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A core industry that outperforms most funds

Release Time:2021-05-12 Topic:Fund company profitability ranking Reading:51 Navigation:Stock Liao information > Gourmet food > A core industry that outperforms most funds phone-reading

   This article is a summary of the in-depth report jointly issued by the Financial Research Institute and Hengtian Enterprise Finance Association. Please scan the code for the full text.

  

   Food and beverages are the closest to investors’ lives An industry is also one of the most popular industries in the capital market. In the bull market of the past year and a half, the performance is not inferior to that of technology, especially the China Securities Liquor Index almost outperformed most funds. Since the beginning of this year, the A-share food and beverage sector has risen three times that of the broader market, and Maotai's share price has soared from less than 1,000 yuan to more than 1,800 yuan. As of September 22, during the epidemic period, the share price of Yun-listed Liangpin Store had risen by 252%, the share price of Yasui Foods, which specializes in fish balls, rose 185%, and the share price of cheese listed company Myokolando rose by 173%... Farmer The listing of Shanquan Hong Kong stocks made Zhong Suisuan surpass Ma Huateng to become the "richest man in half an hour."

   The reason why the food and beverage industry can soar all the way is the embodiment of the long-term deterministic advantage brought by good business and good company. Food is a must-have consumer product. On the one hand, when the external environment is turbulent and economic growth is slowing down, food and beverage, as the basic needs of residents, are purely domestic demand targets, and have stronger expectations than other industries. On the other hand, when our per capita GDP exceeds US$10,000, consumption upgrades will always be the main theme of the times. Japan has gone through this process for 40 years, and we will go through it for a long time. In the wave of consumption upgrades, the "car-making movement" of consumer products will allow more and more food and beverage brands to develop and grow into the secondary market, and even surpass traditional giants such as Nestle and Coca-Cola in market value.

   But at present, whether it is from the perspective of absolute valuation level or relative valuation increase, the valuation of food and beverage is not cheap anymore, and the performance is seriously overdrawn from the perspective of dynamic changes in valuation. , The margin of safety is not that high. The rapid rise in valuation has also caused some doubts in the market. Can the company's growth really support such a high valuation? In fact, for consumer industries such as food and beverage, the investment logic should be changed from short-term valuation thinking to long-term pattern thinking. The share of leading food and beverage companies continues to accelerate expansion, which means that their growth is very certain in the next 5-10 years, and there are fewer and fewer factors that can interfere with their growth, and steady growth allows them to enjoy a valuation premium. When leading companies shift from cyclical growth to stable growth, high valuations were driven by short-term high growth in the past, but now it should be long-term high certainty to drive high valuations.

   Therefore, in order to explore where the long-term growth certainty of food and beverage companies comes from, our 31,000-word in-depth report will trace its origin, development status, market performance, segmentation, development trends and A comprehensive analysis of the investment logic, opportunities and risks of the food and beverage industry from the perspectives of key companies and investment opportunities, the article takes you to dismantle this industry that is closest to life.

  

◆◆Report summary ◆◆

   The food and beverage industry is a general concept with many sub-industries. It can be roughly divided into necessities and options. Necessities are the condiments, rice noodles, grains and oils, meat products, dairy products, etc. that we use every day. The most important optional products are liquor, beer and other alcoholic beverages. In the period of economic downturn, the performance of general necessities is relatively strong, while in the period of economic upturn, optional consumption will exceed expectations. In addition, there is a classification method is high-end products and popular products. High-end products include white wine, red wine, and rice wine, while popular products include beer, dairy, meat products, beverages, condiments, and snack foods. During inflation, high-end products are driven by demand, while mass products are driven by cost. During deflation, high-end products are all prosperous, and every loss is lost, while the leading mass products continue to expand.

   The rapid development of the food and beverage industry mainly benefits from consumption upgrades, Domestic demand is expanding, and the value of category leaders is prominent. First, the disposable income of residents continues to grow, ushering in a wave of consumption upgrades. Not only the first and second tier consumption upgrades, but also the third and fourth tier consumption upgrades. Second, in the context of the escalation of Sino-US trade frictions and the impact of the new crown epidemic, the policy proposes to develop a large domestic cycle, and food and beverages benefit from pure domestic demand. Third, as consumer demand changes, the mode of competition for mass goods has changed. From cost winning to brand recognition as king. In the era of mass product brand recognition, leading category pricing capabilities have accelerated.

   Good business brings sustained and rapid business growth. The operating income and net profit attributable to the parent have maintained a compound growth rate of more than double digits since the mainstream food segment leader went public. The rise in share prices of leading companies in the food sector can basically be considered to be driven by performance growth. ROE leads the market with strong endogenous growth momentum.

