Huachuang Securities: The liquor industry has expansion potential and momentum, and we are optimistic about leading companies seizing opportunities first.

Huachuang Securities released a research report stating that the liquor industry, under the resonance of supply and demand, has the potential and momentum for expansion, predicting that its scale may reach one trillion yuan in the next five years. Industry leader Jinjiu is experiencing upward operational momentum, with sustained interest extending to various product categories. Meanwhile, the sales of baijiu are relatively pressured, with leading baijiu companies increasing their efforts to position themselves for the second growth curve. By 2026, the strategic focus on health liquor is expected to increase significantly, with potential breakthroughs and expansion leveraging brand/channel advantages. Companies with outstanding competitive strength and a proactive approach to change are likely to seize industry expansion opportunities ahead of others. Huachuang Securities' main viewpoints are as follows: Luqiu: China's third largest liquor type, a hidden gem, but with a low degree of industrial standardization and capitalization As a native Chinese liquor type traceable to the Shang Dynastys Chao wine, luqiu embodies the essence of "food and medicine share the same source." It is based on yellow wine or baijiu, blending the essence of various herbs and minerals. However, this ancient liquor type, with a thousand-year history, only began its industrial transformation from traditional homemade brewing to modern consumer products at the end of the 20th century. Over the past nearly 40 years, it has undergone a tortuous evolution from rampant growth to standardization, from low-price volume to gradual upgrading. By 2025, the luqiu market size is expected to exceed 80 billion yuan, making it the third largest liquor type in China. In recent years, the industry has gained traction, but its level of standardization and capitalization remains significantly behind its growth, displaying characteristics of being large but not strong. The main challenges include the unclear boundaries of category recognition, a long-term focus on the stereotype of elderly health supplements, and a lack of scientific claims regarding efficacy, which constitute bottlenecks for value validation. Old trees can bear new buds, focusing on the threefold development opportunities for luqiu in the context of the new beverage era The shift in the times is providing unprecedented historical opportunities for luqiu. First, on the demand side, the convergence of two major consumer philosophieshealth and wellness, and mild intoxicationis reshaping the underlying logic of the Chinese beverage market. The traditional business scenarios associated with alcoholic beverages are weakening, while new drinking scenarios focused on self-enjoyment and light socializing are rapidly expanding. Second, on the supply side, with the rising popularity of luqiu, the willingness of channel agents is increasing, allowing more players to enter the market. Many leading baijiu companies are intensifying their involvement in the luqiu sector, attempting to create a second growth curve through the reuse of brand and channel advantages. Jinjiu, in particular, has achieved a breakthrough from traditional health liquor to light wellness beverages through a revolutionary sales channel and the phenomenon of recommendations on platforms like Xiaohongshu. Third, on the policy side, the 2021 national standards classify luqiu as an independent liquor type with more standardized regulations, and the government is actively promoting the development of various health-related industries, providing dual institutional support for standardization and health. The industry is entering a period of vigorous development, with 2025 to 2030 being a critical window for expanding from "brand heat" to "category heat," with a trillion-yuan track on the horizon From 2022 to 2025, the luqiu industry is expected to see a compound annual growth rate of approximately 10%. The phenomenal breakthrough of Jinjiu in 2025 is anticipated to further elevate industry interest. The external conditions for the expansion of luqiu are already maturing, and the period from 2026 to 2030 is judged to be a critical leap period for industry scale. Looking ahead to the next five years, the luqiu industry is likely to enter the trillion-yuan track. 1) If the brand heat continues in the next five years, the top 2-3 brands will expand, and the industry will primarily rely on traditional health supplement demand for modest single-digit growth, with the market scale expected to slightly expand to over 90 billion. 2) If the heat extends to categories, the silver economy will provide a solid foundation, while the combined attributes of health maintenance and mild intoxication will boost the proportion of young and middle-aged consumers, breaking through the boundaries of new beverages, likely diverting some demand from baijiu and beer. Based on a compound growth rate of 6-10%, the industry scale is expected to exceed one trillion yuan by 2030. Four types of players: Competition is robust, each with strengths, driving industry expansion, with Jinjiu breaking through first Traditional luqiu enterprises: Strong market foundation, with Jinjiu leading breakthrough growth. These companies are core participants in the industry, having cultivated a solid market base for many years. The leading company Jinjiu achieved a phenomenal breakthrough in 2025, experiencing reverse growth and establishing itself independently in the market. Behind this success is the companys alignment with the health and self-enjoyment trend, adherence to ensuring channel profits, non-saturated sales without excessive stock, and continuous innovation in marketing, with the momentum of its core products continuing. Yedao is a time-honored brand deeply rooted in South China, recently upgrading and modernizing its products, though the effectiveness of its youth-focused transformation remains to be verified. Famous baijiu enterprises: Reusable advantages in branding, channels, and funding, cross-industry cultivation of a second growth curve. In recent years, renowned baijiu brands such as Moutai, Wuliangye, and Luzhou Laojiao have strengthened their luqiu strategies, leveraging their comprehensive operational advantages over other players. However, the general strategic focus within their organizations tends to be low, and there are certain practical challenges regarding inter-category synergy. Pharmaceutical companies: Professional endorsement and easier recognition of efficacy, but their distribution channel capabilities need validation. Pharmaceutical companies have professional backing in formula development, quality control, and efficacy recognition, making it easier to gain consumers' trust. However, they generally lack experience in operating consumer goods, and their distribution channel capabilities and marketing strategies targeting younger audiences require validation. Emerging enterprises: Strong in innovative marketing, with a solid customer base. Emerging companies such as Meijian excel in low-alcohol, high-appeal designs and social dissemination, showcasing strong innovation and promotional capabilities, making them a significant force in consumer education for the category. Nonetheless, their efficacy claims are weak, and they lack brand maturity, leading to concerns about their long-term competitive strength. Insights for baijiu enterprises The trend towards diversification is becoming clearer. In the initial stages, it is recommended to enhance product positioning marketing, while in the medium term, leverage operational advantages to create a second growth pole. The firm predicts that future liquor consumption will show a trend towards diversification, and that early positioning for the second growth curve among traditional liquor enterprises is strategically significant. If the brand heat continues in the next five years, the incremental space for the luqiu industry will be relatively limited, making it crucial to focus on differentiated marketing to capture certain market shares. If the heat of the category increases, liquor enterprises should heighten their strategic focus, coordinating product, channel, and operational advantages to strengthen promotional efforts for new categories. Risk warning: Industry competition intensifies, liquor demand underperforms expectations, and younger audience promotion fails to meet expectations.