Kaiyuan Securities released a research report stating that the liquor sector has recently experienced a strong upward trend driven by the combined effects of policy, valuation, and fundamentals. The industry is currently at a cyclical bottom, with expectations of sustainability supported by demand recovery and policy optimization. This bottom-recovery logic also applies to other food and beverage sub-sectors, such as beer and condiments, which are also at dual bottoms. For mass consumption investments in 2026, the focus can be on three main directions: snacks, raw milk/dairy, and the food service supply chain. Risks to monitor include economic conditions, policy developments, and demand recovery falling short of expectations. The main views of Kaiyuan Securities are as follows:
Multiple factors have converged to catalyze a strong rally in the liquor sector. The recent strong performance of the liquor sector is driven by the combined effect of multiple factors, including macro policies, valuation positioning, and fundamentals, rather than a single variable. Specifically, on the macro level, recent continuous optimizations in real estate policies and intensive introductions of policies to support domestic demand have effectively boosted market expectations for a recovery in consumption scenarios. Regarding valuation and positioning, after previous deep adjustments, the valuation of the liquor sector has fallen to historically low levels. Meanwhile, the proportion of active equity public funds allocated to the liquor sector has declined consecutively to 2.9% by Q4 2025, indicating a bottoming range and a clearer, more reasonable positioning structure. Fundamentally, the recent better-than-expected performance in wholesale prices and sales volume of industry leader Kweichow Moutai has served as a core catalyst for the sector's rise, confirming the genuine resilience of end-demand recovery for baijiu.
The logic for recovery from the cycle bottom is clear, supporting expectations for sustainable growth in the liquor sector. The bank believes the current rally in the liquor sector is sustainable, as the industry is in a cyclical bottom area with a clear fundamental recovery logic. Firstly, demand for baijiu is showing a gradual recovery trend. After premium baijiu wholesale prices fell to a reasonable range, genuine consumer demand was effectively stimulated. Coupled with the approaching Spring Festival peak season, demand from scenarios like family gatherings and gift-giving is concentrated, and the consumption boost effect from price declines is gradually materializing. Secondly, after adjustments to alcohol restriction policies, their negative impact is marginally decreasing. Recent recovery in consumption scenarios shows that policy disruptions to core baijiu demand are continuously weakening, leading to more stable market expectations. Thirdly, as the macroeconomy gradually stabilizes and pro-consumption policies continue to be introduced, overall consumer market vitality is expected to recover, supporting a stabilization and rebound for the liquor industry.
As demand recovers and policies intensify, multiple sub-sectors are expected to replicate the bottom-recovery trend. The logic of bottom recovery is not unique to the liquor sector and can extend to the entire food and beverage industry. Currently, several sub-sectors like beer, condiments, and quick-frozen foods are in dual-bottom areas regarding valuation and fundamentals. From a driver perspective, if catalysts such as recovering demand in the catering industry and intensified consumption policies materialize, these sub-sectors could replicate the recovery trend seen in liquor. Active attention is recommended.
Investment opportunities in mass consumption for 2026 focus on snacks, raw milk/dairy, and the food service supply chain. Looking ahead to 2026, mass consumption investment opportunities are primarily seen in three segments: the snack sector, raw milk/dairy, and the food service supply chain. (1) The snack sector continues its high景气度 (prosperity). Leading companies, leveraging blockbuster product strategies, omni-channel layouts, and cost advantages, are seeing continuous improvements in net profit margins. Combined with the timing effect of the Spring Festival, sector performance in Q1 2026 is expected to achieve rapid growth. Companies like Weilong Delicious, Ganyuan Food, Yanjin Palace, and West Oats Food offer both growth potential and valuation advantages and are highly recommended. (2) The supply-demand dynamics in the raw milk sector are continuously optimizing. Current milk prices are in a bottom-grinding phase, dairy cow inventories are persistently declining, and farm losses are driving the exit of inefficient capacity. Coupled with the implementation of temporary countervailing policies on EU dairy products, milk prices are expected to stabilize and rebound in 2026, benefiting both upstream farms and downstream dairy enterprises. Beneficiaries include Youran Dairy, Yili Group, and Mengniu Dairy. (3) The food service supply chain benefits from the recovery in餐饮 (catering) consumption, further supported by Spring Festival dining scenarios, leading to potential volume and price increases. Tianwei Food is highly recommended; other beneficiaries include Anjoy Foods, Qianwei Yangchu, and Guoquan.
Risk warnings include economic downturn, food safety issues, raw material price fluctuations, and consumer demand recovery falling short of expectations.