The Premiumization Strategy Saw Outstanding Results, and Brand Reputation Steadily Escalated

HONG KONG SAR – Media OutReach Newswire – 26 March 2024 – ZJLD Group Inc. (“ZJLD” or the “Company”, together with the Company’s subsidiaries, collectively the “Group”) (SEHK stock code: 06979. HK), an outstanding representative in the Chinese baijiu industry and the first baijiu company listed in Hong Kong Stock Exchange, is pleased to announce its annual results for the fiscal year ended December 31, 2023 (“FY2023” or the “Year”).

The key financial and business highlights are as follows:

• The flagship brand of the Group, Zhen Jiu, in the sauce-aroma baijiu category, ranks as the fourth-largest sauce-aroma baijiu brand in China, with the fastest growth rate in terms of its 2023[1] revenue. Zhen Jiu contributed around 65.2% to the Group’s total revenue during the Year, representing a year-on-year increase of 19.9%. This growth can be attributed to the overall increase in revenue across various product price segments under the Zhenjiu brand. Additionally, the quality of the distribution network has been significantly enhanced, leading to increased contributions from distributor partners and retailers.
• The increase in gross profit margin was primarily due to the strategic optimization of the Group’s product portfolio. This has effectively boosted the revenue contribution of deluxe baijiu products and products with higher gross profit margins in the same price range. As the production capacity expanded, the Group gradually replaced third-party procurement with self-produced base liquor, significantly reducing unit costs.
• To express appreciation for the extensive support from our shareholders, the Board of Directors proposes a distribution of a final dividend of HK$0.18 per ordinary share, amounting to approximately HK$610 million in total.

Grasping the Opportunities to Transform and Upgrade in the Sauce-aroma Baijiu Market to Achieve Sustainable High-quality Growth

During the Year, the consolidation further increased in the competitive landscape of the baijiu industry. To cope with the transition from steady growth to high-quality growth in the premium sauce-aroma baijiu industry, the Group has fully embraced the market opportunities brought by the trend of market integration in the premium segment of the baijiu market. The Group formulated a clear strategy focusing on the four critical elements of the baijiu market: brand, production capacity, distribution channels, and talent. It has traversed the cycle and achieved sustainable, high-quality growth. In this regard, the Group has continued to optimize its product structure, expanding its product portfolio from deluxe to premium and above tiers and increasing the revenue contribution from premium baijiu products with higher gross profit margins within the same price range. At the same time, the Group further optimized the development of mid-priced baijiu products to meet the market demand for affordable and quality baijiu products.

The Group’s baijiu research and development team collaborates with professional institutions to develop iconic formulas by implementing strict control measures in the base liquor brewing process and improving brewing techniques to activate the ultimate flavors of its baijiu products. Regarding production capacity, the Group has actively invested in enhancing its base liquor production capacity and further improving its storage capabilities for premium base liquor. During the Year, the Group allocated more resources to promote sell-through and sell-out. This includes utilizing an immersive promotional strategy, advancing a multichannel sales network, maintaining healthy inventory levels at the distributor end, and keeping a close eye on sales performance to ensure optimal distribution and sales efficiency. As a result, the Group recorded an increase of approximately RMB840 million in gross profit from baijiu product sales during the Year, with a gross profit margin improvement of about 2.7 percentage points compared to the corresponding period in 2022.

ESG Achievement Recognized by the Industry and Committed to Pioneering in the Baijiu Industry

There has been growing attention to environmental, social, and governance (ESG) issues in recent years across various sectors. As one of the earliest adopters of ESG initiatives, the Group has internally established its governance frameworks and guidance and formulated a standardized ESG management and assessment system. Since 2022, the Group has identified four primary strategic objectives and over 300 ESG enhancement plans, covering energy and water conservation, green packaging, quality and safety, employee care, and rural revitalization. The Group had completed over 150 ESG management and enhancement initiatives by the end of 2023, surpassing its strategic objectives in environmental governance ahead of schedule and gaining recognition from all walks of the community.

