CITIC Securities has released a research report suggesting investors focus on three main themes for 2027, according to Zhitong Finance.
The first theme is easing competition. Given gradually rising raw material costs, improving product oversupply, and stabilizing channel structures, the brokerage is bullish on a full slowdown in competition across the meal supply and dairy industries in 2027. It also expects store openings in the bulk snack sector to decelerate in 2027, and believes competition among bulk snack leaders will become more stable and manageable.
The second theme is high dividends. As leading consumer staples companies continue to maintain or slightly grow their market share, with stable fundamentals and ample free cash flow, these top players possess the capacity for sustained high dividend payouts.
The third theme is the growth vitality of the big health sector. The report predicts that consumers will continue to drive growing demand for health-oriented food and beverages in 2027, with areas such as low GI, low-sugar and sugar-free, high-protein, high-fiber, and sports nutrition worth watching.
Three dimensions complete the bottoming-out of the consumer staples sector
On valuation, although the market capitalization of consumer staples segments such as dairy, meal supply, beverages, and snacks has been declining over the past five years, sector profits have indeed grown steadily, and valuations have been significantly digested. The overall sector PE now sits at the 10th to 15th percentile of the past decade. Meanwhile, consumer staples companies are continuously raising their dividend payout ratios, and the sector's rolling dividend yield now ranks second among all CITIC first-tier industries, offering strong appeal.
On capital positioning, as of the end of June 2026, public fund holdings in the consumer staples industry had further fallen to 0.9%, with allocation ratios continuing to decline and the chip structure improving.
On fundamentals, although end demand remains relatively weak, leading consumer staples companies have continuously strengthened their internal capabilities to cope with changes and challenges in the external environment, including weakening prosperity, channel shifts, intensifying competition, changing demand, and high inventory levels. After a downcycle of self-adjustment and capability enhancement, leading companies across various consumer staples sub-sectors have now achieved stable or improved market share and stabilizing fundamentals. At the same time, considering factors such as rising raw material costs, slower capacity deployment, stabilizing channel structures, and stricter regulation in some industries, the brokerage believes the consumer staples industry is expected to see a trend of easing competition in 2027, supporting a steady improvement in the fundamentals of leading companies.
Dairy: Raw milk cycle turns upward, sector prosperity rises in tandem
Over the past two years, dairy cow herd reduction combined with stabilizing dairy demand in 2026 has led to continuous improvement in raw milk supply and demand. Since 2026, milk prices have rebounded from the bottom, with contract milk prices rising by a cumulative 0.09 yuan since mid-April, ending a five-year downtrend. Considering the aging herd structure and the two-to-three-year expansion cycle for dairy cows, the brokerage judges that raw milk will enter an upward cycle in 2027 and 2028. Looking ahead to 2027, overall dairy demand is expected to stabilize at the bottom, with low-temperature dairy and cheese demand continuing to prosper. The upward raw milk cycle will directly drive profit elasticity for livestock companies and is also expected to push leading dairy enterprises to raise product prices, restore market share, and optimize expenses, benefiting earnings growth for top dairy players.
Restaurant supply chain: Weak demand and cost pressure, watch for easing competition and pricing pace
After a brief recovery in the first quarter of 2026, the restaurant supply chain industry saw a significant sequential decline in prosperity in the second quarter. On the cost side, prices for core raw materials such as soybeans, soybean oil, and surimi have continued to rise since the start of 2026. In the first half of 2026, companies benefited from low-cost inventory, keeping cost pressure generally modest, but from the second half of 2026, cost pressures are expected to gradually materialize. Fortunately, the restaurant supply chain industry continued its trend of easing competition that began in the second half of 2025. According to Mashaung data, the CR5 of most sub-tracks in the restaurant supply chain increased year-on-year in the first three quarters of 2026, with companies continuously reducing expenses and trade discounts. Leading companies such as Anjoy began attempting price increases to pass on cost pressure. Looking ahead, the brokerage expects industry demand to remain difficult to improve significantly in the short term, and cost pressures will gradually show up in corporate financial statements. Therefore, it recommends selecting investment targets based on three directions: sustainability of revenue prosperity, price increases, and high dividends.
Beverages: Watch demand and cost trends, seize individual stock opportunities
In 2026, industry demand came under pressure, mainly due to weak consumer spending power and poor weather affecting outdoor travel, while the sharp rise in PET prices placed significant pressure on corporate profitability, especially in the second half of 2026. Leading beverage companies outperformed the overall industry, but sector valuations declined broadly, with only a few companies performing relatively well due to high dividends. Looking ahead to 2027, the brokerage believes there is uncertainty in both demand recovery and cost trends, and recommends focusing mainly on key individual stock opportunities in beverage investment.
Snacks: Bulk snack valuation advantages stand out, branded snacks await their moment
Since the start of 2026, leading bulk snack companies have accelerated store openings while maintaining good net margin improvement. Although store openings have exceeded expectations this year, the market worries about overly rapid expansion and subsequent space being squeezed. However, the brokerage believes current valuations have fully reflected market concerns about the future fundamentals of bulk snack leaders. Considering room for store expansion and efficiency improvement potential in same-store operations, the brokerage is bullish on bulk snack leaders maintaining double-digit revenue and profit growth over the next two years. At the same time, low PE ratios and ample cash flow will support these leading companies in providing shareholders with relatively high cash returns.
Health products: Continue to recommend H&H Group, watch yeast protein opportunities
Since the start of this year, regulators and e-commerce platforms have successively taken measures to rectify industry irregularities, with health product industry regulation becoming stricter. Tightening regulation from policies and platforms will cause some short-term disruption to online demand in the health products industry, but it will also raise entry barriers and drive industry share concentration. Since the start of 2026, whey protein prices have surged, and the tight supply-demand situation for whey protein is expected to continue into 2027.
Risk factors: Downside in consumer prosperity; restaurant recovery falling short of expectations; price increase results falling short of expectations; intensifying industry competition; emerging channel disruption exceeding expectations; continued rise in raw material prices; food safety issues.
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