CITIC SEC: Snack Spring Festival stocking is good, focusing on the WeChat small store channel dividend.

CITIC SEC released a research report stating that, against the backdrop of the emergence of new channels such as member supermarkets, Douyin e-commerce channels, and bulk snack stores in recent years, the vast majority of listed snack companies have seized the channel dividend opportunity through organizational, product, and supply chain adjustments, achieving an average annual revenue growth of over 20%. In the trillion-dollar snack industry with low to mid-single-digit annual growth rates, they have maintained a rapid increase in market share. With the recent push by Tencent (00700) in the WeChat mini-store space, if the development of the WeChat mini-store channel exceeds expectations in the future, snack companies are expected to achieve good business growth in this channel. It is important to focus on the release of demand for snack companies' WeChat mini-stores during the 2025 Spring Festival season. Recent channel feedback shows that snack stocking for the Spring Festival is growing well, and the sector is catalyzed by the logic of new channels from WeChat mini-stores, indicating good investment opportunities in the snack sector. CITIC SEC's main points are as follows: Snack companies are stocking up well for the Spring Festival, and demand for snack gifts during the Spring Festival is expected to rise. According to recent feedback from fasting distributors, stocking up for the 2025 Spring Festival is ongoing, with the inventory of snack gift packages growing by 10% compared to last year, showing an accelerated pace of stocking compared to last year. Snack gift boxes, especially nut gift boxes, have gradually become a preferred gift form for young people, replacing some of the demand for other food and beverage gifts during the Spring Festival. Taking into account the active promotion of snack gift boxes by major listed snack companies, it is expected that snack gift products will maintain good sales during the 2025 Spring Festival. Tencent's push in WeChat mini-stores is expected to bring a new round of channel dividends to the snack industry, and the gift-giving function is expected to drive growth in snack gift demand. On December 17, 2024, WeChat automatically activated the "gift-giving" function, with the product details page displaying a "support gift-giving" entrance. In January 2025, WeChat mini-stores launched a "private domain incentive program", offering fee reductions for orders directly transacted through specific scenarios. In the past few years, the growth of the snack industry has relied on new channel dividends. With the emergence of new channels such as bulk snack stores, member supermarkets, and social e-commerce in the past 2-3 years, excellent listed snack companies have adjusted their supply chains to embrace new channels and achieve good growth. As a new channel, WeChat mini-stores, under Tencent's efforts, are expected to become a new flow channel, bringing new growth opportunities to excellent snack companies. The gift-giving function of WeChat mini-stores is expected to boost demand in private domain gift-giving scenarios, with snack products, with moderate unit prices, suitable for all ages, and with novel product and packaging features, benefiting from the opening of the gift-giving function on WeChat mini-stores and achieving growth in gift-giving demand. The WeChat mini-store channel favors snack companies with strong e-commerce operation capabilities & strong brand power. If the GMV of the WeChat mini-store channel grows rapidly, two types of snack companies will benefit more: 1) Snack companies with strong e-commerce operation capabilities, which adopt a multi-SKU product matrix and have excellent business capability and a deep understanding of private domain traffic operation in their e-commerce team, are expected to achieve large sales volume in the WeChat mini-store channel. 2) Snack companies with strong brand power & product strength, the WeChat mini-store gift-giving channel favors the growth of snack demand with strong brand power, and snack companies with good products are expected to benefit from efficient social spread through the gift-giving channel on WeChat mini-stores. Risk factors: Unexpected macroeconomic consumption demand; Sharp rise in raw material costs; Development of the WeChat mini-store channel falls short of expectations; Intensified industry competition; Food safety and quality issues.