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Chongqing Brewery Sees Revenue and Profit Decline in H1, Investors Question Why It Lags Behind Yanjing U8
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Chongqing Brewery (600132.SH) faced tough questions from investors during a September 23 performance briefing, as it was the only one among China's top five domestic brewers to report declines in both revenue and profit in the first half of 2024. Revenue fell 2.98% year-on-year to 8.576 billion yuan, while net profit attributable to shareholders dropped 7.98% to 796 million yuan. CFO Chin Wee Hua attributed the results to weak on-premise consumption channels, a slower-than-expected economic recovery, and adverse weather. However, investors focused on internal issues, including declining advertising efficiency, pressure in the core Sichuan-Chongqing-Guizhou region (where revenue fell 7.48%), and sluggish growth of the flagship Wusu brand. Wusu's national growth rate was compared unfavorably to Yanjing's U8, which has surged from 100,000 kiloliters to about 900,000 kiloliters in five years. Management did not directly answer questions about Wusu's revival but listed marketing initiatives. The company's sales expense ratio rose to 16.4%, the highest among the five peers, as advertising spending increased 9.7% without driving proportional sales growth. Chongqing Brewery launched 49 new products in the half, including craft beer and non-beer categories, but has not disclosed their performance.
Source report
Chongqing Brewery (600132.SH) was the only company among China's five leading domestic beer producers to report declines in both revenue and net profit for the first half of 2024, according to a review by International Financial News.
On the afternoon of September 23, the company participated in the Chongqing Regional Listed Companies Collective Reception Day and Interim Performance Briefing.
Financial Highlights
| Metric | H1 2024 | Year-on-Year Change | |--------|---------|---------------------| | Revenue | 8.576 billion yuan | -2.98% | | Net profit attributable to shareholders | 796 million yuan | -7.98% |
External Factors Cited
Chin Wee Hua (Chen Weihao), Vice President of Finance, attributed the decline to:
- Weakness in on-premise consumption channels
- Slower-than-expected consumer recovery
- Adverse weather conditions
Internal Challenges Under Scrutiny
Beyond external factors, investors focused on internal operational issues, including:
- Declining efficiency of advertising spending
- Pressure in the company's core Sichuan-Chongqing market
- Slowing growth of key products
Pressure in the Core Sichuan-Chongqing Market
Chongqing Brewery divides its operations into three regions: Central, Northwest, and South. The Central region (Sichuan, Chongqing, and Guizhou) is the most critical market, contributing approximately 40% of total revenue.
In the first half of 2024, revenue from the Central region fell 7.48% year-on-year to 3.268 billion yuan, underperforming other regions and dragging down overall results. Board Secretary Deng Wei cited "intensified competition" as a factor.
Industry insiders noted that competitors such as China Resources Beer, Tsingtao Brewery, and Yanjing Beer have increased their presence in the Southwest region in recent years, squeezing Chongqing Brewery's mainstream products.
Regional Performance and Expansion Strategy
- Central region: Revenue declined 7.48%
- South region: Revenue declined 0.27%
- Northwest region: Revenue grew 0.68%
When asked about national expansion plans, management stated they would focus on new growth opportunities, actively expand modern trade and e-commerce channels, and develop instant retail channels.
Rising Marketing Costs
Chongqing Brewery's sales expenses increased 5.23% year-on-year to 1.403 billion yuan in the first half. Advertising and marketing expenses reached 703 million yuan, up 9.7%, but failed to translate into effective sales volume.
The sales expense ratio (sales expenses/revenue) rose to 16.4%, the highest among the five domestic beer companies.
In response to a question from International Financial News, management said the company would work to maintain reasonable expense levels going forward.
Wusu Growth Questioned Against Yanjing U8
Investors pressed management on why Wusu's national growth rate has lagged significantly behind Yanjing U8 in recent years, and asked what measures could restore Wusu's growth trajectory.
Wusu is one of Chongqing Brewery's most nationally recognized brands, with Red Wusu carrying the premiumization mandate. However, its growth momentum has gradually faded.
By comparison, Yanjing U8—a core product of Yanjing Beer—has seen sales surge from 100,000 kiloliters to approximately 900,000 kiloliters over the past five years. In 2024, Yanjing Beer officially surpassed Chongqing Brewery in total revenue.
Management did not directly address the questions but listed Wusu's marketing initiatives in the first half, including:
- Launching an 8.88L mega-pack with brand ambassadors
- Organizing various marketing campaigns
- Sponsoring the "Xinjiang Super League"
Product Structure Shifting Downward
Reliance on marketing alone appears insufficient to sustain Chongqing Brewery's premiumization and national expansion goals.
In the first half of 2024:
- Premium products: Revenue declined 1.53%
- Mainstream products: Revenue declined 5.69%
- Economy products: Revenue grew 3.17%
This indicates a downward shift in the product mix.
Seeking New Growth Drivers
As traditional beer product growth slows, Chongqing Brewery is accelerating efforts to find new growth areas.
According to its financial report, the company launched 49 new products in the first half of 2024, covering:
- 1L craft beer
- Low-alcohol and non-alcoholic beer
- Specialty flavored beer
- Non-beer categories such as energy drinks and fruit juices
The financial report has not yet disclosed sales volume or performance contributions from these new products.
Reported by Shui Furong
Source
国际金融报Regional
Part of this Story
Chongqing Brewery Pressured by Investors Over Slowing Growth, Underperformance vs. Yanjing U8