–500 yuan segment, while a newly independent brand “First Workshop” focuses on the high-end above 800 yuan, emphasizing high-quality base liquor and craftsmanship to reinforce product value.

Hu explains that, given current more rational consumer behavior, the long-term trend of Baijiu’s high-end development remains unchanged. “This category has an ‘upgrade inertia’—as personal income increases, consumers tend to shift gradually toward more expensive, higher-quality products, and once accustomed to certain flavors, it’s hard to downgrade.”

“Our high-end volume is still far below leading competitors. The key is to steadily cultivate consumers, persist long-term, and gradually encourage repeat purchases of Shuijingfang’s high-end products,” Hu emphasizes. “Our goal isn’t to become the top high-end Baijiu brand overnight but to steadily achieve a breakthrough in brand premiumization.”

On the product front, to address the issue of similar bottle appearances causing price perception confusion, Shuijingfang has renamed its product lines to Shuijingfang Zhen Niang No. 8, Shuijingfang 18, and Shuijingfang 28 (not yet launched), strengthening consumer recognition of different core products.

In channels, during industry difficulties, Shuijingfang increased support for terminal stores, strictly controlled inventory within reasonable levels, and ensured fair profits for distributors and outlets.

According to Huachuang Securities’ January report, in the second half of last year, Shuijingfang continued cautious operations, avoiding inventory pressure during Mid-Autumn and National Day festivals, keeping channel inventory manageable. Feedback indicates that the core product “Zhen Niang No. 8” remains at a healthy level, and banquet scenarios performed well due to cost-performance advantages, laying a solid foundation for steady recovery.

Organizational “Sprint Capability”

Due to industry cycles and proactive strategic adjustments, Shuijingfang’s 2025 earnings forecast shows a projected revenue decline of 42% year-over-year to 3.038 billion yuan, and net profit attributable to shareholders down 71% to 392 million yuan.

Hu candidly states, “If the numbers are bad, they’re bad.” He acknowledges that performance is under pressure amid the industry-wide adjustment. The company’s strategic plan spans 3–5 years, with brand and product strategies at about 35–40% progress, and channel strategy at roughly 30%, slightly behind expectations. “It’s like encountering roadblocks during a run, needing time to find detours, but overall, the channel strategy remains aligned with the core direction.”

He admits there is room for improvement in execution, but the strategic direction remains clear and firm. Reflecting on recent efforts, Hu notes that during complex external conditions, the company prioritized stabilizing partner operations, which temporarily affected some long-term planning.

Meanwhile, in premiumization, the current product mix is skewed toward mid-to-high-end offerings, reflecting rational resource allocation based on operational realities. However, long-term, premiumization remains a clear strategic goal, and the company is increasing investment and improving efficiency. Operational systems are also being optimized to support higher-quality growth.

“2025 performance is affected by macroeconomic and policy changes, which were unforeseen. I believe the key is whether we can maintain our long-term commitment during tough times, and learn from FMCG industry best practices to ensure the right strategic direction,” Hu says.

Hu applies a “race” logic from FMCG to Baijiu. Over 20 years, he has worked at major FMCG companies like Procter & Gamble, Kodak, Pepsi, and Hennessy, and has indirectly engaged with Baijiu during his tenure at Yuyuan Shares.

“FMCG is like a relay race—you need to win every leg to ultimately succeed. It requires fast response, strong execution, and planning. Baijiu, on the other hand, is a marathon—pacing matters. You shouldn’t sprint at the start; you need room to adjust, which tests patience and perseverance,” Hu explains.

He believes that detailed planning, speed and execution, and consumer engagement are lessons Baijiu can learn from FMCG. At the same time, Baijiu must uphold long-termism—building brands, deepening products, and ensuring base liquor quality all take time, and rushing is counterproductive.

Based on this “race” analogy, Hu has systematically adjusted team management, emphasizing “strict assessment, strong support, and clear talent profiles.”

Specifically, to improve execution, Shuijingfang has implemented rigorous performance evaluations since last year, emphasizing results, and increased resource support. In the face of industry adjustment, the company is also clarifying future talent profiles, including skills in digital analysis, AI tools, and channel empowerment.

“Traditional Baijiu development is like a marathon—long-term focus is essential. But future industry development will demand higher short-term operational capabilities, such as timely planning, standardized execution, precise cost control, and focused scene creation,” Hu states. “The core of team building is cultivating versatile teams that can uphold long-term strategies while also responding swiftly to market changes.”

He predicts that future talent capabilities in Baijiu will evolve and integrate, but not solely through FMCG + Baijiu hybrid experience. Major companies are actively developing talent pipelines, and training methods will adapt to industry shifts.