   The demographic dividend is superimposed on the rapid economic growth, and the business volume and price of food and beverage companies have risen. China's vast domestic demand market with a population of approximately 1.4 billion, combined with sustained and rapid economic growth, has become the largest growth dividend for the food and beverage industry. On the sales side, traditional industries have nurtured giants. Although the growth rate is slow, the growth ramp is still long. For the leading companies in the track, share expansion and increased concentration can still drive sales growth. In addition, as per capita income rises, lifestyle changes, and industry changes, new growth opportunities continue to emerge. On the price side, benefiting from the promotion of inflation and consumption upgrades, the prices of products in various sub-sectors of food and beverages have been able to continue to increase, and most of them have overcome CPI. Price is the most important driving force for the growth of some companies. In 2019, the category leader will fully utilize strong pricing power to effectively drive operational improvement.

   From the perspective of market performance, the food and beverage industry has led the market in ten-year growth, and stocks have emerged in large numbers. In the past decade from 2010 to 2020, there were 12 ten-fold stocks in the food and beverage industry, among which 10 ten-fold stocks appeared in the liquor and condiment sectors. The remaining two industries are evenly distributed and are the leaders of new categories born under the new consumer trend. In the long run, ten times stocks are mainly driven by performance. Valuation-driven opportunities often result in extremely low valuations due to industry or company crises. The reason why the liquor and condiment sector is a "fertile soil" for producing bull stocks is that the excellent business model brings a very stable and clear competitive landscape. First, the consumption of liquor and condiments is highly viscous. The characteristics of high stickiness make the consumption fundamentals of the two industries stable and can exist for a long time. Second, the products are highly differentiated and have an extremely long life cycle. A high degree of differentiation can displace competition and produce a number of high-quality companies.

   The biggest risk facing the food and beverage industry is still valuation. From an absolute level, the current price-earnings ratio has reached 46.7, and the 10-year historical valuation level has reached 98.9%, which is the second highest valuation level among all A-shares. The increase in relative valuation is not too small, at least half of it has gone through. From the perspective of the dynamic changes in valuation, the future performance growth of stocks is also difficult to support the current valuation. However, the internal differentiation is more serious. The historical water level of liquor valuation is close to 100%, while the valuation level of soft drinks is only 16%.

The growth of    consumer products companies mainly depends on two factors. One is the prosperous performance of the long-term track, that is, the research and judgment of consumer trends under the background of the big era, and the other is the implementation of products, channels, and brands. Growth in the level of corporate management. In the context of consumption upgrades, market concentration continues to increase, and category leaders have increasingly prominent advantages in terms of products, brands, and channels. It is reflected in each subdivision track:

   Liquor: Liquor takes into account both consumption and investment, and is accompanied by periodic attributes. The industry is in a slow growth rate of total volume expansion and concentrated The degree of rapid improvement stage. Under the structural cycle, the volume has slowed down, prices have risen, profits have increased steadily, and industry differentiation has intensified. The epidemic has magnified the long-term advantages of famous wine companies, and the main seats in the industry will be reserved for leaders with profound brand heritage. The business model of high-end liquor is extremely certain, and the competitive landscape is the clearest. Maowulu's three main "players" basically account for more than 95% of the income of high-end liquor, and the certainty of steady growth in performance is strong. After the epidemic, the price of high-end liquor has remained firm, and sales have recovered well. The positioning of high-end wine brands is clearer. The rise of mass consumption and social demand constitute the most basic support for Moutai consumption. Wuliangye has a strong appeal in the thousand-yuan price zone, and Guojiao's follow-up strategy may be challenged. The sub-high-end expansion speed is also relatively fast, and the growth flexibility is also relatively large. However, the sub-high-end structure is still changing a lot, and there is greater uncertainty in the seating position.

   Beer: Divided from 2017, the beer sector’sThere have been some relatively big changes in the tone of competition. From 2013 to 2017, due to factors such as factory closures, fierce industry competition, and national restrictions on consumption by the country, the sales volume and sales revenue growth rate of each beer company declined. In 2017, the company began to change its strategy, from low-price "staking" to high-end and brand-based strategies. Therefore, leading companies began to enter the stage of normalized price increases, and at the same time, the high-end product structure accelerated, and production capacity optimization began to be promoted. In the future, the concentration of my country's beer industry is expected to increase to 80%+, and the profitability of leading companies is expected to increase simultaneously. Since the beginning of this year, the beer industry’s prosperity has reversed. The long-term low-price thinking model of channels and terminals has basically been reversed. The shutdown of factories and staff reductions in the industry is coming to an end. The core driving force of the accelerating profitability trend.

