According to Zhito Finance APP, China Securities Co., Ltd. has released research reports stating that since September, new fiscal and monetary policies have been introduced, sending a clear policy signal of efforts to achieve the annual economic and social development goals. In 2025, there will be more fiscal monetary policy space, focusing on boosting consumption and expanding effective domestic demand, which is expected to bring the food and beverage industry to an upswing. In the baijiu(chinese liquor) sector, maintaining the long-term value of industry leaders and adjusting for healthy development is critical. For beer, attention should be paid to policies stimulating incremental consumption. In dairy products, fresh milk prices have risen month-on-month, and preparations for the Spring Festival peak season should be noted. For dining chains, the effects of consumption vouchers are gradually becoming apparent, and improvements in the dining chain industry should be observed. The beverage industry remains highly prosperous.

Main viewpoints of Zhongxin Jiandao are as follows:

1. Since September, significant meetings have continuously released a clear policy signal to strive to achieve annual economic and social development goals, with policies such as lowering reserve requirements, interest rates, and stock mortgage rates, supporting local governments to resolve administrative risks, issuing special government bonds to supplement core tier-one capital, using various tools to stabilize the falling real estate market, and increasing support for key groups. Focused on boosting consumption and expanding effective domestic demand, the food and beverage industry is expected to meet an upswing point, with performance and valuation likely to continue to improve. The baijiu(chinese liquor) sector is expected to benefit from the domestic economic boost and the recovery in consumer spending, returning to a consumption upgrade path. The profitability of leading liquor companies is likely to recover faster. Currently, the overall valuation of the baijiu(chinese liquor) sector is still at a low level, highlighting long-term investment value.

2. With the increase in policy stimulus, cyclical restaurant chains are expected to benefit first from improved expectations. Continued optimism: 1) The leisure snack and beverage industries maintain high prosperity, with new channels providing important incremental opportunities for companies in the industry; 2) In conjunction with the continued recovery of the dining channel, attention should be given to condiments, beer, and restaurant chain symbols that have expectations for new product development or reforms. Additionally, the current market price of molasses has further decreased month-on-month, greatly helping yeast companies enhance profit elasticity. 3) The turning point for raw milk cycles is approaching, gift-giving scenarios are expected to recover, dairy products will continue structural upgrades, and high dividends will highlight cost-effectiveness.

Baijiu(chinese liquor): maintaining the long-term value of industry leaders and adjusting for healthy development.

In November, the baijiu(chinese liquor) market performance remained flat. After Kweichow Moutai controlled supply, prices stabilized somewhat. After increased investment in costs, the price of Wuliangye has decreased somewhat. Leading liquor companies have actively controlled the sales rhythm, reducing channel funding and inventory pressure. Most liquor companies have lowered their growth expectations for 2025, aiming to deepen and solidify the market with the premise of promoting sales. At the same time, they remain cautious about expense investments and continue to prioritize the importance of price and brand, maintaining an optimistic outlook for industry demand next year.

From an investment perspective, leading companies have exceptionally strong business models. The pressure on the consumer environment in the short term has resulted in the sector's valuation being at a relatively low level, increasing the safety margin for investment. As beverage companies adjust their strategies to emphasize the healthy development of the industry chain, the profit foundation becomes more solid.

Beer: Pay attention to incremental consumption stimulus policies, waiting for demand to recover.

Starting in October, cities like Shanghai and Hangzhou have gradually launched dining consumption vouchers. With the implementation of fiscal debt policies, consumer-related policies are expected to gradually take effect. Beer consumption in 2025 is likely to restart a recovery in both volume and price, paying attention to the gradual development of policies that stimulate dining demand.

The beer industry is at the end of its capital expenditure phase. Good receivable periods and stable operating cash flow give beer companies the ability to increase dividends. In 2024, strong brands like heineken nv sponsored adr, chongqing, lebou, and U8 have also strengthened regional penetration and national trend, further helping companies complete the positioning in the 8-10 yuan price range. The industry's structural upgrade is still ongoing. The competitive landscape in the beer market is stable, and under a package of stimulating policies, beer consumption is expected to restart a recovery in both volume and price.

Dairy product: Fresh milk prices have increased compared to last month, pay attention to stocking up for the Spring Festival peak season.

