Guosheng Securities released a research report stating that the Baijiu sector will fully release risks in 2025 and is expected to welcome a dual improvement of "supply leading the way and demand gradually recovering" in 2026. Currently at a triple bottom in terms of sales velocity, price structure, and financial statements, short-term positive catalysts are seen from sequential improvements in Spring Festival sales. From a medium-term perspective, sales velocity, price structure, and financial statements are expected to recover successively. Allocation should be based on the supply perspective in the short term and on competitive landscape and dividends in the medium term. Consumer staples are stabilizing, with high-end discretionary spending showing signs of revival; ongoing channel transformations and product innovations continue to be driving forces. For allocation, the optimal strategy is to focus on two main tracks: recovery and growth.
Consumption Trends: Total Volume Stabilizes Amid Price Pressure, Structural Growth and Transformation Continue. 1) Market Review: In 2025, the Food & Beverage (CITIC) sector fell 4% cumulatively, underperforming the CSI 300 by 20%. The Baijiu sector faced significant pressure, declining 7% year-to-date, while pro-cyclical sectors like beer and condiments fell 9% and 7% respectively. Alpha performance in consumer staples was notably divergent; the Food (primarily health supplements and Angel Yeast) / Quick-frozen Food / Beverage sectors rose 18%, 15%, and 12% year-to-date respectively. The dairy sector rose 7% cumulatively, benefiting from the recovery logic of the raw milk cycle. 2) Consumption Volume and Price: Total retail sales maintained moderate growth in 2025. Breaking this down, consumption volume gradually stabilized, with essential demand customer flow, represented by Baba Food's same-store sales, stabilizing and recovering. The Food CPI was low in the first half and higher in the second half of 2025, operating in negative territory from February to October before turning positive year-on-year at +0.2% in November. 3) Structure and Trends: High-end consumption is reviving first, experiential consumption is warming up ahead of others. On the product side, the lifecycle of major product lines is shortening. Channel trust is increasing, with a clear trend towards health-oriented products. On the channel side, offline channels continue to iterate, while online channels extend their reach, leading to a coexistence of quality and discount-driven prosperity.
Baijiu: Triple Bottom, Value Highlighted. 1) Ongoing Supply Clearing: Financial statements in Q3 2025 accelerated their bottoming-out, releasing pressure. Recently, industry leaders Kweichow Moutai and Wuliangye have taken the lead in controlling supply to stabilize the price floor and channel confidence. Baijiu companies generally have rational targets for 2026, with strategies expected to prioritize volume over price, prioritize sales velocity, and focus on market share. 2) Gradual Demand Recovery: The low point for current sales velocity has passed, with sequential improvement already seen in opened bottles. Short-term, sales velocity during the 2026 Spring Festival is expected to continue its sequential recovery, with "Moutai and Wuliangye" likely leading in sales velocity and regional Baijiu showing resilient demand. Medium-term, a gradual alignment between sales velocity and financial statements is anticipated. The Baijiu industry currently exhibits three distinct characteristics: grinding sales velocity at the bottom, clearing financial statements, and low expectations, highlighting the enduring asset allocation value of high-quality leading companies in the medium to long term.
Beer & Beverages: Dividends as Shield, Growth as Spear, Focus on Leading Companies' Certainty. 1) Beer: Expect the catering recovery to drive better-than-expected volume and price performance for the sector. Seize the allocation window in Q1 2026, favoring alpha stocks driven by major product lines like Yanjing Beer; also focus on fundamentally sound, high-dividend stocks such as China Resources Beer, Tsingtao Brewery (A+H shares), and Chongqing Brewery. 2) Beverages: The industry scale is steadily expanding, with sub-sectors like sugar-free tea, energy drinks, and packaged water leading growth rates. Industry competition remains intense, and companies with outstanding brand power and channel strength are expected to stand out.
Food: Dual Tracks of Recovery and Growth, Seeking Strong Alpha Opportunities. 1) Catering Supply Chain: Recent demand has shown sequential recovery, and price wars have marginally eased. Leaders like Anjoy Foods have reported positive sales feedback and are expected to be the first to emerge from price pressures. In 2026, the trend where hot pot ingredients and prepared dishes recover faster than flour/rice products, and large B-end channels recover faster than small B-end, which in turn recover faster than C-end channels, is expected to continue. Benefiting from low bases, corporate revenue growth rates are expected to improve, with profit margins having upward revision potential. 2) Snacks: Focus on two main lines: retail transformation and product-driven growth. For 2026, value-for-money retail will emphasize operational efficiency improvements. Manufacturing companies will be more driven by alpha factors; watch for opportunities with breakout products. 3) Dairy Products: Expect a potential turning point in the raw milk cycle in the second half of 2026. Priority is given to the valuation repair and profit improvement of dairy farming businesses, followed by capturing the value from New Hope Dairy's product structure upgrades and the allocation value of leading company Inner Mongolia Yili Industrial Group. 4) Health Supplements: The Chinese health supplement market is still in a growth phase, with new ingredients and efficacy claims offering potential for explosive growth. Content e-commerce channels like Douyin offer significant红利. Prefer highly elastic brand owners like H&H International Holdings and Ruoyuchen; in the contract manufacturing segment, prefer leaders like By-health that benefit from increasing concentration and global expansion.
Risk Warning: Unexpected rise in raw material costs, slower-than-expected recovery in consumer spending power and consumption scenarios, intensification of industry competition.