   Condiments: The condiment industry has a huge room for development, which mainly benefits from several factors: First, mass catering continues to grow steadily. Second, there is a clear trend of refined home cooking. Third, the increase in residents' income promotes the consumption upgrade of the condiment industry and promotes the increase in the industry's average price. The industry is expected to maintain a high level of prosperity, and revenue is expected to maintain a compound growth rate of about 10% in the next five years. Condiments are a good business. The industry has a long life cycle and slow changes in the industry. There are already strong players and strong ones. In addition, condiments can be priced differently, which can produce many high-quality companies with strong profitability. In the future, industry leaders will benefit from two aspects. On the one hand, the premium of increased share concentration. The other is the expansion of product categories. The catering supply chain will bring condiments a high-growth track in the next five years. Benefiting from the recovery of catering in the second half of the year, the compound condiment industry is still expected to maintain high growth. In the difficult times of the industry, the leader has a strong ability to seize market shares, and the market share is expected to increase at an accelerated rate.

   Dairy products: The demand for the dairy industry has rebounded since 2018, mainly due to consumption upgrades and the rise of dairy product consumption in third- and fourth-tier cities. Liquid milk revenue is expected to remain promising in the next 5 years Maintain a compound growth rate of around 5%. From the perspective of the prosperity of the various sub-sectors of dairy products, the cheese industry has the highest prosperity, and the liquid milk industry has entered a mature period. Currently, pasteurized milk has the highest prosperity in the liquid milk industry. In the future, as the share of pasteurized milk increases, the advantages of room temperature milk may be weakened. The duopoly competition pattern in the liquid milk industry is obvious, with CR2's market share reaching 43%. Gradually differentiated competition: Yili expands horizontally to build a food platform. Mengniu focuses on dairy products and builds a dairy industry chain vertically.

   Snack food: my country's snack food market has a huge space, and the industry sales in 18 years have exceeded trillions. However, compared with foreign developed countries, my country's snack food industry still has a large market. Room for growth. E-commerce penetration increase and category expansion are expected to drive revenue growth of about 10% CAGR in the next three years. During the epidemic, snack foods mainly benefited from the increase in C-end demand. From the perspective of different channels, offline supermarket channels and online channels that have been less affected have good sales. Consumers are more concerned about health, product safety and hygiene due to the epidemic, and tend to choose products with strong brands and packaged products. The industry concentration is expected to increase.

   Meat products: The industry’s prosperity is stable, the cost is down cycle, and the product structure and price increase dividends are expected to appear. Domestic meat product consumption is in the stage of upgrading high-temperature to low-temperature meat products, and there is much room for product structure upgrading. The leader Shuanghui has launched the low-temperature meat product business in response to the consumption upgrade trend, which is expected to nurture consumers and promote the upgrading of industrial product structure.

   The new era has given birth to new opportunities for the development of the food and beverage industry. The first is the change of channel model. The procurement scene will change from traditional farmer’s market to modern channels. The explosion of e-commerce channels has brought high growth opportunities for enterprises. The second is changes in product categories. The outbreak of the epidemic, on the one hand, has spawned the accelerated trend of C-end chaining and online delivery to home, which will increase the demand for pre-products. On the other hand, for the B-end, the trend of restaurant chaining has strengthened, and the trend of B-end food packaging has accelerated . The third is the change in the industry structure, the degree of concentration will accelerate, and the leading advantage will become more and more obvious.

   Finding and targeting good businesses, good companies, and excellent entrepreneurial teams, and continuous in-depth tracking, along with their growth, is the safest way to invest in the food and beverage industry. In general, we should pay attention to category leaders. There are three main reasons: The first reason is that the epidemic has provided leading companies with historic opportunities for long-term share expansion. The second reason is the high certainty of the growth of food and drink leaders during the year, and the market has a clear preference for certainty. The third reason is that under the background of increasing pricing power for long-term funds, the medium and long-term growth spaceDefinite, clear growth path, profitable targets with potential, willing to give a higher tolerance, willing to hold these good companies on the high-quality track for a long time.

   The overall valuation of the current sector is at a high level, and the valuation premium will focus on high-quality leaders. At the same time, low valuation improvement targets are expected to obtain excess returns. We have sorted out the fundamentals of 27 leading companies in various subdivisions of food and beverage. Mainly include high-end and sub-high-end liquors that benefit from the continuous promotion of consumption upgrades; the performance certainty is still high, and the mass product segment leader with sufficient growth potential under the long-term industry trend; and dairy products that benefit from increased concentration + improved low valuation Faucet.

  Catalog

  1. Concept and origin:

  1. Concept: a wide range of necessary and optional products, high-end popular elites

2. The origin of the rise: consumption upgrades, domestic demand expands, and the value of category leaders is highlighted

   (1) Residents’ disposable income continues to grow, ushering in a wave of consumption upgrades

   (2) Development of the domestic cycle , The expansion of domestic demand contributes to the steady growth of the industry

   2. Development status: good business is the fundamental driving force, demographic dividend brings both volume and price rise

  1. Good business brings continuous rapid business Endogenous growth

  2. The demographic dividend is superimposed on the rapid economic growth, and the business volume and price of food and beverage companies have risen.