Three Events Decide the Turning Point

After years of industry turbulence, market signals for recovery are eagerly awaited.

Regarding the upcoming Spring Festival, Hu notes that the overall market shows “improving differentiation,” with positive signs but no full recovery yet. Notably, the boom in catering and cultural tourism in third- and fourth-tier cities has boosted Baijiu consumption. Business banquets are somewhat recovering but have not yet returned to pre-pandemic levels.

As for the timing of the “turning point,” Hu prefers not to specify exact dates but mentions that investment banks generally expect it around 2026 or early 2027.

“The turning point is a result of industry development, not something to be forced,” Hu believes. Instead of passively waiting, companies should focus on three core tasks: deepening brand-consumer connections in new scenarios, innovating and differentiating products for various consumption contexts, and balancing old and new channels to motivate channel partners.

“The speed of advancing these three areas will directly determine when the industry turns. I believe, with the Chinese spirit of resilience, the turning point shouldn’t be too far off,” Hu concludes.

Despite recent industry softness, Hu emphasizes that Diageo, the major shareholder, maintains a long-term investment perspective, focusing on sustainable strategies and business models rather than short-term fluctuations. “As the world’s largest spirits company, Diageo respects Baijiu’s development characteristics and grants us full autonomy—this is invaluable support,” he says.

Diageo also provides multiple forms of support, including leveraging its global R&D to improve Shuijingfang’s quality and helping with international expansion. Hu reveals that, through Diageo’s distribution network, Shuijingfang has achieved good brand penetration in Southeast Asia and duty-free stores worldwide, laying a foundation for internationalization.

Currently, Shuijingfang is exploring overseas markets.

On one hand, due to high tariffs and taxes on foreign spirits, the company seeks local partnerships to address market expansion challenges. On the other hand, it plans to innovate products tailored to overseas consumption habits and scenarios, exploring solutions suitable for international consumers.

Three Major Industry Structural Changes

Looking ahead five years, Hu predicts three key structural shifts in Baijiu:

First, the reconstruction of consumption scenarios. Personal drinking, family gatherings, and social meetups will rapidly increase in importance, becoming core consumption scenes. “Business banquets may decline temporarily, while self-drinking in social settings will grow. This will push producers to adopt new channel strategies, like emphasizing instant retail, as younger consumers prefer purchasing through these channels,” Hu explains.

Second, a transformation in operational models. The importance of new channels will rise, and traditional channels will upgrade their capabilities. Overall, operational approaches will shift to focus on scenarios and consumer needs.

“Consumers of new channels like O2O, instant retail, and online platforms are mainly young people, representing a growing market segment. Traditional channels like tobacco and liquor stores tend to have older customers with more fixed habits,” Hu notes. As these younger consumers start drinking Baijiu and their purchasing habits differ from traditional consumers, this drives strong growth in new channels.

According to Shuijingfang’s 2025 third-quarter report, in the first nine months, revenue from new channels reached 562 million yuan, a 71.24% increase, accounting for 25% of total revenue.

Third, upgrading product solutions. Baijiu will shift from traditional aroma-based classifications to segmentation based on consumption scenarios and habits. Product portfolios will better match different drinking needs, such as products for young people’s cocktails and small sips.

Hu mentions that inspired by the rise of small bottles in Western spirits at convenience stores, Shuijingfang is considering launching smaller-sized products. “Young consumers have social and entertainment drinking needs but limited budgets. Small bottles meet their instant consumption needs at convenience stores and similar channels. This trend applies to Baijiu as well—we will develop products tailored for this scenario.”

From these insights, capturing the new generation of Baijiu consumers is a key focus for Shuijingfang’s adaptation.

“I don’t believe young consumers will reject Baijiu in the future. Research shows that as consumers age, they develop a sense of ‘life’s sediment,’ and in social gatherings, Baijiu consumption will gradually increase with age,” Hu states. He emphasizes that when exploring new consumer groups, the core question isn’t whether “young people drink or not,” but rather, when they develop Baijiu demand, which brands will they choose first.

Hu believes that historical experience shows Baijiu is a long-term, deep-paved industry. This was a major reason he decided to take the helm at Shuijingfang.

“Although business consumption may decline or fluctuate, long-term, Baijiu remains a highly valuable industry. Shuijingfang’s 600-year heritage, deep roots, and strong product quality are assets. The key now is to focus on brand, channel, and product strategies, and ensure organizational efficiency supports these three areas,” Hu says. “While challenging, I believe my past experience can help, and my capabilities align with the company’s needs.”

He concludes that Shuijingfang will follow industry structural changes closely, focusing on ‘scenario adaptation, consumer connection, and product innovation’ to become a leader in scenario-based consumption, brand premiumization, and operational refinement, securing a core position in the new industry landscape.