According to the Zhifin Finance APP, Tianfeng Securities released a research report stating that the national scale beer production volume in April/May/June decreased by -9.1%/-4.5%/-1.7% year-on-year, attributed to weak consumption growth and weather deviations, putting pressure on current drinking demand. Regional beers such as heavy and Yanjing benefit from tourism and reform logic, showing better sales performance than the national leaders. In the first half of 2024, the total retail sales of beverages in China's total retail sales of consumer goods reached 156.4 billion yuan, with a growth rate of 5.6%; Nongfu Spring, Uni-President (beverage business) saw a large double-digit increase in revenue, while Dongpeng beverages increased by 44%. Focus on 2 main themes: 1) It is recommended to pay attention to the cost dividend that can be anticipated and high dividends of Tingyi (00322) and U-Presid China (00220); 2) It is recommended to focus on the high growth of Beijing Yanjing Brewery (000729.SZ).

Beer sector

1. Revenue: Dining demand affected by weather, pressure on volume and price.

Volume: The national scale beer production volume in April/May/June decreased by -9.1%/-4.5%/-1.7% year-on-year, attributed to weak consumption growth and weather deviations, putting pressure on current drinking demand. Regional beers such as heavy and Yanjing, benefitting from tourism and reform logic, show better sales performance than national leaders.

Price per ton: The industry's ton price growth rate in H1 generally dropped to single digits; in Q2, some breweries saw a year-on-year decline in ton price (Tsingtao -0.9%, Budweiser -5.4%, Heavy Beer Business remained flat year-on-year), we expect this is due to: 1) Heavy and Budweiser have good product structures themselves, with relatively high ton price base, and more pronounced demand pressure after the Spring Festival effect in Q2. 2) Zhujiang and Yanjing's ton price growth is in double digits, attributed to their inherently low ton price and the outstanding performance of flagship products (U8, 97 Pure Draft).

Structure: Upgrading continues, with medium to high-end performance still outperforming the overall, the proportion is still increasing, but the growth rate in Q2 has slowed down. For example: Qingdao's medium to high-end sales volume declined by 5.5% year-on-year in Q2 and by 2.4% year-on-year in Q1; Heavy Beer's high-end revenue in Q2 declined by 1.9% year-on-year and increased by 8.3% year-on-year in Q1; Yanjing's high-end revenue in H1 increased by 10.6% year-on-year; Zhujiang's high-end/medium-grade/mass market revenue in H1 increased by 17.2%/-13.4%/+12.0% year-on-year, with high-end (Snow Beer, Pure Draft) volume increasing by 14.3% and ton price by 2.5% in H1, and high-end sales volume in Q1 by 15.05%.

Profits: In the first five months of 2024, the industry's growth rate was in the low single digits, and cost dividends were fully realized.

Costs: In H1, the industry's cost per ton decreased by around -1% year-on-year, with Q2 generally expanding the decrease in cost per ton compared to Q1. Barley prices declined, low-cost raw materials were used, and Tsingtao Beer showed significant improvement, while Chingqing Beer was affected by additional depreciation from the Foshan factory.

Expenditure: This year, with the Olympics and the European Cup, various companies are actively promoting sports marketing. The increase in sales expenses rate in H1 is generally between 0-1 percentage points, with Q2 showing a larger increase over Q1, though the overall trend remains positive.

Beverage Sector

H1 benefited from travel, with sub-track prosperity varying and expenditure intensifying.

Scale: In the first half of 2024, the total retail sales of consumer goods in China included a beverage retail sales of 156.4 billion yuan, a 5.6% increase; Nongfu Spring, U-presid (beverage business) revenue grew by double digits, and Dongpeng Beverage grew by 44%.

Profits: Cost dividends were derived from the decrease in bulk milk powder import prices and freight charges, with significant increases in gross margin for dairy-containing companies. Cost pressures came from white sugar and almonds (H1 procurement prices up more than 30%). Sales expenses rate generally increased in H1 and Q2, offsetting some of the cost dividends.

Track Prosperity Ranking: From the perspective of listed companies' growth rates, functional beverages and tea beverages performed better. From January to May 2024, the total beverage output of the industry was 78.3345 million tons, a year-on-year increase of 8.99%; particularly notable is the significant growth of "non-three major categories" beverages represented by tea beverages, protein beverages, and special purpose beverages, with the total output surpassing 25% year-on-year, favoring beverages with more functionality and health benefits.