According to data disclosed by the Ministry of Agriculture and Rural Affairs, in the fourth week of November (collection date is November 27), the average price of fresh milk in 10 major producing provinces including inner mongolia and hebei is 3.12 yuan/kg, a year-on-year decrease of 15.2% and a slight month-on-month decrease of 0.3%. However, in recent weeks, there are signs that fresh milk prices are stabilizing. From both supply and demand perspectives, the supply of dairy products is continuously optimizing, and from the demand side, policies are gradually forming certain favorable stimuli for consumption, which is expected to continuously drive dairy product consumption. Especially as the end of the year approaches the Spring Festival, there has been an increase in channel stocking.

Overall, the trend of supply and demand structure next year is expected to improve compared to this year. Meanwhile, from a cost perspective, the cost of raw milk may still run at low levels in the future. In the fodder market, prices of corn have also decreased, and breeding costs have improved, reducing cost pressure for dairy companies.

Condiments & frozen foods: The stimulus effect of dining vouchers is gradually becoming evident, pay attention to the improvement progress in the dining chain industry.

The current market is fluctuating due to expectations, mainly because this year's dining demand has been weak, putting overall pressure on the dining chain. Consequently, market expectations for policy support have increased. In the consumer sector, various types of consumption vouchers are currently the main means of stimulating consumption, and many regions have begun to issue dining vouchers, such as in Shanghai and Shenzhen, especially Shanghai, where the issuance is more substantial.

According to data from Meituan, after the issuance of the "Enjoy Pudong" dining vouchers, consumption at dining establishments in Shanghai's Pudong New District increased by 19.8% in November compared to October, while the average daily number of dine-in consumers also rose by 10.8%. This indicates that dining vouchers have provided effective stimulation to the dining sector and are likely to drive the recovery of dining chain demand.

In the short term, most symbols have already fallen to historically low levels, with some symbols achieving dividend yields of over 3%. Current sentiment is marginally improving. Considering the stabilization of fundamentals along with policy stimulus, the following directions are likely to benefit:

1) Leaders in segmented industries, with comprehensive channel layouts and rich product lines, sufficiently adapting to diverse consumption needs across multiple scenarios and channels, are likely to benefit from the recovery of the dining industry; 2) Improvement in industry prosperity is expected to lead to a pickup in growth rates, and there is a logical marginal improvement on the cost side; 3) Driven by convenience trends, industry penetration rates are continuously increasing, and the companies have a relatively high dividend rate; 4) Symbols with reform expectations can outperform the industry through optimized organizational efficiency and tapping into inherent potential.

Soft drinks & snack food: Nongfu tea drinks continue to grow strongly, and competition in bottled water is expected to gradually ease.

Nongfu Spring's tea drink segment continues to maintain a high growth rate, with Dongfang Shuye leading the market share in the sugar-free tea segment, showing good performance even from a high base. From an industry perspective, the bottled water segment has not experienced vicious competition. Although Nongfu bottled water is still under pressure year-on-year, it is gradually recovering. The company is appropriately controlling the proportion of green water, increasing the management of bottled water channels and sales management, and the bottled water business is expected to stabilize and rebound. The beverage industry maintains a high level of prosperity, and the recent price war trend is easing, so high-growth symbols are recommended.

The overall growth rate of snack food is at a relatively high level among food and beverage companies, but there is internal differentiation. Youyou Foods benefits from new channel incremental effects, with performance exceeding expectations in the third quarter. Yanker Shop Food shows steady revenue growth, but the net income has come under pressure excluding non-recurring items. Three Squirrels Inc. has seen effective results from channel and organizational adjustments, achieving high growth in both revenue and net income.

Most companies in the sector are on a fast development track, and the third quarter reports confirm the strong growth momentum and good fundamentals of snack food companies. After previous adjustments, snack food company valuations have returned to a more reasonable range, and growth symbols in the sector continue to hold investment value.

Risk Warning: The demand recovery may fall short of expectations. In the past two years, economic growth has slowed due to factors such as the macro environment, and national income growth has also been affected. The pace of recovery in resident income growth and improvement in consumption power in the medium to short term may not meet expectations; Food safety risks remain a hot topic for consumers in recent years. Although industry chain companies have continuously improved production quality control levels, there are still risks regarding food quality safety due to the long industry chain and the involvement of numerous links and companies; Cost fluctuation risks have increased in recent years with greater price volatility of upstream commodities in the food and beverage sector. High-end baijiu (Chinese liquor), being a high-margin category, is less affected by fluctuations in raw material prices. However, categories with a higher cost proportion, such as low-end liquor and condiment, may see profitability affected relatively more by fluctuations in raw material prices.