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Food and beverage industry: long-term prosperity cycle does not change

In 2018, the food and beverage sector has more corrections. From the beginning of the year to the end of October, the food and beverage sector and the broader market trend fell simultaneously, the Shanghai and Shenzhen 300 index fell 21.8%, while the food and beverage sector index fell 25.9%, slightly lower than the Shanghai and Shenzhen 300 index. From April to mid-October, the decline in the food and beverage sector has been lower than the Shanghai and Shenzhen 300 Index. In the first 10 months of 2018, the food and beverage industry ranked eighth in the industry, with a drop of 25.88%. In the third quarter of 2018, the fund holdings of the food and beverage sector amounted to 2.531 billion shares, and the shareholding ratio reached 5.21%. From all industry sectors, the shareholding ratio of food and beverage funds remained at the top.

The liquor industry has a prosperous cycle and rationally sees a slowdown in phased growth.

High-end liquor is in the seller’s market. The supply and demand relationship is tight. The demand is strong and the performance is strong. The demand for the industry boom is still strong. After the breakthrough of the production bottleneck, it is expected to achieve high growth. The price of high-end liquor is clear, and the living space of the next-end high-end liquor is even larger. The second-grade high-end liquor occupies a price below 800 yuan, and the product structure is obviously upgraded, and the performance elasticity is large. There is a phenomenon of differentiation and growth of real estate wines. The consumption power of third- and fourth-tier cities is strong, and the regional market has a broad space.

Demand in the dairy industry is recovering, the trend of concentration is not changing

In 2017, the demand of the dairy industry is in a state of recovery. The overall growth rate of the industry has increased to more than 5%. The increase comes from the expansion of the third- and fourth-line markets, and the market share of room temperature milk harvesting. The elastic release of dairy companies has achieved high growth in performance, and Yili has achieved double-digit growth as a leading company, and regional dairy companies have also gained more room for growth. In the first half of 2018, the competition in the industry intensified, and dairy companies increased their efforts on the cost. The high sales expense ratio of Yili shares affected the net interest rate. The increase in the sales expenses of dairy products came from the competition for market share. Yili’s room temperature milk The market share is constantly increasing.

Condiment volume and price growth space is sufficient, industry benign competition

The condiment industry is becoming more and more mature, and the room for volume and price growth is the change in eating habits and occasions. There is a product upgrade space for traditional condiments, which caters to the needs of consumers and has a large growth potential for high fresh soy sauce. The taste barriers make the condiments have a good competitive environment and benefit the platform-based enterprises. In the long run, platform-based companies have barriers to channel and consumption stickiness. Food and beverage channels are difficult to enter and replacement costs are high. First-comers have obvious advantages, strong brand power, and can be promoted through existing channels in the category expansion category. Upward upgrades are easily recognized by consumers and accelerate the segmentation of market share.

Investment Strategy

The liquor industry continued to prosper and its performance became more stable. It recommended the brand Maotai (600519). The competition pattern of the mass food sector was initially stable, and the performance of the leading benefit pricing power continued to grow. It recommended Yili (600887.SH), Haitian (603288), and delicious food (603517).

Updated: March 20, 2016 — 8:04 pm

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