Haitong International has released a research report indicating that the beer industry experienced a moderate recovery in 2025, with leading domestic companies achieving simultaneous growth in market share and profitability. Cost advantages and operational efficiency improvements served as the core drivers for enhanced earnings, while performance divergence among companies intensified further. From a medium-term perspective, the industry's fundamentals remain highly correlated with the macroeconomic environment. Should consumer demand show marginal improvement, the benefits of product premiumization are expected to continue being realized, potentially opening a window for industry valuation recovery. Long-term, the beer industry benefits from significant economies of scale and stable cash flow attributes. Beyond investment opportunities arising from the reshaping competitive landscape, breakthroughs in product innovation, international expansion, and business diversification also hold potential for value re-rating. Consequently, the firm believes that leading companies with strong channel barriers, leadership in product upgrades, and proactive strategies in internationalization and diversification will be the primary beneficiaries. Key companies to watch include Tsingtao Brewery Company Limited (600600.SH), CHINA RES BEER (00291), and Beijing Yanjing Brewery Co.,Ltd. (000729.SZ). Haitong International's main views are as follows:
**2025 Performance Review** The industry demonstrated stable volume and pricing, indicating a mild recovery. Annual production for major enterprises reached 353.6 million hectoliters (a year-on-year decrease of 1.1%). Compared to the peak in 2013, the Compound Annual Growth Rate (CAGR) is approximately -2.8%. In 2025, most listed companies achieved steady sales volume growth of 1-2%. The market structure is diverging, with leading domestic players steadily gaining market share. Influenced by shifts in the macroeconomic environment and evolving consumer preferences, the industry's competitive landscape is undergoing significant and continuous adjustment. Some companies, due to relatively singular channel strategies and insufficient product adaptability, have seen their market shares decline. In contrast, domestic leaders have leveraged their stronghold market barriers and product portfolio upgrades to increase their shares. A combination of favorable input costs and efficiency gains led to profit growth outpacing revenue growth. Declining prices for barley and glass contributed to a reduction in cost per unit, with gross profit margins generally improving by 1-2 percentage points. Expense ratios mostly decreased by within 1 percentage point, reflecting companies' efforts to enhance cost efficiency through refined operations amidst slowing revenue growth.
**Industry Remains in a Period of Transformation** Emerging channels are reshaping competitive dynamics. The share of on-premise channels has declined from over 55% pre-pandemic to around 40%, while new channels like instant retail and snack omnichannel stores are rapidly rising. Companies are increasingly investing in the layout and operation of these new channels. The traditional model of gaining market share through heavy spending is becoming unsustainable. The core of industry competition is shifting towards improving operational efficiency and achieving precise reach to end consumers. A trend towards more rational consumer preferences is forcing product innovation. The growth path driven primarily by price increases is facing bottlenecks. Companies are focusing on developing product matrices suitable for diverse consumption scenarios, while simultaneously exploring specialty beers and non-beer categories to cultivate new growth points, though the effectiveness of these strategies requires long-term market validation. Corporate governance and cash flow management are being optimized. Management changes within the industry have been frequent, with management styles becoming more pragmatic, leading to continuous improvements in organizational operational efficiency. Companies generally possess ample cash flow, with capital being allocated strategically towards shareholder returns and long-term development initiatives.
**2026 Industry Outlook** The first quarter is expected to continue the trend of stable overall volume with structural divergence. Companies' channel strategies and product focuses vary. Leaders, supported by their stronghold market barriers and ability to upgrade product structures, are likely to continue outperforming the industry. For the full year, industry sales volume is projected to maintain low single-digit positive growth. Three catalysts are anticipated to converge throughout the year: 1) A relatively low base in 2025, influenced by factors like intense food delivery competition and specific policies, lays a solid foundation for recovery during the peak season of 2026. 2) The hosting of major sporting events, such as the FIFA World Cup, is expected to significantly boost consumption demand in on-premise channels. 3) If market expectations for a rebound in the Consumer Price Index (CPI) and a recovery in the food service channel materialize as anticipated, this will support an increase in the industry's Average Selling Price (ASP), potentially leading to a 'Davis Double Play' scenario. On the cost side, overall risks appear manageable. Prices for key raw materials and packaging materials, such as barley, glass, and aluminum cans, have been partially locked in. The impact of geopolitical conflicts is assessed as limited. Currently, only the cost fluctuation for aluminum cans is relatively pronounced. For the full year, cost per unit is forecasted to experience a low single-digit increase.
**Risk Warning:** Economic recovery falling short of expectations, rising raw material costs, and food safety incidents.
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