(Yicai Global) June 20 -- China's sales of distilled rice wine, also known as baijiu, began to falter in March despite a slight rebound earlier in the year after the country’s zero-Covid policy was lifted, and remain weak, according to a recent survey.

Sales were slower in the first six months than the same period last year and inventories higher, according to 51.3 percent of respondents in a poll conducted by the China Alcoholic Drinks Association and released yesterday.

Of those surveyed, 48 percent said their inventory pressures have increased, 36 percent said their cash flow is being squeezed and 64 percent said that market prices have inverted, meaning that they are spending more to buy stock than to sell it.

The inversion reflects growing panic in the market, said Cai Xuefei, general manager at consultancy Zhiqu. Inversion mostly happens to lesser known products, and it is not common among well-known brands.

The liquor market was focused on digesting existing stock and stabilizing wholesale prices in the first half, said Xiao Zhuqing, chair of a tech firm in Wuhan, central Hubei province.

The alcohol-drinking offseason after the Lunar New Year holiday, which fell in January this year, came earlier than in pre-pandemic years, the report said.

And the three main drivers of liquor consumption, namely business activities, bulk buys and banquets, vary in performance. Of the three, only demand from banquets was strong during the Labor Day holiday in May. This means baijiu sales channels will continue to have high inventories.

Demand for alcoholic drinks, such as baijiu and wine, remains quite weak overall, resulting in a reluctance by some retailers to re-stock, Wang Wei, a liquor wholesaler based in Tianjin, told Yicai Global. There will be a slight uptick in the Dragon Boat Festival that falls this weekend and the school summer holidays.

Most dealers are undecided over the baijiu market’s outlook in the second half. Some 51.4 percent of those polled are cautiously optimistic and 34.2 percent think it is necessary to be wary.

Editors: Tang Shihua, Kim Taylor