China Securities Co., Ltd.: After high-end brands in the liquor industry complete their transformation to the C-end, the valuation center has significant upward potential.

China Securities Co., Ltd. has released a research report that constructs a four-quadrant model for consumer goods based on the price-direct sales ratio, analyzing the iterative patterns of global high-end consumer goods channels. The report examines international benchmarks such as Apple and Herms, demonstrating the inevitable trend of high-end categories transitioning from multi-level distribution in the B-end to direct-to-consumer (DTC) connections in the C-end. It further focuses on the domestic high-end liquor industry, breaking down channel changes, valuation reconstruction logic, and differentiation paths for leading companies. China Securities Co., Ltd. notes that the shift in business models drives the restructuring of valuation systems. In the liquor industry, high-end brands that have completed the C-end transformation will gradually shed their labels as cyclical stocks, moving towards becoming high-end consumer growth stocks, with significant upward potential in their valuation centers. The main viewpoints of China Securities Co., Ltd. are as follows: From the perspective of channel evolution, consumer goods can be divided into four quadrants: high price-high direct sales, high price-low direct sales, low price-high direct sales, and low price-low direct sales. Both Apple and Herms have successfully reduced the role of intermediaries and heavily invested in direct sales systems, achieving direct connections between brands and consumers. This allows them to firmly grasp pricing power, brand image, and user data, a developmental logic that also applies to high-end liquor. The domestic liquor industry has experienced multiple stages, including planned total sales, inter-channel sales, and deep distribution, and has long relied on distribution channels, existing in the high-price-low-direct-sales quadrant. With the advent of the new normal in the economy, the industry has fully embraced C-end transformation, compounded by intensified competition, evolving consumption scenarios, and mature digital technologies. Leading liquor companies are actively streamlining channels and increasing direct sales, advancing towards a high-price-high-direct-sales model. The transformation of the business model drives the reconstruction of the valuation system. Under the traditional B-end channel-driven model, enterprise performance is heavily influenced by inventory cycles and macroeconomic conditions, exhibiting strong cyclical attributes and significant valuation fluctuations. After transitioning to DTC connections with the C-end, profitability relies on genuine repeat purchases from users and high-consistency recurring revenue, smoothing out cyclical fluctuations and significantly enhancing profitability quality and operational certainty. With a mature direct sales ecosystem, Apple and Herms enjoy valuations far exceeding those of their peers dependent on distribution. Correspondingly, in the liquor industry, high-end brands completing the C-end transformation will gradually shed their labels as cyclical stocks, transition to high-end consumer growth stocks, and possess significant upward potential in their valuation centers. Risk warnings: Demand recovery may fall short of expectations. In recent years, economic growth has slowed due to factors such as the macroeconomic environment, affecting national income growth. The pace of recovery in residents' income growth and improvement in consumer capacity may be slower than anticipated in the medium to short term. Inventory reduction in liquor may not meet expectations. The liquor sector is currently in an inventory reduction phase, and the performance of liquor companies is declining to enhance channel health. If the recovery of sales falls short of expectations, the time for inventory to bottom out will be delayed, extending the industrys cyclical turning point. High-end demand may continue to be weak, putting pressure on high-end prices. Food safety risks. In recent years, food safety issues have been a persistent concern for consumers. Despite continuous enhancement of production quality control levels by companies along the supply chain, risks regarding food quality and safety still exist due to the long supply chain and numerous involved parties and enterprises. Policy risks. Adjustments to liquor consumption taxes and regulatory policies may suppress industry profitability. Additionally, policies that impose strong restrictions on officials alcohol consumption may affect the foundational demand for liquor.