Founder: Overall demand in the food and beverage industry is under pressure; sub-sectors seek structural highlights.

Founder released a research report stating that overall demand in the food and beverage industry is under pressure, with structural highlights emerging across sub-sectors. In snacks, snack volume retail enterprises maintained high-speed growth while supply chain companies showed divergence, with optimism toward high-value-for-money channels and upstream quality suppliers with strong product R&D capabilities; in dairy, leading companies saw revenue recover first, tax back-payment disrupted short-term profitability, and the resonance of meat and dairy prices boosted sector sentiment, with the market potentially re-concentrating toward the top players; in soft drinks, industry revenue and profit continued to grow, while rising costs and weather disruptions affected sell-through, causing a temporary hit to industry fundamentals, with leading enterprises operating more steadily. Founder's main views are as follows: Snacks: Snack volume retail enterprises maintained high-speed growth, supply chain companies showed divergence, with optimism toward high-value-for-money channels and upstream quality suppliers with strong product R&D capabilities As consumers become more rational, downstream high-value-for-money chain channels are achieving rapid growth through more efficient retail models, continuously strengthening their bargaining power over upstream suppliers. Drawing on overseas experience, such enterprises possess the ability to navigate cycles through efficient operations and are currently still in a period of improving profitability. We recommend paying attention to leading snack volume retailers BUSYMING and Fujian Wanchen Food Group. Upstream suppliers can still achieve rapid growth by actively responding to consumer demand through category innovation, such as konjac, oats, and medicine-food homologous products maintaining relatively fast growth. We recommend paying attention to Yanker Shop Food, WL DELICIOUS, Guilin Seamild Foods, and YouYou Foods. Dairy: Leading companies saw revenue recover first, tax back-payment disrupted short-term profitability, the resonance of meat and dairy prices boosted sector sentiment, and the market may re-concentrate toward the top players In 26Q2, the dairy industry recorded revenue of RMB 46.96 billion, up 1.9% year-on-year; in 26H1, revenue was RMB 99.07 billion, up 3.5% year-on-year. In 26Q2, industry net profit attributable to parent was RMB 1.12 billion, down 62.3% year-on-year; in 26H1, net profit attributable to parent was RMB 7.08 billion, down 14.8% year-on-year. In terms of internal structure, leading companies led the revenue recovery, while more than half of the companies improved year-on-year on the profit side; gross margins and sales expense ratios moved in different directions, with more than half of the companies seeing slight expansion in gross-sales spread. Under operating pressure, internal expense control was generally strengthened, and profitability was mostly under pressure in Q2 due to large tax back-payments. In 2026, upstream capacity in the industry continues to be phased out, downstream demand is bottoming out and stabilizing, and the gradual commissioning of deep dairy processing capacity further increases raw milk consumption demand. Raw milk prices are stabilizing and rebounding, beef prices continue to rise, and the resonance of meat and dairy supports a recovery in sector sentiment. We recommend paying attention to: Inner Mongolia Yili Industrial Group, Shanghai Milkground Food Tech, New Hope Dairy, Xinjiang Terun Dairy, Ziyan Foods Group, and Guangdong Yantang Dairy. Soft drinks: Industry revenue and profit continued to grow, cost price increases and weather disrupted sell-through, causing a temporary hit to industry fundamentals, with leading enterprises operating more steadily In 26Q2, the soft drinks industry recorded revenue of RMB 10.06 billion, up 12.1% year-on-year; in 26H1, revenue was RMB 22.54 billion, up 17.4% year-on-year. In 26Q2, industry net profit attributable to parent was RMB 1.70 billion, up 9.9% year-on-year; in 26H1, net profit attributable to parent was RMB 4.29 billion, up 21.2% year-on-year. In terms of internal structure, leading companies maintained steady growth in both revenue and profit, while other companies showed significant tiered divergence in operating performance; leaders maintained an expanding gross-sales spread, while most other companies saw a slight contraction in gross-sales spread in 26Q2. Leaders maintained a trend of improving profitability, while other companies showed mixed year-on-year changes in profitability. In 2026, surging crude oil prices drove PET resin prices to high levels, paper prices rose slightly, and sugar prices may show signs of turning upward during the year, increasing cost pressure on the industry; abnormal weather disrupted peak-season sell-through, overall industry demand was relatively weak, and leading enterprises with excellent supply chain and channel management were more stable. We recommend paying attention to: Eastroc Beverage, CR BEVERAGE, Xiangpiaopiao Food, IFBH, and Huanlejia Food Group. Health supplements: Industry revenue and profit both returned to positive growth, but under stricter regulation and stronger competition, the market further concentrated toward leading players with more standardized operations In 26Q2, the health supplements industry recorded revenue of RMB 5.26 billion, up 2.3% year-on-year; in 26H1, revenue was RMB 10.60 billion, up 4.7% year-on-year. In 26Q2, industry net profit attributable to parent was RMB 700 million, up 35.8% year-on-year; in 26H1, net profit attributable to parent was RMB 1.23 billion, up 2.6% year-on-year. In terms of internal structure, there was some structural divergence in year-on-year revenue growth among companies, with the divergence effect on the profit side being more significant; under tightening industry regulation and intensifying market competition, gross margins and sales expense ratios moved in different directions across companies, with significant divergence in gross-sales spread structure and a general short-term decline in profitability. In 2026, with Douyin cracking down on cross-border health supplements, Xiaohongshu issuing new regulations on "three categories of products and one category of devices," Customs Order No. 280, and new medical insurance regulations being introduced, the health supplements industry has entered an era of stricter regulation, and sector sentiment has been temporarily suppressed. However, with the accelerated clearing of mid- and tail-tier brands, the industry is expected to further concentrate toward leading brands. We recommend paying attention to: H&H International Holdings, Hangzhou Minsheng Healthcare, Weihai Baihe Biology Technological, Sirio Pharma, Byhealth Co.,Ltd, and TSI Group Co., Ltd. Condiments: Revenue year-on-year growth generally slowed in 26Q2, with significant divergence in profitability performance On the revenue side, the core drag on the condiments sector's deceleration was weak catering demand, compounded by Q2 being a traditional off-season for sales. On the profit side, soy sauce demand is rigid, and after accelerated industry destocking since 2025, competition has eased, with expanded gross-sales spread driving profitability improvement. Non-soy-sauce condiments grew revenue relatively faster than soy sauce, but internal performance diverged significantly; against the backdrop of slow catering recovery, competition was relatively intense, and profitability performance was mediocre. We recommend focusing on industry leader Foshan Haitian Flavouring and Food as well as Jonjee Hi-Tech Industrial And Commercial Holding, which has put its reforms on track and is expected to continue accelerating its recovery; for other condiments, we recommend selecting individual stocks. Risk warnings: Macroeconomic recovery falling short of expectations, household consumption recovery falling short of expectations, food safety risks, and worsening industry competition.