CICC stated in a research report that raw material prices rose month-on-month in March. In the initial stage of cost increases, related sectors experienced short-term stock price declines due to market sentiment. However, leading companies contributed to profit growth through direct price hikes and product portfolio optimization. Recent crude oil price increases have driven inflation expectations. The institution believes consumer goods companies are likely to reduce profit volatility by locking in prices early, optimizing product structures, and improving operational efficiency.
Key viewpoints from CICC are as follows:
Geopolitical tensions have driven crude oil prices upward, with PET and edible oil prices also rising. In March, crude oil prices increased by 30-40% year-on-year, while prices of raw materials positively correlated with crude oil, such as PET and edible oils, climbed month-on-month. Reviewing the previous cost inflation cycle from 2021 to 2022, related sectors saw short-term stock declines initially due to market sentiment, but leading firms achieved profit growth through direct price increases and product mix optimization. In the current cost cycle, CICC expects consumer goods companies to mitigate the impact of cost fluctuations on profits by pre-purchasing materials, refining product offerings, and enhancing internal efficiency.
Soft drinks: In the short term, direct price hikes may be challenging. Companies are expected to reduce the impact of rising costs by locking in prices early, introducing premium products, and cutting back on promotions.
Beer: According to CICC's estimates, packaging materials account for 51% of costs. A 10% increase in packaging material prices would reduce gross margin by approximately 2.7 percentage points. With aluminum can prices up 10% year-on-year, leading companies are likely to achieve profit growth by adjusting can packaging structures and improving efficiency.
Seasoning products: Based on CICC's calculations, using Haitian as an example, a 10% rise in PET prices would lower gross margin by about 0.6 percentage points, while a 10% increase in soybean prices would reduce it by roughly 1.1 percentage points. Most seasoning companies have already locked in prices early, so short-term cost impacts are expected to be limited.
Frozen foods: Per CICC's analysis, a 10% increase in edible oil prices would decrease gross margin by around 1.3 percentage points. Manufacturers may adjust product mixes to reduce the proportion of oil-related costs.
Snacks: Raw material price trends for snacks are expected to diverge in 2026. Investors are advised to focus on segments with strong bargaining power in the supply chain, as well as categories with favorable competitive landscapes and declining costs, such as yeast, oats, and konjac.
Risks include sustained crude oil price increases, food safety incidents, and weakening demand due to macroeconomic conditions.
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