The baijiu industry entered a new phase of accelerated market consolidation in the first half of 2026, with 19 listed liquor companies generating combined revenue of RMB 197.894 billion, down 6.75% year-on-year, while aggregate net profit attributable to shareholders fell 8.39% to RMB 73.1 billion. The pace of decline has quickened notably: the median revenue growth rate slipped further from -12.84% in H1 2025 to -15.34%, while the median net profit growth rate deteriorated sharply from -24.63% to -40.10%.
At the industry level, the scope of losses is expanding. Only four companies recorded revenue growth in the first half, and just four posted net profit gains, while the number of firms with revenue declines exceeding 20% surged to seven, up from five in the same period last year. More strikingly, three listed liquor companies have already fallen into half-year losses — including Sichuan Swellfun Co., Ltd., Huangtai Liquor, and Golden Seed Wine.
Looking at the broader picture, the sector is showing three major trends. The first trend is a shift in growth model, moving from the previous "channel-pressuring growth centered on distributors" to "sell-through growth centered on consumers." Leading liquor companies are accelerating this transition — in the first half, Kweichow Moutai's direct sales channels (including self-operated stores and the i-Moutai app) accounted for 57.3% of its revenue. Contract liabilities (advance payments from distributors) across the 19 listed liquor firms totaled RMB 32.384 billion in H1, down 13.6% year-on-year, with 13 companies reporting declines. Industry bellwether Kweichow Moutai saw its contract liabilities plunge 42.3%, while Luzhou Laojiao and Yanghe also recorded substantial drops. Meanwhile, total industry inventory rose 12.4% to RMB 189.188 billion from RMB 168.325 billion. Three companies saw inventory growth exceeding 20%, led by Wuliangye with a 27.68% increase. Several firms — including Jinshiyuan, Huangtai, Yili Te, Gujing Gongjiu, and Luzhou Laojiao — experienced double-digit inventory growth alongside revenue declines.
The second trend reflects the dual squeeze of weak demand and intensifying competition, as liquor companies face "falling gross margins plus rising expense ratios," with net margin declines generally outpacing gross margin erosion. In H1, 12 companies saw gross margins contract, including heavyweights like Kweichow Moutai, Shanxi Fenjiu, Luzhou Laojiao, and Yanghe. Net margins declined at 16 firms, with Shede Spirits suffering the steepest drop among non-loss-making companies, falling from 16.35% to 6.21%. On the expense side, 13 companies saw selling expense ratios rise, and another 13 recorded higher administrative expense ratios. Combining financial and administrative expenses, 14 firms posted year-on-year increases, with Golden Seed Wine, Huangtai, Yanghe, and Kouzi Liquor all showing significant expense inflation.
The third trend points to further concentration toward industry leaders. Kweichow Moutai alone accounted for approximately 47% of total listed liquor revenue in H1 2026, up from 43% in the same period of 2025. Yet this concentration masks the accelerated shakeout among other players. Beyond Moutai, other large distillers have not proven resilient: Wuliangye's 20.87% revenue growth in H1 masks a restatement of its 2025 financials — prior to the restatement, its H1 2025 revenue stood at RMB 52.77 billion and H1 2024 at RMB 50.648 billion, but the restated H1 2026 figure is just RMB 28.417 billion. The other four hundred-billion-yuan players — Shanxi Fenjiu, Yanghe, Luzhou Laojiao, and Gujing Gongjiu — all posted double-digit revenue declines.
Turning to the focal point: Sichuan Swellfun Co., Ltd. reported revenue of RMB 1.082 billion in H1 2026, down 27.78% year-on-year, and posted a net loss of RMB 6.2225 million, a 105.9% decline — marking the company's first half-year loss since 2015 and placing it among the three loss-making listed liquor firms. On a quarterly basis, the second quarter saw a cliff-like deterioration: Q1 revenue was approximately RMB 816 million, down 14.92%, but Q2 revenue collapsed to RMB 266 million, a 50.65% plunge. Net profit swung from RMB 171 million in Q1 to a loss of RMB 177 million in Q2. The company attributed this to inventory digestion efforts and controlled shipment pacing.
In fact, shipment suspensions have become a recurring tool for Swellfun in recent years. In October 2024, the company halted deliveries and orders for its Zhenniang Bahao series. In July 2025, it again suspended all-channel shipments of the 500ml Zhenniang Bahao packaging (including single bottles, cartons, and gift sets). These repeated suspensions stem from price inversion issues: Zhenniang Bahao and Jingtai are Swellfun's core products, contributing the bulk of revenue. Zhenniang Bahao, positioned in the mid-to-high-end price band, carries a suggested retail price of RMB 578 for the 52-degree version, yet e-commerce platforms now list it as low as RMB 270. Jingtai, with a retail price above RMB 800, has dropped to RMB 300-400 on online channels. According to today's liquor pricing data as of September 9, the wholesale price for Zhenniang Bahao stands at RMB 360 and the new Jingtai at RMB 510 — still far above the lowest e-commerce prices. As the industry undergoes deep adjustment, the mid-to-high-end segment targeting business banquets has borne the brunt, making it impossible for Swellfun to remain insulated.
It's worth noting that Swellfun has long pursued a premium strategy, focusing on mid-to-high-end and above products, and even eliminated its low-end lines for an extended period. Around 2023, the company revived mid-to-low-end offerings, increasing investment in series wines and relaunching products like Tianhaochen, Shui Jing Yan, and Xiao Shui Jing. However, mid-range product revenue in H1 2026 was a mere RMB 48.361 million — negligible in proportion. With its mid-to-high-end products under pressure and its mass-market offerings too small and uncompetitive, the company's revenue took a major hit.
From a channel perspective, Swellfun's dealer count fell to 62 by the end of the reporting period, with 6 added and 45 removed — a net reduction of 39. Domestic dealers plunged from 94 at the start of the year to 60, a 36% contraction, while overseas dealers fell to 2, a net loss of 5. This signals a rapid erosion of the company's domestic distribution footprint. Meanwhile, inventory swelled to RMB 4.082 billion, with inventory turnover days soaring to 2,786. Inventory now accounts for nearly 50% of total assets, posing significant risk. Accounts receivable surged 81% year-on-year to RMB 77.5966 million, while contract liabilities (advance payments from distributors) fell 35% to RMB 641 million from RMB 983 million a year earlier. The divergence between these two metrics highlights the intense pressure on end-market sell-through.
More critically, cash collection ratio plummeted to 80.38% in H1, with operating cash flow remaining negative. Cash on hand dwindled to RMB 206 million — just 13% of the level seen in the same period of 2024. At the same time, interest-bearing debt has skyrocketed, with short-term borrowings reaching RMB 1.28 billion by the end of H1. Of this, 65% comprises supply chain financing and 11% credit loans. The supply chain finance arrangements involve "e-Xintong" products with China Construction Bank and HSBC's supply chain solutions, used to pay supplier invoices. For a liquor company that typically demands cash-before-delivery from distributors, such elevated interest-bearing debt is highly unusual. Where exactly has the company's cash gone, and why must it rely on bank financing even for raw material procurement?
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