China Galaxy Securities: Top liquor companies set the tone for next year's strategy, traditional consumption is expected to see bottom-up improvement.

China Galaxy Securities released a research report stating that the food and beverage index in December experienced a slight correction, with the main reasons being the delayed Mid-Autumn Festival leading to a slight slowdown in November's sales data compared to the previous month, and the later Spring Festival stocking period in 2026 potentially putting pressure on Q4 revenue growth. Within the sector, the snack, seasoning, and pre-packaged food indices saw small positive gains. Looking ahead to 2026, the firm maintains its previous judgment that new consumption trends will continue but there may be a rotation within the sector, while traditional consumption may see improvements at the bottom. Key points from China Galaxy Securities: Top liquor companies set strategies for 2026, balancing counter-cyclical adjustments and long-term changes 1) Counter-cyclical adjustments: major liquor companies mentioned that the industry will continue to face downward pressure in the short term, so they will focus on maintaining price systems and stabilizing channel profit margins. Specific measures include developing high-margin single products for high channels and increasing investment in expenses to boost distributor enthusiasm. 2) Advancing long-term changes: continue to cultivate demand from new, younger consumer groups; develop products in line with new consumption trends (e.g. Moutai's own brand formula liquor, Wuliangye Yibin's low-alcohol liquor, Fenjiu's bamboo leaf green fruit-flavored liquor); embrace new channel changes, including maintaining relationships with e-commerce platforms and actively cooperating with instant retail channels. In summary, the firm believes that the industry will be in a bottoming process in 2026, with a narrowing decline in end-demand and continued clearance of supply from listed liquor companies, but with long-term value becoming more evident as industry adjustments occur, and liquor companies looking ahead to long-term changes may achieve excess returns in the next upturn cycle. Data tracking: prices of Feitian Moutai rebounded in December 1) Liquor prices: Kweichow Moutai: on December 24, the wholesale price of Feitian whole box/bottled liquor was 1600/1590 yuan, up +20 yuan from November 30, and down -720/-660 yuan compared to the same period last year. Wuliangye Yibin: the eight generations of Puwu wholesale price was 850 yuan, flat from November 30 and down -100 yuan from the same period last year. Luzhou Laojiao: Guojiao 1573 wholesale price was 840 yuan, down -10 yuan from November 30 and -20 yuan from the same period last year. Jiangsu Yanghe Distillery: M6+ wholesale price was 540 yuan, flat from November 30 and down -10 yuan from the same period last year. 2) Packaging materials: as of December 23, 2025, glass/PET/film prices were YoY -26.4%/-3.8%/-10.5%, aluminum/carton prices were YoY +10.5%/+4.9%. 3) Raw materials: sugar/flour/palm oil/pork/sunflower seed prices were YoY -15.8%/-1.9%/-3.7%/-23.8%/-6.2%; quail eggs/soybean prices were YoY +12.4%/+7.8%. Barley import prices in November 2025 were YoY +1.1%. Dairy products: on December 18, domestic fresh milk was priced at 3.03 yuan/kg, down -2.6% YoY and up +0.3% from the end of the previous month; GDT auction whole milk powder was bid at 3364 USD/ton, up 15.6% YoY and down -2.5% from the previous month. Market tracking: food and beverage index corrected in December As of December 23, 2025, the food and beverage industry had a 3.1% decline, with an excess return relative to the Wind A-share index of -4.9%, ranking 28th out of 31 sub-industries, a slight decrease from November. Half of the sub-sectors saw an increase, with snacks, seasonings/fermented products, and pre-packaged foods leading with increases of +3.6%, +3.0%, and +2.6%, respectively. Risks to watch: Risks include slower-than-expected demand recovery, intensified industry competition, underwhelming effects of downstream channel changes, and food safety risks.