The truly next Maotai, with certainty even much higher than Maotai itself! Non-Maotai itself

Ask AI · Why Do All Things Follow Cycles and Cause Investors to Miss the Mark Again and Again?

This is the 1299th original article in the front line of new energy.

The Vanke 2025 annual report forecast has been released, showing a huge loss.

Although there had been some psychological anticipation of Vanke’s performance before, seeing a loss of over 3.55M still shocks me — the power of cycles is far more terrifying than we imagined. We must have a higher-dimensional understanding of cycles and assign greater importance to them, especially for value investors.

Why should value investors pay more attention to the power of cycles? Because they tend to overlook macro factors due to the business model or fundamentals of the company, believing either that their holdings are perpetual growth companies without cycles, or that the company is so excellent it can withstand cycles. The more confident they are, the easier they are to ignore the macro environment’s impact on the industry and ultimately on the company’s operations.

Remember, everything follows cycles — only the length varies. In China, there are basically no companies unaffected by macro conditions.

This is also one of the reasons why value investing in A-shares is more difficult than in U.S. stocks. China’s macro regulation is more frequent, and besides market economy factors, there are many other market-influencing elements, unlike in capitalist societies where capital decides everything. Moreover, American companies generally operate globally, smoothing out U.S. market cyclicality, while most Chinese companies derive revenue domestically, making them more susceptible to cycles.

01

Real estate is an excellent business model

For example, Vanke, which has been mired in difficulties these years — isn’t the business model good? Isn’t this company outstanding?

From a business model perspective, the real estate industry is definitely top-tier, even arguably the best, requiring very little startup capital — some impressive startups even need none. They can use bank financing to acquire land and land use rights, and even at the initial stage, they can get a “Commercial Housing Pre-sale Permit” to start selling, collecting buyers’ money before construction begins. It’s a light-asset operation mode. Years ago, many were able to “whitewash” with no capital, earning very handsome profits.

Plus, during China’s rapid economic growth, housing demand surged, and the real estate market boomed. As long as the houses were built, they sold easily — this business model was simply top-tier.

Therefore, whether in Hong Kong or mainland China’s reform and opening-up period, many entrepreneurs’ first major leap to wealth was through real estate. That’s why over the past 30-40 years, many companies expanded into real estate — because the money came so quickly. From a business model standpoint, it’s far better than manufacturing.

The collective collapse of the real estate industry and stocks has nothing to do with the business model. If it did, it would only mean the industry was too good — so good that companies forgot about risks, thinking it was forever prosperous, with no end to growth, forgetting the terrifying power of Chinese policy regulation (or globally, but China’s policies are more pronounced). Coupled with population growth stagnation and slowing economic growth, the illusion of forever rising housing prices vanished, demand froze instantly, and previously frantic land hoarders were plunged into hell — leading to the current situation.

Similarly, the high-end white liquor industry, which was once revered but has fallen from the altar in recent years — is even better in terms of business model. Of course, I’m talking about high-end white liquor; low-end white liquor is just ordinary consumer goods.

02

High-end white liquor is arguably the most top-tier business

In Leo’s view, the high-end white liquor industry is the most top-tier business model in the world, bar none! Of course, we’re talking about legal and compliant industries — not gambling, drugs, or tax evasion.

The upstream raw material is grain, which can’t be strangled. Once processed into finished products, it yields hundreds of times the value. The key is, this product doesn’t face inventory crises; the longer the aging, the more valuable it becomes. Some, like Maotai, even have financial attributes. Plus, the brand tone of high-end white liquor is built over many years through geography and cultural history, making it very scarce. After so many years, only a few high-end brands remain, with no room for expansion. To tell a story believed by most people takes decades or even centuries. White liquor also doesn’t cause boredom and has addictive qualities, ensuring steady demand.

Thus, the profitability of the high-end white liquor industry is terrifying — for example, Maotai’s gross margin approaches 100%, and its ROI over the past decades has exceeded 30%. Where else can you find such a business model?

But why has the secondary market performance of high-end white liquor been so poor in recent years?

Even Maotai, from its peak of 2,300 yuan in 2021, once dropped to over 1,300 — nearly halved. And brands like Yanghe have been cut almost in half again.

Why is such a top-tier business model struggling?

03

Everything follows cycles

It’s not just because of the recent excessive speculation in the secondary market and valuation normalization. In fact, the performance of high-end white liquor has also faced issues, and the fundamental reason is macroeconomic problems.

The downturn in the real estate sector directly impacted high-end white liquor, and because the real estate industry influences the overall economy, it further affected demand for high-end liquor — a double whammy.

Moreover, the decline in white liquor consumers and consumption volume has just begun to impact the high-end segment.

There has been ongoing debate about the shrinking white liquor consumer base. Opponents argue, “You’ll drink it when you’re old.”

But we must look at objective data: over the past decade, China’s white liquor consumption has significantly decreased. In 2025, the total output of white liquor enterprises above designated size was 13.58M liters, down over 12% year-on-year. From a peak of 3.55M liters in 2016 to 10M liters in 2025, a 74% reduction — evaporating about 10 billion liters of capacity.

Why did China’s white liquor output peak in 2016 and then decline, yet the industry experienced a super bull market in the following years? The reason is that high-end white liquor is a different story from other white liquors. Although total output decreased, the high-end segment benefited from China’s economic growth and income increases, leading to consumption upgrades. Market concentration continued to rise. In other words, after reaching a peak, high-end white liquor enjoyed several years of rising volume and price.

While market concentration in white liquor is still increasing, with CR5 over 55% and potentially reaching 80%, further growth becomes more difficult. Coupled with economic impacts and accelerated population aging, the high-end white liquor industry is inevitably losing its divine status.

So, looking back, cycles spare no one — everyone is subject to them.

Of course, this doesn’t mean high-end white liquor has no future opportunities. The economy has cycles, but China’s sustained growth is highly certain, so negative factors will gradually fade. The decline in white liquor consumers is real, but there are opportunities: as China’s economy continues upward, eventually reaching global leadership, and as Chinese culture’s influence grows worldwide, white liquor culture may gradually be accepted by other countries. When that happens, the consumer base will experience a new wave of recovery and growth.

All these factors carry uncertainties. The market is still hesitant to believe such macro narratives, making it difficult for the white liquor industry to reverse its decline — at best, a stage rebound. Even if the economy recovers and grows, without positive signals for consumption, or if white liquor’s overseas expansion proves feasible, the industry will struggle to break its historical peak.

Looking back, the secondary market has never been as affected by macroeconomic factors as in these recent years.

It’s precisely this historic change that makes every investor deeply realize: there are no forever bull stocks, only era-defining ones. When holding a company long-term, one must consider whether it belongs to this era or the last.

Therefore, previously we said the next Maotai would ultimately prove to be Maotai itself. After these years of macro environment upheaval, we realize it’s just a matter of time. There will always be a “next Maotai,” but it belongs to a different era — it depends on whether we can see it clearly.

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Author’s note: Personal opinions only, for reference.