CITIC SEC: The current wine industry is at a stage of bottoming out in both volume and price.

CITIC SEC released a research report stating that the wine industry is currently in a phase of stabilizing volume and price. In terms of sales volume, it is expected that an increase in the proportion of female consumers may slightly expand the drinkable demographic, but the overall growth potential remains limited; on the pricing side, the industry is gradually enhancing the price per ton through product upgrades, focusing on increasing the sales share of products priced over 100 yuan within the red wine category, while continuously boosting the sales proportion of white and ros wines. In the context of significant industry pressure and relatively mature consumer behavior, companies should place greater emphasis on how to maintain product strength and ensure effective channel reach, thereby achieving an increase in market share. It is advisable to focus on industry changes and the corresponding shifts in consumer behavior. Key points from CITIC SEC are as follows: Market size of 70 billion yuan, with a fragmented competitive landscape. According to Euromonitor data, by 2025, the wine market is expected to reach 72.8 billion yuan, with a CAGR of -14.1% from 2022 to 2025. The domestic wine market has undergone a cycle of rapid expansion, gradually declining after reaching its peak around 2017. The current industry is overall in a phase of contraction and structural differentiation; while the total industry volume continues to decline, there are certain structural opportunities emerging within categories and price segments. The competitive landscape of the domestic wine market is fragmented, with the top five companies holding only about 35% of the market share. There are numerous small and medium-sized wineries and regional brands, with many smaller producers continuing to exit the market. Development Review: The industry has undergone a complete cycle and is currently undergoing structural adjustments. 2005-2012: A golden decade marked by a government and business-driven rise in both volume and price. Following China's accession to the WTO in 2001, import tariffs were significantly reduced, while high growth in GDP and import/export volumes stimulated the explosion of business banquets and gifting scenarios, allowing wine to rapidly permeate as a symbol of "quality living," elevating China to the worlds fifth-largest consumer market; 2013-2017: Changes in consumption scenarios and demographics, with an increased focus on product quality and a rise in the proportion of imported products. After the introduction of the Eight Regulations, government-related scenarios gradually faded from the market, directly affecting the sales and channel models of products including Great Wall and Dynasty. According to Euromonitor data, the size of the Chinese wine market fell by 9.0% to 145 billion yuan in 2013, followed by a recovery (2014/2015/2016 year-on-year -0.1%/+12.5%/+8.7%). During this phase, international brands rapidly regained growth due to their better wine quality and brand strength; 2018-2021: A significant decline influenced by the pandemic and countervailing measures impacting industry development. The internal driving forces for growth within the industry weakened, compounded by trade relief measures resulting from the China-Australia geopolitical trade friction and the impact of the COVID-19 pandemic, which put pressure on both the supply and demand sides; 2022-2026: A time of stagnation and structural reconstruction. From 2022 to 2025, production is expected to decline by 54.7%. The wine industry is gradually reforming the market at the bottom, enhancing its understanding of consumer demand and improving its overall capability, with trends emerging towards structural premiumization, diversification of categories, and breakthroughs for domestically produced wines. Development of Self-Indulgence Scenarios, with high consumer expectations for product quality. The domestic wine consumer demographic is undergoing a deep paradigm shift from a previous heavy reliance on business and festive social attributes to a focus on self-indulgence in daily life, necessitating that companies possess the operational and promotional capabilities for family scenarios, rather than just catering to 2B scenarios like dining and group purchases. On the consumer front, after two decades of rapid development, the market has sufficiently educated middle-class consumers, with the number of individuals holding WSET wine certificates in China surpassing that of the U.S. and U.K., resulting in a solid base of discerning consumers. Based on a comprehensive assessment of consumption scenarios and demographics, it is expected that the sales of white wine categories will maintain growth above the mid-single digits in the next three years, making it a sub-industry with growth potential. Risk Factors: Macroeconomic consumer demand may fall short of expectations; intensifying industry competition; core product price performance in the wine industry may not meet expectations; channel inventory risks in the wine industry; food safety issues.