   (1) Sales: sales generally continue to grow, leading market share is further expanded

   (2) Price: The overall price has generally risen but the difference is large. Price increase is the main driving force when the industry increment is limited

   3. Market performance: Industry valuation continues to rise , Liquor condiment stocks emerge in large numbers

  1, the food and beverage industry has led the market in ten-year growth rate

  2, excellent business model has created a large number of liquor condiment stocks

  3. Food and beverage valuations continue to rise and are currently at an absolute high level

  4. Subdivision areas: brands, products, channels, and management levels build a moat together, leading to obvious competitive advantages

  1. Liquor: The competitive landscape is first, and the certainty of high-end liquor is more prominent

  (1) The industry has entered a stage of squeezing growth, and corporate competition has become a major factor in the dominant industry

(2) High-end liquor: demand expansion, with certainty increasing steadily

   (3) Sub-high-end liquor: long-term growth elasticity, seat ranking is still uncertain

  2, beer: competition The pattern has improved and the industry’s prosperity has improved

   (1) The competitive strategy has shifted from price wars to high-end and branding, and the industry has entered a three-year profit acceleration period

   (2) The year’s prosperity Reversal, performance is highly elastic

  3. Condiments: The industry has a broad space for development, and the competition pattern is stable and the concentration continues to increase.

   (1) The industry is expected to maintain a high level of prosperity in the next 5 years. Annual revenue is expected to maintain a compound growth rate of about 10%

   (2) Stable competitive landscape, numerous high-quality companies and strong profitability

   (3) The catering supply chain empowers the growth of condiments

  4. Dairy products: steady growth in the industry, differentiated competition from duopoly

   (1) The demand for liquid milk industry will benefit from the upgrade of third- and fourth-tier consumption, and it is expected to maintain a compound growth of about 5%

   (2) Duopoly market share reached 43%, forming differentiated competition

  5. Snack food: The impact of the epidemic is small, and the industry has a large room for growth

   (1) Demand for casual snacks during the epidemic has increased

   (2) The snack food market has a vast space and electricity Increased commercial penetration and increased category expansion to promote industry growth

  6. Meat products: The economy is stable, and the product structure is expected to continue to upgrade

   (1) During the period of cost decline, the industry growth is stable

   (2) Large room for product structure upgrade

   V. Development trend: new opportunities are spawned in the new era, channels, products, and industry patterns are accelerating changes

  1. Channel model changes : The outbreak of e-commerce channels brings high growth opportunities for companies

  2. Product category changes: B-end food packaging trends accelerate, and C-end pre-products benefit

  3. Industry structure Changes: Concentration will accelerate and the leading advantage will become more obvious

  6. Full analysis of key investment targets

  1. Liquor: Kweichow Moutai, Wuliangye

   (1) Kweichow Moutai:Reform deepening and direct operation accelerated, and the performance of liquor leaders grew steadily.

   (2) Wuliangye: High-end liquor has obvious advantages, and marketing reform promotes high-quality transformation of channels

  2. Beer: Qingdao Beer

   Tsingtao Brewery: product upgrades and efficiency enhancements jointly drive the increase in ton prices, and the brand value continues to increase

  3. Condiments: Haitian flavor industry

   Haitian flavor industry : Leading advantages are expected to accelerate expansion, category expansion leads long-term development

  4. Meat products: Shuanghui development

   Shuanghui development: slaughtering meat products benefiting the post-live cycle of pigs, leading companies have a large industry integration space

  5. Snack food: Yasui Foods

   Yasui Foods: BC end two-wheel drive, steadily increasing production capacity

  6. Dairy products: Yili shares

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   Yili shares: sales recovered rapidly after the epidemic, and the value of the leading dairy products was highlighted

  Chart list

  Chart 1: Residents' consumption levels are showing a good growth trend

   Chart 2: The growth rate of total social retail consumption has always been greater than the GDP growth rate

   Chart 3: In 2019, the dairy products cities grew faster at county-level cities and townships

   Chart 4 :Final consumption expenditure is becoming more and more important in GDP

  Figure 5: The compound annual growth rate of revenue since the listing of the leading food segmentation

   Figure 6: The listing of the leading food segmentation Annual compound growth rate of net profit attributable to the parent so far

   Chart 7: Mainstream liquor companies’ listing to this year’s compound revenue growth rate

   Chart 8: Mainstream liquor companies’ listing to this year’s revenue Compound growth rate

   Chart 9: Key food and beverage companies listed to this year compound growth rate of various indicators

   Chart 10: Food and beverage industry ROE far surpasses other industries

Figure 11: Liquor sector ROE leads the market

   Figure 12: Food and beverage operating net cash flow/total operating income leads the industry

   Figure 13: Leading sales of dairy products, condiments, and meat products Growth

   Chart 14: White wine faucet sales growth

   Chart 15: Room temperature milk market pattern leading concentration effect is obvious

   Chart 16: The leading Maowulu market share continues Growth

   Chart 17: The price growth of leading companies in the food and beverage industry

