Caitong Securities Co.,Ltd. has released a research report stating that while uncertainties in the external environment for the food and beverage industry have intensified, a shift in market focus towards domestic demand is underway. The current strategy should involve seeking out: 1) stocks with "bottoming fundamentals, high dividends, and costs unaffected by geopolitical conflicts"; 2) candidates with price increase expectations; and 3) companies demonstrating strong earnings trends. Regarding the agricultural product price increase chain, upstream additives are the most direct beneficiaries, followed by seasonings which have potential price hike expectations. The main views of Caitong Securities Co.,Ltd. are as follows:
Food and Beverage: Q1 Shows Improving Trends, Q2 Expected to Continue on Low Base Effect Overall, in the first quarter, against the backdrop of the shifted Spring Festival timing and an extended holiday, financial reports generally showed a continued improvement trend. Sectors related to travel and dining, in particular, demonstrated relatively leading fundamental performance in Q1 previews. On the other hand, segments with strong industrial logic maintained high growth momentum in Q1 previews, such as new business formats, oats, energy drinks, sugar-free tea, and low-temperature milk, primarily concentrated in the "store expansion and health & wellness" directions.
Liquor Sector: Moutai and Wuliangye Exceed Spring Festival Sales Expectations, Industry Decline Narrows During the 2026 Spring Festival period, the baijiu market showed a trend of structural divergence. Kweichow Moutai and Wuliangye performed exceptionally well in this period's Spring Festival sales. Across the industry, channel destocking progressed significantly during the holiday. Distilleries generally did not set a strong "good start" as a rigid target, with repayments and shipments mostly being rational and cautious. It is anticipated that for Q1 2026, while the overall revenue of the baijiu sector will remain under year-on-year pressure, the rate of decline is expected to narrow compared to previous periods. Leading distilleries, benefiting from brand strength and channel control, are likely to see revenue and profit performances outperform the industry average. Pressure on second and third-tier distilleries persists.
Mass Market Products Sector: Demand Improves with Shifted Holiday, Dining Chain Performs Relatively Well 1) Beer: Sales volume is expected to be flat, with growth driven by product innovation and channel expansion like O2O. 2) Snacks: The New Year sales period contributed significantly, with volume-snack retail channels remaining a key source of incremental growth. 3) Quick-frozen Foods: Industry beta has stabilized, alpha from leading companies is emerging, concentration is expected to accelerate, and net profit margins continue to improve. 4) Seasonings: Basic seasonings showed significant improvement; compound seasonings show elasticity on a low base in the C-end, while the B-end maintains steady growth. 5) Soft Drinks: The beverage sector continues its divergent trend, with leader Dongpeng Beverage maintaining high growth. Smaller niche beverages like Xiangpiaopiao and Junyao Health possess independent growth logic. 6) Dairy Products: Dairy demand is bottoming out, the low-temperature trend is evident, gross-to-sales margins are improving, and net profits show elasticity.
Investment Advice Seasonings have potential price increase expectations, primarily due to rising soybean futures upstream, coupled with recovering downstream demand and more favorable fundamentals compared to 2021. The industry structure is one superpower and several strong players, making the price hike logic the smoothest. Focus on Foshan Haitian Flavouring & Food Company Ltd. and Zhongju High-Technology Co., Ltd. For upstream additives, focus on Chenguang Biotech Group Co.,Ltd., a beneficiary of rising agricultural product prices. For high dividends and resilience to external factors, consider baijiu, beer, and dairy. Baijiu expectations have reset to lower levels; events like the Kweichow Moutai shareholder meeting and the Spring Sugar & Wine Fair may boost expectations. Current key focuses are Kweichow Moutai and Jinhuiju Co.,Ltd., with attention also on Wuliangye, Luzhou Laojiao, and Yingjia Gongjiu. Beer sector expectations are currently low, and it possesses a positive seasonal calendar effect. It is expected to recover alongside the catering sector rebound and rising price per ton. Key focuses are Tsingtao Brewery Company Limited and Beijing Yanjing Brewery Company Limited, with attention on Chongqing Brewery Company Limited. In dairy, upstream raw milk prices are expected to rise, current demand is stabilizing, and leading companies have cleared risks. Focus on Inner Mongolia Yili Industrial Group Co., Ltd., China Mengniu Dairy Company Limited, and Youran Dairy Group Limited. For companies with strong fundamentals, focus is mainly on the dining chain, health & wellness, and store expansion directions: 1) Dining Chain: Continue to monitor Anjoy Foods Co.,Ltd., Yihai International Holding Ltd., and Tianwei Foods Co.,Ltd.. 2) Health & Wellness: Focus on Western Oat Foods Co.,Ltd. and New Hope Dairy Co.,Ltd.. 3) Store Expansion: Focus on Wanchen Group and Guoquan Shouyi.
Risk warnings include slower-than-expected recovery in consumer spending power, intensifying industry competition, and food safety issues.
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