CITIC SEC: Leading liquor company speeds up focus on consumers, optimistic about opportunity to allocate at the bottom of the industry.

CITIC SEC released a research report stating that in recent days, major liquor companies have been holding important meetings to convey their determination to adjust, reform, and rebalance their channels, which is beneficial for the long-term healthy development of the industry. Since the fourth quarter of 2025, leading liquor companies have been taking measures such as controlling shipments continuously, reducing burdens for distributors, and promoting opening bottle sales to lower channel inventory. Taking into consideration factors such as gradually stable sales, an extra day of the 2026 Spring Festival holiday, and the consumption scene during the Spring Festival for liquor, it is expected that liquor sales during the 2026 Spring Festival are likely to remain stable, without the need for excessive pessimism. Considering the clear trend of gradual recovery in the future, it is optimistic about the bottom allocation opportunities in the liquor industry, focusing on the resilience of leading companies such as Wuliangye Yibin as demand recovers. It is expected that the beer industry will experience a mild recovery from the bottom position in 2026, showing a trend of stable volume and price growth, and it is recommended to pay attention to the implementation of a firm upgrade strategy, strong channel control, and industry leaders with brand premium capabilities. CITIC SEC's main points are as follows: Liquor: Leading companies accelerate their focus on consumers and actively promote reforms in their existing channels. Since 2026, the industry has witnessed many major events and changes, driving upgrades and breakthroughs in the liquor industry channels. In the short term, leading liquor companies have actively embraced consumers, with unprecedented intensity in consumer touchpoints and education; mid-tier companies have appropriately lowered prices to maintain market equilibrium in terms of quantity and price; and tail-end companies have discontinued production and cleared inventory. In the long term, a "consumer-centric" channel synergy system is expected to become the core competitive strength in the next industry cycle, requiring companies to gradually improve their customer acquisition capabilities, service capabilities, and scene operation capabilities. Under the new market cultivation, the industry as a whole is expected to benefit from the effects of acquiring new consumers and enhancing consumer education in this current round. Beer: Structural upgrades continue, and high-quality development drives value growth. According to data from the National Bureau of Statistics, the total output of large-scale beer companies in the first 11 months of 2025 was 331.8 million hectoliters, a year-on-year decrease of 0.3%, with a slight decline in industry output. The industry concentration remained high, and the competition focus of breweries gradually shifted to value chains and product quality, with consumers increasingly diversifying and demanding high-quality lifestyles, posing higher requirements for brand building, scene penetration, and channel control for breweries. In terms of channels, the catering channel is showing a mild recovery from the bottom position, but the channel markups and efficiency levels are still below pre-epidemic levels; non-alcoholic beverage channels are still rapidly expanding, with the penetration rate of channels such as instant retail showing accelerated growth. The bank believes that the beer industry will experience a mild recovery from the bottom position in 2026, showing a trend of stable volume and price growth, and recommends focusing on industry leaders with a firm execution of an upgrade strategy, strong channel control, and brand premium capabilities. Risk factors: Macro consumer demand falls below expectations; intensified competition in the liquor and beer industries; the core product prices of the liquor industry do not perform as expected in the market; channel inventory risks in the liquor industry; slow recovery of catering consumption; food safety issues, etc.