   Chart 18: Since 2010, the growth rate of food and beverage ranks first among the first-tier industries in Shenwan

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   Chart 19: The ten-fold stocks of the food and beverage industry from 2010 to 2020 are mainly concentrated in the liquor and condiments sector

   Chart 20: Five wine appraisals in the history of famous and premium liquors, liquor companies Brand building barriers and accumulating

   Figure 21: Condiment catering channels account for a relatively high proportion, and building barriers and accumulating through channels

   Figure 22: Food and beverage industry valuation levels over the years

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   Chart 23: Valuation of food and beverage segments in various sectors

   Chart 24: The industry revenue growth rate from 2003 to 2013 coincides with the trend of output growth, and after 2014 it is consistent with the price trend

   Chart 25: The long-term high-quality, centralized development trend of the liquor industry remains unchanged

   Chart 26: The proportion of the six major wines in the industry

   Chart 27: The six major Proportion of famous wine profits in the industry

   Chart 28: Moutai’s sales market share in 2008 was slightly lower than that of Wuliangye

   Chart 29: Moutai’s sales market share in 2019 was 1.4 times that of Wuliangye

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   Chart 30: The price of high-end liquor is strong, and the sales are recovering well

   Chart 31: The social attributes of Maotai's appraisal are strengthened, and the financial attributes are boosted

   Chart 32: After 2013 Beer production capacity peaked and declined

  Chart 33: Major beer companies’ closures in recent years

   Chart 34: Beer industry output and growth rate from 2019 to 2020

   Chart 35: 2017-2020H1 major listed beer company profit growth rate

   Chart 36: Condiment industry revenue 418.2 billion yuan in 2019

   Chart 37: Condiment sub-industry concentration has Room for improvement

   Chart 38: Condiment industry catering revenue accounted for 50%

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   Chart 39: The scale and growth rate of the catering industry

   Chart 40: The growth rate of the liquid milk industry has picked up slightly since 2018

   Chart 41: First-line demand growth is slow, Demand in lower-tier cities is relatively strong

  Figure 42: Obvious duopoly competition in the liquid milk industry

  Figure 43: Snack food companies have positive growth in revenue in the first half of the year

  Chart 44: In March, the sales of Ali's snack foods increased by 17% year-on-year

   Figure 45: China's snack food industry scale exceeds one trillion

   Figure 46: E-commerce penetration rate is increased by snack food Industry growth momentum

   Chart 47: The income and profit of the meat industry grow steadily

   Chart 48: China's low-temperature meat products consumption level is still low

   Chart 49: Three Squirrel’s online business distribution

   Chart 50: The average number of chain restaurants continues to increase

   Chart 51: Comparison of the TOP50 share of the catering industry in China and the United States

   Chart 52: The fundamentals of leading food and beverage companies have been sorted out

   Figure 53: Kweichow Moutai’s main financial indicators

   Figure 54: Wuliangye’s main financial indicators

   Figure 55: Tsingtao Beer’s main financial indicators Financial indicators

   Chart 56: Haitian Flavor Industry’s main financial indicators

   Chart 57: Shuanghui Development’s main financial indicators

   Chart 58: Yasui Foods’ main financial indicators

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   Chart 59: Yili shares’ main financial indicators

   1. Concept and rise to the source

   Concept: a wide range of required and optional products , High-end mass elites

   The origin of the rise: consumption upgrade, domestic demand expansion, leading category value prominent

   1. Concept: required There are a wide variety of options, and a gathering of high-end popular talents

   Food is the most important thing for the people, and the food and beverage industry is the most ordinary and ordinary industry, but it also invests in Changchun. The food and beverage industry is a general concept, with many sub-industries. It can be roughly divided into necessities and options. Necessities are the condiments, rice noodles, grains and oils, meat products, dairy products, etc. that we use every day. The most important optional products are liquor, beer and other alcoholic beverages. Different sub-sectors have different driving factors, so they have different performances under the same macroeconomic background. During the economic downturn, the performance of general necessities is relatively strong, because the demand is sticky, the performance is high, and the defensiveness is strong. When the economy is up, optional consumption will exceed expectations, and there will be more demand for upgraded consumption.

   There is also a classification method of high-end products and popular products. High-end products include white wine, red wine, and rice wine, while popular products include beer, dairy, meat products, beverages, condiments, and snack foods. When the economy is in inflation or ample liquidity, high-end products are driven by demand and popular products are driven by costs. In deflation, the opposite is true. High-end products will flourish and lose everything. The leading share of popular products will continue to expand, and different sub-sectors are different. The rhythm of integration.

