The food and beverage industry is currently positioned at a crucial window for allocation, characterized by a bottoming recovery and structural divergence, with valuations having retreated to historically low ranges, offering a substantial margin of safety. The sector's trends of pursuing high quality-to-price ratios, functionality, and health consciousness are persisting. Channels such as discount snack retail, membership-based supermarkets, and instant retail are expected to continue contributing incremental growth. Looking ahead to the second half of the year, as new consumption scenarios successively emerge, expectations for a valuation recovery in the sector are anticipated to gradually materialize.
Investment Strategy and Core Views
The recommended investment strategy emphasizes holding leading companies, positioning for recovery, and selecting value. For the baijiu (distilled spirits) segment, the focus is on capturing valuation recovery and high-dividend yields. For mass-market foods, the emphasis is on leading companies with outstanding competitiveness and strong earnings certainty, targets with reasonable valuations and continuously improving fundamentals, and value-oriented stocks offering stable growth with high dividends.
Baijiu Sector Outlook
Earnings are expected to recover in stages, entering a new phase of structural recovery. Leading companies with faster clearance cycles and clear market share logic are likely to recover first. In the first half, the baijiu sector remained in the latter stages of bottoming and clearance, with year-on-year declines in sell-through narrowing sequentially. Prices for Moutai have shown a clear trend of stabilization and recovery, while the sector continues its inventory destocking and financial statement adjustment clearance. Looking ahead to the second half, as the year-on-year base for sell-through further lowers and the marginal impact of policies potentially dulls, aiding a year-on-year turn to positive sell-through, deeper inventory destocking is expected to gradually increase positive signals from channels. Earnings for the baijiu sector in the second half may recover in stages, with the industry stepping into a new phase of structural recovery, shifting from pure market share competition to a parallel model of "optimizing existing markets and expanding into new ones," leading to increasingly diversified growth models. Focus is on leading companies with rapid clearance and clear share logic, as well as innovative enterprises expanding volume.
Mass-Market Foods Sector Outlook
Fundamentals are bottoming out and stabilizing, with new channels and product categories driving differentiated growth, revealing long-term allocation value. For the second half, channels like discount snack retail, membership-based supermarkets, and instant retail are anticipated to keep providing incremental growth. Sub-sectors like snacks and soft drinks are expected to maintain relatively high activity. For dairy, raw milk prices in the second half of 2026 are projected to bottom out and rise gradually, with demand for liquid milk stabilizing. For condiments and frozen foods, competitive landscapes are optimizing, with profitability gradually recovering. The recommendation is to select leading companies in sub-sectors with solid competitive moats and strong earnings delivery capability, alongside high-dividend targets possessing long-term, stable investment value.
Key Risks
Potential risks include a slower-than-expected recovery in demand, volatility in raw material prices, intensifying competition within sub-sectors, and food safety incidents.