CITIC SEC: K-shaped divergence during the peak dual-festival season; baijiu channel inventory is reasonable.

CITIC SEC released a research report stating that the fundamentals of the baijiu industry are gradually stabilizing at the bottom, showing characteristics such as wholesale prices stabilizing under the support of shipment control, sell-through remaining rigid despite the pullback in expense investment, and inventory steadily destocking. Against the backdrop of improved channel pessimism toward Mid-Autumn peak-season sell-through, a moderately positive expectation can be given for the subsequent New Year's Day and Spring Festival peak season. Bullish on the baijiu sector's recovery rally, and recommends increasing allocations to leading liquor companies on dips. The beer sector is undergoing the dual challenges of sales volume decline and insufficient consumption power. With the industry facing scale pressure for the full year, it is recommended to focus more on targets with market expansion capabilities. CITIC SEC's main views are as follows: Baijiu: K-shaped divergence during the Mid-Autumn peak season, reasonable channel inventory Wholesale prices remain stable, and dual-festival sell-through appears more rigid amid shrinking sales expenses. Three fundamental changes are taking place in the industry: 1) The industry is developing healthily, channels are no longer forcing inventory, and liquor companies have not issued excessively high payment collection tasks or targets; 2) Inventory has begun to destock, dealer inventory levels are already within half a year, the market is gradually shifting from chaos toward manufacturer-led "2C" end construction, and financial statement pressure lags behind sell-through improvement; 3) Under manufacturers' expense contraction and flexible incentives, the underlying demand is more evident. Sell-through before Mid-Autumn and National Day is expected to decline slightly, but it is more rigid demand rather than stimulated by sales expenses. Product price bands are diverging, with Moutai performing brilliantly. Before Mid-Autumn and National Day, high-end liquor and regional liquor performed slightly better than expected. Moutai and Wuliangye Yibin's market sell-through volumes overall showed strong performance, the proportion of self-operated channels increased significantly, and dealers have not yet fully perceived the prosperity of market demand; the sell-through decline trend in the sub-high-end segment remains relatively fast, companies find it difficult to find operational levers, and revenue declines have made expense investment more restrained; regional liquor demand in the 100-300 yuan price band is relatively rigid. Beer: Significant sales pressure in July-August, the beer industry is entering a "preserve volume, stabilize price" phase. Affected by weather and consumer demand, according to the National Bureau of Statistics, from January to August 2026, China's beer output by enterprises above designated size totaled 26.128 million kiloliters, down 2.1% year-on-year. It is expected that in the second half of the year the overall industry focus will be on "appropriately preserving volume." From the perspective of channel structure, as of September 2026, the non-on-premise proportion of leading enterprises has mostly fallen below 40%. Restaurant and nightlife channels are overall weak, and non-on-premise channels place greater demands on companies' sales team fundamentals. Consumers: Pay attention to AI development; liquor companies still need to return to building differentiation. According to recent Accenture and iiMedia Research data, consumers are returning to a more rational state, with good products and strong price promotions becoming the top two ways new brands attract consumers. According to Accenture's 2025 survey data, with the high degree of diversification and fragmentation of information, consumers make more rational decisions and rely on AI, search engines, and other tools for rapid analysis, with higher demand for quality or differentiation. 77% of consumers already have habits of frequent AI use, and 59% of consumers will consult AI tools when making consumption decisions (only 35% consult family and friends). In Funda.ai's recent survey of Muse by Meta, which has drawn market attention, shopping and food ordering needs have already ranked among the top ten demands, placing higher requirements on how products express themselves. Risk factors: Macro consumption demand falling short of expectations; intensifying competition in the baijiu industry; market performance of core baijiu products falling short of expectations; risk of high channel inventory; risk of rising raw material costs for beer; food safety issues, etc.