   2. The origin of the rise: consumption upgrades, domestic demand expands, and the value of category leaders is highlighted

   (1) Residential People Disposable income continues to grow, ushering in a wave of consumption upgrades

   Referring to Japan’s experience in the early 1970s, after experiencing the "Lewis Turning Point", the growth of household consumption has accelerated. The process of consumption upgrade in Japan lasted for about 40 years, which is a very long cycle. Since 2007, China has experienced consumption upgrades after the Lewis turning point. The growth rate of labor remuneration and total social zero is much faster than that of GDP, which shows that our consumption level is higher than the level of total social wealth improvement.

   Consumption upgrade is not just an increase in the amount of consumption, or the purchase of a higher-priced commodity. In essence, it refers to the transformation of consumption from low-end to mid-to-high-end, from the pursuit of quantity to brand quality, and from the pursuit of material For the spirit. There are three main reasons for the consumption upgrade: The first is the change in consumption willingness, and consumers are willing to pay a premium for health and safety. The second is the change in consumption power and the increase in consumer income. In 2019, the per capita disposable income of urban residents in my country exceeded RMB 30,000, a compound growth rate in the past five yearsReached 7.5%, and the per capita consumption expenditure of Chinese residents has exceeded 21,600 yuan. Consumers have the willingness and ability to consume better products. The third is the changes in the consumption environment, the increase in the urbanization rate and the highly developed logistics, so that consumers can buy the goods they need.

   is not only in first- and second-tier cities, but also in third- and fourth-tier cities. From the perspective of changes in consumer structure, young people (young people) in small towns in third- and fourth-tier cities are increasingly willing to consume. From the perspective of population return, the consumption habits of third- and fourth-tier cities are moving closer to large and medium-sized cities. From the perspective of channels, most consumer product channels are sinking to the third and fourth tiers, making them more accessible to consumers. It can be verified from the data of dairy products Nielsen that the growth rate of the county and township market is in a relatively rapid growth stage. This era is very long. As long as our economy is still rising, consumption upgrading will always be the main theme of the era.

   Chart 1: Residents' consumption levels are showing a good growth trend

  Data source: National Bureau of Statistics, such as the Financial Research Institute

   Chart 2: The growth rate of total social retail consumption is always greater than that of GDP

  Data source: Wind, such as the Institute of Financial Research

   Chart 3: The county-level dairy products cities in 2019 Rapid growth in cities and townships

  Data source: Nielsen, such as the Institute of Finance

   (2) Develop the domestic cycle, and the expansion of domestic demand helps the industry to stabilize Growth

  As an important area of ​​household consumption, food and beverages are expected to benefit significantly from the expansion of demand brought about by relevant policies. The needs of consumers for food, clothing, housing and transportation have little relationship with the external environment, and the certainty of the sector is stronger, especially in the period of external turbulence, which shows the characteristics of hedging.

   On July 30, General Secretary Xi presided over a meeting of the Political Bureau of the Central Committee and pointed out that the formation of a new development pattern in which the domestic cycle is the main body and the domestic double cycle promotes each other is accelerated. The mid-year Politburo meeting was heavily set, marking the formal formation of a new development pattern, and expanding domestic demand has become one of the main focus of follow-up policies. With domestic as the mainstay, domestic demand is the first. Although external demand is also important, its highest proportion is less than 10%, and its proportion has been declining in recent years. Consumption contributes more and more to the economy. Especially after the escalation of Sino-US trade frictions and the impact of the new crown epidemic, domestic demand will be the most solid basis. China is likely to be an unprecedented unified market with a population of 1.4 billion and a new middle class of over 300 million. The potential for domestic demand is huge.

   Chart 4: Final consumption expenditure is becoming more and more important in GDP

  

   internal circulation is the main body, mainly through policy to stimulate stocks and create increments. In the short term, the policy is mainly to start from the demand side, by directly issuing money to the needy groups, issuing consumer vouchers to middle-income groups, and issuing special treasury bonds to small and medium-sized enterprises to stimulate consumption and promote consumption replenishment. In the long run, the future market space is huge, and the potential remains to be stimulated. First, my country's per capita GDP has just exceeded 10,000 U.S. dollars and is still at a middle income level. An epic consumption upgrade is in progress. Second, the monthly income of 600 million people is less than 1,000 yuan, indicating that the per capita income level is actually very low, there is still a lot of room for improvement, and the differentiation is very serious. Third, there are still at least 200 million people who have not yet achieved real urbanization. There is still a second half of urbanization, which has huge potential for demand. Fourth, the consumer demand of nearly 600 million sinking markets has not been fully met, and the silent market that needs to be opened up and awakened has a bright future. Food and beverage, as an absolute domestic demand industry, will usher in further growth in the market space in the future.

