A research report from Guotai Haitong Securities Co., Ltd. indicates a clear divergence in the food and beverage industry. In the first quarter of 2026, sector revenue reached 312.8 billion yuan, a year-on-year increase of 3%, while net profit was 73.7 billion yuan, up 2% year-on-year, achieving positive growth. Structurally, the divergence within the industry continues, with mass-market products showing early signs of recovery, while baijiu remains in a phase of deep adjustment and consolidation. The catering supply chain demonstrated the strongest performance, whereas baijiu is undergoing a significant correction.
Key investment recommendations include: 1) Prefer baijiu stocks with price elasticity; 2) Catering supply chain and condiment companies showing volume and price recovery potential; 3) Dairy products; 4) Beverage growth stocks, while also emphasizing low valuation and high dividend yields; 5) Beer sector anticipating recovery during peak seasons; 6) Food ingredients and snack growth stocks.
The main views of Guotai Haitong Securities Co., Ltd. are as follows: The industry currently exhibits significant divergence. Mass-market products, having adjusted earlier, began improving from 2025, while baijiu is in a phase of deep adjustment. For the full year 2025, the overall food and beverage sector revenue was 1,221.8 billion yuan, down 6% year-on-year, with net profit at 208.9 billion yuan, down 15% year-on-year, turning both revenue and profit growth negative. Specifically, in the fourth quarter of 2025, sector revenue and net profit fell by 13% and 40% year-on-year respectively, a significant deterioration compared to the first three quarters.
Entering 2026, the first quarter saw sector revenue of 312.8 billion yuan, up 3% year-on-year, and net profit of 73.7 billion yuan, up 2% year-on-year, marking a return to positive growth. However, considering the later timing of the Spring Festival creating a base effect, and looking at the combined fourth quarter of 2025 and first quarter of 2026, food and beverage sector revenue declined 4% year-on-year, while net profit fell 13% year-on-year, showing no significant improvement compared to the second and third quarters of 2025. Structurally, the internal industry divergence persists, with mass-market products leading the recovery, while the decline in baijiu has intensified.
Mass-market products showed commendable performance, with revenue stabilizing and rebounding: 1) The catering supply chain performed best. Driven by downstream demand and improved competitive dynamics, quick-frozen foods and condiments saw significant acceleration in both revenue and profit. First-quarter 2026 revenue grew 7% and 5% year-on-year respectively, with profits surging 41% and 18% year-on-year, leading sector growth. 2) The dairy sector moved past pessimistic expectations, essentially confirming a bottoming-out phase, with performance trends improving. Leading livestock enterprises accelerated herd reduction, further increasing the proportion of mature cows, leading to a substantial narrowing of sector losses. 3) Soft drinks remained relatively strong, with new categories and channel penetration raising the growth ceiling. First-quarter 2026 profits grew 27% year-on-year, indicating the sector still has growth potential. 4) Beer profits maintained resilience. The snacks sector benefited from economies of scale and easing competition in the first quarter of 2026, leading to a recovery in sentiment. 5) Huangjiu (yellow wine) showed signs of revival through premiumization strategies improving profit margins, with profit growth outpacing revenue growth, rising 18% year-on-year in the first quarter of 2026.
Baijiu supply is accelerating its consolidation, with bottoming characteristics becoming clearer. The baijiu industry was severely impacted in 2025, with multiple negative factors叠加 including slowing sell-through, inventory destocking, declining prices, and pessimistic channel sentiment. Full-year revenue and profit fell 18% and 24% year-on-year respectively. Fourth-quarter 2025 revenue and net profit declined 30% and 46% year-on-year respectively. There might have been some smoothing between the fourth quarter of 2025 and the first quarter of 2026; combined, revenue for these two quarters fell 11% year-on-year, while net profit declined 15% year-on-year. Referencing the industry adjustment period of 2012-2016, financial statement consolidation often requires multiple quarters. Based on current channel inventory, sell-through rates, and wholesale price trends, it is believed that the characteristics of this cycle's industry bottom are becoming clearer, although financial cleanup will still take time. Valuation bottoms might occur earlier, potentially in the second half of the year, and medium-term prospects remain favorable for high-quality assets with stable cash flows.
Risks include slower-than-expected consumption recovery, intensified market competition, and further cost increases.
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