Zhongjin: In the next 25 years, selective consumption is expected to benefit from multiple perspectives.

Zhongjin released a research report stating that the demand in the food and beverage industry in 2024 was relatively weak due to factors such as insufficient consumer confidence, cautious expectations of income growth, and a K-shaped differentiation in consumption trends overall. The performance of mid-to-high-end products was under pressure, while products with high quality-price ratios and those that provide emotional value to consumers performed more prominently. Looking ahead to 2025, it is expected that with the implementation of a package of stimulus policies, essential consumption is expected to benefit directly and indirectly from measures such as the distribution of consumption vouchers, boosting consumer confidence, and improving residents' income expectations. Commercial and gifting scenarios are expected to gradually benefit from increased economic activity, and the demand for liquor industry may see a stable recovery, continuing the trend of industry concentration and differentiation. Key points from Zhongjin: Liquor: Looking ahead to 2025, supply growth in the liquor industry is expected to slow down, and demand may steadily recover, gradually achieving supply-demand equilibrium and showing a weak recovery trend from low to high throughout the year. Since 2024, industry demand has been weak, with pressure on companies lacking in brand and capabilities, and those burdened with accumulated inventory in the past few years. The characteristics of stock competition are obvious, and mainstream companies are paying more attention to sustainable and steady development. It is expected that supply in the industry will slow down in 2025, adapting to the new phase of supply-demand equilibrium; on the demand side, industry demand is expected to recover steadily, with scenes such as business and gifting gradually benefiting as economic activity increases with the gradual implementation of national stimulus policies. The industry as a whole may show a weak recovery trend from low to high, with the first half of the year focusing on bottoming out, and the second half seeing a possible demand recovery driving the industry steadily into a weak recovery process. Mass food: With industry demand remaining weak, leading companies have completed deep adjustments and efficiency improvements and are expected to gradually warm up in 2025. Looking ahead to 2025, most sub-industries in mass food demand are expected to warm up under potential policy stimuli, with the continuation of value-for-money and emotional value consumption styles. Industries like soft drinks and snacks will continue to expand in overall scale; leading companies on the supply side have completed channel adjustments, internal efficiency improvements, and steady improvements in operational quality. Channel inventories are optimized, and it is recommended to focus on industry leaders with both channel advantages and product strength, judging that they are likely to continue to gain market share. Recommended portfolio includes: A-share liquor: Kweichow Moutai (600519.SH), Wuliangye Yibin (000858.SZ), Luzhou Laojiao (000568.SZ), Shanxi Xinghuacun Fen Wine Factory (600809.SH), Anhui Gujing Distillery (000596.SZ), Tsingtao Brewery (600600.SH). A-share non-alcoholic: Inner Mongolia Yili Industrial Group (600887.SH), Eastroc Beverage (605499.SH), Yanjian Shop Food (002847.SZ), Three Squirrels Inc. (300783.SZ), Chacha Food (002557.SZ), New Hope Dairy (002946.SZ), Foshan Haitian Flavouring and Food (603288.SH), Chongqing Fuling Zhacai Group (002507.SZ), Qianhe Condiment And Food (603027.SH), Zhongyin Babi Food (605338.SH), Fujian Wanchen Biotechnology Group (300972.SZ). H-share: MENGNIU DAIRY (02319), TINGYI (00322), U-PRESID CHINA (00220), CHINA RES BEER (00291), TSINGTAO BREW (00168). Risk factors: The progress of demand recovery is slower than expected, raw material price fluctuations are greater than expected, and market competition in various sub-sectors intensifies.