   As consumer demand changes, the competitive model of mass goods has changed. From cost winning to brand recognition as king. In the era of mass product brand recognition, leading category pricing capabilities have accelerated. In the era of consumption shortage, consumer price sensitivity is extremely high. Therefore, for mass goods companies, reducing production costs and obtaining a larger consumer group at low prices have become the winning rule. However, with the improvement of consumer spending power, consumer demands have begun to change. Price is no longer the first element of consumer demand, but a comprehensive price-performance ratio.Including brand endorsement of safety, quality and service quality, this demand change has accelerated in recent years: from the consumer side, consumption upgrades and health demands have led to consumers becoming less price-sensitive, paying more attention to brands, and shifting from price-oriented to Product and brand orientation. From the perspective of the channel, the dealer’s business decision-making has changed from simply looking at the turnover rate and profit margin, and gradually transformed into a continuous business thinking, with a higher degree of loyalty to companies with strong comprehensive service capabilities. Under this trend, the leading category-leading pricing power in all aspects has been fully opened.

   Second, the status quo of development

   Good business is the fundamental driving force, and the demographic dividend brings both volume and price rise

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   1. Good business brings sustained and rapid endogenous growth in business

   Food industry leaders continue to grow rapidly. Mainstream food segmentation leaders have maintained double-digit compound growth rates in operating income and net profit attributable to their mothers since their listing. On the revenue side, the compound growth rates of dairy products Yili and Mengniu Dairy since the listing have been 28% and 20% respectively. , Haitian Weiye, the leading condiment, and Fuling mustard all reached 15%. On the profit side, the compound growth rates of dairy products Yili and Mengniu Dairy since their listing have been 29% and 19%, respectively, while the leading condiments Fuling Mustard and Haitian Flavour have respectively 29% and 21%.

   Chart 5The compound annual revenue growth rate of the leading food segment since its launch

   Chart 6: The compound annual growth rate of net profit attributable to the parent since the listing of the leading food segmentation

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   Baijiu performance continues to grow at a high speed. Since the listing of mainstream liquor companies, operating income and net profit attributable to the parent company have maintained a relatively high compound growth rate. On the revenue side, the compound growth rate of operating income of Kweichow Moutai, Yanghe Stock, and Luzhou Laojiao since the listing have been 26%, 20%, and 18%, respectively On the profit side, the compound growth rate of net profit attributable to the parent company since the listing of Kweichow Moutai, Yanghe and Wuliangye have been 31%, 21%, and 19% respectively, highlighting long-term growth.

   Chart 7 Mainstream liquor companies go public to this year’s compound revenue growth rate

   Chart 8: Mainstream liquor Since the company’s listing to this year’s compound revenue growth rate

   The share price of leading companies in the food sector rose basically It can be considered to be driven by performance growth. Various food leaders represented by dairy products, condiments, snack foods, etc., and various liquor leaders represented by national famous wines and regional sub-high-end leaders, have a compound annual return on stock price and a compound growth rate of net profit attributable to the parent since listing. Highly matching, for example: Kweichow Moutai, Yili shares, Shuanghui Development's listing to this year's conversion to the parent net profit in line with the growth rate of 31%, 29%, 22%, respectively, the corresponding stock price compound return rate of 33%, 30%, 25%.

   Chart 9: Key food and beverage companies listed to this year compound growth rate of various indicators

  ROE leads the market with strong endogenous growth momentum. The ROE of the food and beverage industry reached 11.9, ranking first among all primary industries. The liquor sector has a ROE of 14.5%, meat products and fermented products also exceed 13%, and the overall food industry exceeds 10%, leading the whole market by far. The organic growth of the business provides a strong guarantee.

   Chart 10 The ROE of the food and beverage industry far exceeds other industries

   Chart 11: Liquor sector ROE leads the market

   The business model determines that there is ample cash flow, growth is not driven by financing, and the ability to pay dividends is strong. The food and beverage sectors generally have the operating characteristics of light assets and high ROE, which are determined by their brand and channel-driven business model. Benefiting from this, the food and beverage sector has ample cash flow and strong dividend payout capabilities. For example, the liquor leader Kweichow Moutai, the condiment leader Haitian Flavour, and Zhongju Gaoxin have not issued additional financing since 2000. The remaining liquor leaders Wuliangye and dairy products leader Yili have only raised approximately 1.9 billion yuan and 5.8 billion yuan respectively. . Observing the operating net cash flow/total operating income indicators of the food and beverage and liquor sector, it has always been in the forefront of Shenwan's first-level sub-industry.

   Chart 12: Food and beverage net cash flow/total operating income leading industry

  

   2. The demographic dividend is superimposed on the rapid economic growth, and the business volume and price of food and beverage companies have risen.

   China's vast domestic market with a population of approximately 1.4 billion , The superimposed economy continues to grow rapidly, becoming the biggest growth dividend for the food and beverage industry. Food and beverage is the most basic business sector in the economic system, and companies in each segment have opportunities for continuous growth. At the same time, the leading companies on the various subdivisions gradually won, the brand, channel, and organizational advantages have appeared, and they have also gained more market share and strived for higher brand premiums, which further boosted the company's business volume and price rise.

