According to reports from China Merchants Securities (CMSC), the number of companies, activities, and investors participating in this year’s autumn sugar festival has declined year-on-year, leading to a further decrease in enthusiasm. The strong sales during the dual holiday peak season for the liquor industry are in line with expectations, and the industry is gradually coming to terms with the current situation. More companies are either proactively or passively starting to clear out stock, resulting in low inventory levels at cigar shops and among distributors. The performance of liquor companies in Q3 2025 and the demand and pricing conditions for the Chinese New Year in 2026 will be essential indicators for validation. The food sector is experiencing a divergence in trends. The beverage sector has shown a noticeable effect in destocking during the long holiday, with strong performances from brands such as Nongfu Spring (NONGFU SPRING) and Eastroc (东鹏). The snack sector still has room for expansion in the number of store locations, with channels continuing to contribute additional growth. Key insights from China Merchants Securities are as follows: enthusiasm for this year’s autumn sugar event has further diminished, with fewer liquor companies participating, an increased focus on the consumer end, and a prevalent wait-and-see attitude among liquor distributors. Overall, first, the participation of national liquor brands in exhibitions has decreased, while regional brands remain active. Second, significant reductions in key activities such as company recruitments and new product launches among liquor companies have led to an increase in industry concentration, diminishing the function of exhibitions as companies prefer to allocate their expenses to addressing actual sales issues on the consumer side. Third, the wait-and-see sentiment among liquor distributors remains strong, who are more inclined to purchase based on immediate needs to control inventory levels, while instant retail and online platform subsidies have also placed some pressure on offline distributors, further exacerbating this cautious outlook. The observed decline in liquor sales during the holiday season aligns with expectations, and major brands are demonstrating resilience. Communications with companies and channels indicate that the drop in liquor sales during the dual holiday peak season in 2025 is generally in line with predictions, with leading brands experiencing a decline that is slightly better than the industry average. Following a price drop, leading products like Feitian and Pu’er are showing prominent value for money, further enhancing industry concentration. 1) By product category, premium liquor and mass consumption products have performed relatively well. Once the price of Moutai falls to around 1,800 yuan, the opening rate during the holidays increases, expanding consumption scenarios and demographics, with prices in this range providing certain support. After the price drop, the sales performance of Wuliangye (五粮液) during the holidays has outperformed its competitors, and considering that channel subsidies have recently increased, the confidence in the distributor system is expected to be bolstered moving forward. Luzhou Laojiao is firmly maintaining pricing strategies, although its short-term sales have been somewhat affected, with moderate prices for lower-alcohol and series liquors remaining stable. 2) By sales scenario, banquet occasions have performed slightly better than expected, with weddings showing an increase in frequency but a decrease in wine consumption; the demand from government and business sectors has rebounded month-on-month in multiple regions, though it is forecasted to decline by 20%-30% for the year-on-year comparison; general self-consumption demand remains stable, with light bottle liquor performing impressively and the sales of Guangping liquor continuing to progress smoothly. 3) Future outlook: it is expected that liquor sales during the 2026 Spring Festival will continue to recover month-on-month, with brand performances diverging. The destocking results in H2 2025 and the growth of liquor sales during the 2026 Spring Festival will serve as crucial signals for the industry bottoming out. The food sector is also witnessing divergence in its demand dynamics, with continuous attention to growth trajectories and month-on-month recovery in demand. During the dual festivals, some regions experienced higher-than-average temperatures benefiting the beverage sector, coupled with noticeable destocking during the long holiday. Among leading brands, Nongfu Spring is expected to see double-digit growth, and its market share in bottled water continues to rise; Eastroc shows overall favorable performance, with its functional and hydration drinks providing solid support. For the juice and tea market, watch for company actions in 2026; Yi Bao has seen a lesser decline than its apparent numbers, highlighting opportunities for improvement amid shifts in the competitive landscape. In the snack sector, new stores for top snack brands are mostly “money-saving supermarkets” replacing convenience stores and small supermarkets, with same-store sales down by approximately single digits year-on-year, but still, there is room for expansion in store numbers moving forward. In the dairy segment, the shelf-stable liquid milk remains under pressure during the dual festivals, reflecting a downward shift in product mix. Investment recommendation: the liquor sector continues to adjust, while the food sector shows a divergence in performance. This year’s sugar and liquor fair has seen the lowest enthusiasm from industry participants, companies, and investors in recent years. Demand pressures remain; however, against the backdrop of dwindling supply, the bottom line is becoming clearer. Investment focus should be on leading companies such as Kweichow Moutai (贵州茅台)(600519.SH), Shanxi Fenjiu (山西汾酒)(600809.SH), Luzhou Laojiao (泸州老窖)(000568.SZ), and Wuliangye (五粮液)(000858.SZ), alongside companies experiencing early inventory destocking or cash flow contributions like Zhenjiu Lidu (珍酒李渡)(06979) and Yingjia Gongjiu (迎驾贡酒)(603198.SH), which are promoting practical reforms under new management and steadily reducing inventories like Yanghe Brewery (洋河股份)(002304.SZ). In the food sector, continue to recommend snack and beverage sectors with favorable trends, while keeping an eye on structural opportunities in the dairy segment. For snacks, recommend Ximai Food (西麦食品)(002956.SZ) and pay attention to WL Delicious (卫龙美味)(09985) and Yanjinpuzi (盐津铺子)(002847.SZ); for beverages, continue to recommend leading players such as Nongfu Spring (农夫山泉)(09633) and Eastroc (东鹏饮料)(605499.SH); for dairy, focus on companies with better sales performance during the dual festivals and stable dividends like Yili (伊利股份)(600887.SH). Risk warnings include potential underperformance in sales, weaker-than-expected price performance, heightened competition risk, rising costs, and the possibility that channel survey data may not reflect the overall situation.