In December 2023, the Group received an “AA” ESG rating from Wind, a leading financial information data provider in mainland China. The Group was also recognized as one of the “Top 100 Best ESG Practices” among all listed companies in Greater China for 2023, being the only baijiu company in the Greater China region to make the list. In addition, the Group’s brand, Zhenjiu, was rated as a national-level Green Factory and was selected as one of the five baijiu companies in the “Outstanding Cases of Corporate Social Responsibility of Chinese Private Enterprises (2023)” and featured by People’s Daily for its ESG-related practices on several occasions. The Group’s significant achievements in various ESG initiatives will be further strengthened by enhancing its ESG-related risk monitoring and control capabilities, aiming to solidify its position as a pioneer in ESG practices within the Baijiu industry.

Create a New Brand Image to Consolidate Development Potential and Enrich Visibility

The baijiu industry is shifting its growth model from extensive and explosive expansion to a focused and high-quality development, with market segmentation concentrating around top-tier brands. Branding is the core of distinguishing and standing out from the rest in this competitive landscape. Throughout the Year, the Group has made significant investments in brand promotion. The Group’s brand, Zhenjiu, has combined the visualization of baijiu products with the intangible cultural heritage of “Tian-tsui” (點翠 or “dotting with kingfishers”) and launched a new brand image promotion strategy. The brand has been prominently showcased in major airports, high-speed railway stations, and city LED screens through an all-rounded, three-dimensional communication approach. Furthermore, the brand advertisements have been broadcast during the prime time slot on China Central Television (“CCTV”), creating a brand-specific symbol with unique characteristics of “Zhen.” During the Year, Zhenjiu was selected as one of the “2023 China Brand Innovation Cases”, becoming a model for brand development. Leveraging its vigorous brand strength, Zhenjiu has consecutively ranked higher in the “Hurun Most Valuable China Brands” for two consecutive years, climbing 31 spots with a 20% increase in brand value.

Mr. Wu Xiangdong, Founder and Chairman of ZJLD Group, stated, “In 2023, despite the challenging macroeconomic and capital market conditions, ZJLD Group successfully listed on the Hong Kong Stock Exchange on 27 April and completed Hong Kong’s largest IPO of the year. It is also the first baijiu company to have listed in nearly eight years. Over the years, the Group has always adhered to seven principles: wholeheartedly brewing fine baijiu; meticulously perfecting products; entrenching in culture to build brands; developing channels with sincerity; elaborately orchestrating immersive experiences; genuinely and thoroughly operating the business; and courageously shouldering responsibilities to prosper. It is through these principles that we have been able to gain a solid foothold and steadily progress in the fiercely competitive baijiu industry. Looking ahead to 2024, we will continue to put in sufficient efforts to brand building, product competency, channel management, regional expansion, and organizational structure to be well-prepared to encounter various challenges, fully engage in our work, and strive to repay the trust and support of our investors.”

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The issuer is solely responsible for the content of this announcement.

About ZJLD Group Inc.

Zhenjiu was established in 1975 in Zunyi, Guizhou, China’s primary production area of sauce-aroma baijiu. In 1988, it was honored with the Silver Award of the National Quality Award at the 5th National Wine Appreciation Conference. It is one of the “Three Great Sauce Flavor Brands in Guizhou”, along with Moutai and Xijiu. In the same year, it was approved by the Protocol Department of the Ministry of Foreign Affairs, the Communication Department of the Ministry of Economy and Trade, and the Great Hall of the People Management Bureau to become one of the four baijiu brands served at state banquets.

ZJLD Group Inc. is a leading baijiu group in China that is devoted to offering baijiu products, including sauce-aroma, mixed-aroma, and strong-aroma, with sauce-aroma being its core. In terms of revenue in 2023, the Company was deemed the third-largest private baijiu company in China, according to Frost & Sullivan statistics. The Company operates four baijiu brands in China, including Zhenjiu, Lidu, and two leading regional names, Xiangjiao and Kaikouxiao. ZJLD prides itself on inheriting the time-honored baijiu-brewing techniques and reinvigorating them to develop iconic recipes and classical flavours. It strives to create a wide variety of aromatic and mellow baijiu products to meet the diverse preferences of consumers, seize broader market opportunities, and promote traditional Chinese baijiu culture.