Dongxing Securities Corporation Limited released a research report stating that, generally, cash flow provides an earlier signal of recovery than profits, especially in the trough phase of an industry. Changes in cash flow directly reflect channel collections, inventory destocking, and the pace of corporate expansion. While the overall food and beverage industry is still bottoming out, structural recovery has begun to emerge, with the primary rebound direction pointing towards the catering chain and the business-to-business (B2B) supply chain. It is recommended to prioritize leading companies in pre-processed foods, beer, and condiments, which exhibit strong cash flow recovery. For sectors with intense consumer-facing (B2C) competition, such as snacks and health products, it is advisable to wait for operating cash flow and cash flow quality to align with profit performance. The main views of Dongxing Securities Corporation Limited are as follows:
The change in cash flow in Q1 2026 may signal the structural recovery of the food and beverage industry. In Q1 2026, the food and beverage industry's net operating cash flow turned positive year-on-year, rising from -28.98% in Q4 2025 to +20.21%. Free cash flow also turned positive, recovering from -32.33% to +32.47% year-on-year, achieving a simultaneous positive shift in both cash flow indicators for Q1 2026. Combining Q4 2025 and Q1 2026 to eliminate the impact of the Lunar New Year timing difference, the industry's net operating cash flow was -27.17% year-on-year, and free cash flow was -28.21% year-on-year. Considering the Q1 2026 cash flow performance, this indicates the industry is in a phase of "marginal cash flow recovery."
Screening food and beverage sub-sectors for recovery strength based on free cash flow changes using a "Cash Flow Four Quadrants" approach. Based on the four-quadrant analysis framework, pre-processed foods represent the clearest direction in the first quadrant. The condiment industry, under the combined Q4 2025 and Q1 2026 timing-adjusted basis, showed year-on-year growth in both net operating cash flow and free cash flow and is also placed in the first quadrant for observation. On a timing-adjusted basis, beer had negative free cash flow and is placed in the second quadrant for observation. For leisure snacks, on a timing-adjusted basis, net operating cash flow was negative year-on-year while free cash flow was positive, placing it in the third quadrant for observation. For baijiu (Chinese distilled spirits), on a timing-adjusted basis, both net operating cash flow and free cash flow were negative, indicating it remains in a phase of clearing and bottoming, and is placed in the fourth quadrant for observation.
Overall, the divergence between the B2B and B2C sectors is the most significant structural feature of the food and beverage industry's recovery in Q1 2026. The high growth in cash flow for pre-processed foods contrasts with the cash flow pressure in some B2C categories like snacks and health products, suggesting the current recovery stems more from the repair of the catering supply chain, the expansion of chain catering, and channel restocking. This trend aligns with the faster growth rates of catering and B2B business segments among listed food and beverage companies. Structurally, certain cash flow metrics for pre-processed foods, beer, soft drinks, snacks, and condiments/fermented products have already shown early improvement. Sectors such as baijiu, meat products, dairy, baked goods, and prepared foods are still affected by industry cycles, capital expenditures, or base period disturbances.
Risk warnings include: slower-than-expected macroeconomic recovery, slower-than-expected recovery in catering demand, and slower-than-expected performance recovery of listed companies in the food and beverage industry.
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