China Galaxy Securities has released a research report stating that supply-demand relationships in multiple sub-sectors of the food and beverage industry are expected to improve by 2026, with increasing clarity on CPI recovery. The firm maintains its previous view that new consumption trends will persist but experience internal rotation, while traditional consumption sectors benefiting from greater CPI recovery elasticity are anticipated to see bottom-line improvements. Key companies recommended for focus include those in mass-market food products and the baijiu sector. China Galaxy Securities' main viewpoints are as follows:
PPI transmission combined with consumption recovery is expected to sustain the CPI uptrend. In October 2025, CPI growth turned positive for the first time and showed monthly improvement thereafter, with November/December CPI rising 0.7%/0.8% year-on-year. Food CPI increased by 0.2%/1.1% during the same period. Specifically, fresh vegetable/fresh fruit price increases continued to expand, with fresh vegetable CPI up 14.5%/18.2% and fresh fruit CPI up 0.7%/4.4% in November/December respectively. Meanwhile, declines in grain/edible oil/livestock meat prices narrowed, with grain CPI down 0.4%/0.3%, edible oil CPI down 1.2%/1.0%, and livestock meat CPI down 6.6%/6.1% in November/December. The firm expects the CPI improvement trend to continue into 2026, primarily due to: 1) PPI improvements gradually transmitting to CPI, and 2) sustained demand-side transmission of pro-domestic consumption policy packages.
Investment opportunities arising from CPI recovery are viewed favorably, with pro-cyclical sectors featuring low valuations and supply clearing expected to benefit accordingly.
Baijiu: Feitian Moutai wholesale prices show recovery. On February 8, wholesale prices for case and single bottles of Feitian Moutai reached 1,710/1,660 yuan, up 30/10 yuan from January 31. Pre-holiday wholesale prices have stabilized above the 1,600 yuan level after sustained increases. This is attributed to: 1) robust demand for Spring Festival self-consumption, gifting, and gatherings, combined with activated potential consumers following the price decline cycle, leading to gradual recovery in terminal sales; 2) supply-side adjustments where the company recently rebalanced its product structure toward Feitian Moutai while initiating channel reforms, effectively supporting the bottom price level.
Dairy: Raw milk prices gradually bottoming out. On January 29, the average price of fresh milk in major domestic production areas was 3.04 yuan/kg (down 2.9% year-on-year, up 0.3% month-on-month), essentially stabilizing since second half 2025 and fluctuating within the 3.02-3.05 yuan/kg range, indicating strong bottoming signals. The firm anticipates milk prices entering an upward trajectory in 2026 due to: 1) supply-side adjustments by large-scale farms and continued pressure on smaller farms from losses and funding constraints, combined with livestock cycle reversal and rising beef cattle prices potentially catalyzing capacity reduction; 2) demand-side marginal improvements driven by multi-dimensional fertility policies, with traditional liquid milk upgrades and growth in B2B/deep-processed products becoming more evident.
Mass-market products: Partial price recovery observed. In quick-frozen foods, industry competition gradually bottomed out in second half 2025. If demand recovers after consolidation in 2026, sector fundamentals could improve. According to company announcements, industry leader Anjoy has moderately withdrawn promotional policies for some products, potentially leading to profit recovery. For snacks, industry reports indicate Three Squirrels raised ex-factory prices for certain nut gift products in offline distribution channels starting January 19, which may alleviate pressure from rising nut raw material costs and increased transportation expenses, thereby improving profitability.
Risk warnings include potential slower-than-expected demand recovery, intensified industry competition, ineffective downstream channel reforms, and food safety risks.