   (1) Sales: sales generally continue to grow, leading market share further expands

   traditional industries have nurtured giants, although the growth rate is slow but the growth ramp Still long. After about 30 years of development, traditional industries such as dairy products, meat products, condiments, liquor, and beer have all produced large-scale enterprises. On the one hand, benefiting from the growth of per capita income, per capita consumption continues to rise. On the other hand, the market share of leading companies continues to increase. Therefore, although overall, the growth rate of sales in some of these industries has slowed down, such as dairy products, condiments, and meat products, while sales in some industries, such as liquor and beer, have stabilized or even declined. But for the leading companies in the track, share expansion and increased concentration can still drive sales growth.

   The growth opportunities for subdivision of the track and structural transformation are highlighted. With the rise in per capita income, the transformation of life patterns, and the changes in industries, new growth opportunities continue to emerge, such as lo-mei foods in snack foods and bread with short shelf life. The rise of e-commerce channels has brought opportunities to the three squirrels. The accelerated trend of B-end food packaging has brought opportunities to quick-frozen foods and compound seasonings. Consumption upgrades have brought opportunities to the rapid rise of liquor product structure. The internal transformation of product structure has given rise to opportunities. The opportunities brought by meat products, the opportunities brought by increased concentration to slaughter, etc.

   For example, in the dairy industry, the growth rate of sales in the industry has slowed down due to the increase in per capita milk drinking and the growth rate of per capita income. For example, the consumption of liquid milk has increased from 29.61 million in 2009. Tons increased to 37.59 million tons in 2017, and the 8-year CAGR was only 3%. However, the leading company Yili's sales growth rate is still relatively fast, from 6.4 million tons in 2015 to 8.71 million tons in 2019, a compound annual growth rate of 8%. The main reason is that its market share of room temperature liquid milk has increased from 26% in 2012 to about 37% in 2018, pushing up the growth rate.

In the    condiment industry, the soy sauce output of large-scale enterprises in China increased from about 3.67 million tons in 2008 to about 5.77 million tons in 2018, a compound annual growth rate of 4.6%. However, Haitian Weiye's soy sauce sales increased from about 800,000 tons in 2008 to about 2.17 million tons in 2019, with a compound annual growth rate of about 10.5%, and its market share rose from about 21% to about 33%.

In the    liquor industry, China’s liquor production has increased from approximately 4.76 million kiloliters in 2003 to approximately 7.86 million kiloliters in 2019, with a compound annual growth rate of approximately 2.7%. Taking into account the base wine trade and other reasons led to double counting, the actual consumption of the liquor industry should be declining. However, the sales volume of Moutai in Kweichow Moutai increased from 3,355 tons in 2000 to 34,562 tons in 2019, with a compound annual growth rate of approximately13.1%, Wuliangye's Wuliangye liquor sales increased from approximately 6,500 tons in 2001 to approximately 26,800 tons in 2019, with a compound annual growth rate of approximately 8.19%. Leading products of leading companies continue to grow.

   Chart 13 :Dairy products, condiments, meat products leading sales growth

  

   Chart 14 Liquor faucet sales volume Growth

  

   chart 15 :The leading concentration effect of the room temperature milk market is obvious

  

  Data source: Nielsen, Huaan Securities , Such as the Financial Research Institute

   Chart 16 The market share of the leader Maowulu continues to grow

   (2) Price: The overall price rises generally but differs The price increase is the main driving force when the industry’s growth is limited.

   Benefited from inflation and consumption upgrades, the prices of food and beverage products in various sub-sectors have continued to increase, and most Conquered CPI. In spite of the general increase, the price increase varies greatly among products. In terms of product attributes, the overall increase of non-staple food products was higher than that of staple foods, and the increase of To C-end products was higher than that of To B-end products, such as liquor, condiments, and snack foods. The increase was higher than that of quick-frozen, meat products, bread, and C-end condiments. Fuling mustard tuber and Hengshun vinegar, which accounted for a larger proportion, increased more than Haitian and Qianhe, which accounted for a larger proportion of B-end. From 2001 to 2019, the ex-factory price compound growth rates of high-end famous liquor 53% Feitian Moutai, 52% Classic Wuliangye, and 52% Guojiao 1573 were respectively 8.6%, 7.3%, and 6.0%, significantly outpacing China’s CPI growth rate of 2.3% during the same period. Enjoy consumption The upgrade bonus is obvious. In terms of the industry cycle, first, rising income levels may gradually increase the price increase ability of staple food products, and second, cost cycles and changes in management ideas will promote price strategy adjustments. Typical examples include Shuanghui Meat Products starting to increase their prices six times in a row at the end of 2018.

  Price is the most important driving force for the growth of some companies. When the volume of the industry is limited, the ability to increase product prices may be better reflected. Since 2019, leaders in categories including meat products, traditional snack foods, vinegar, and cooking wine have fully used strong pricing power to effectively drive operational improvement. For example, for beer, the leading domestic capital raised prices in 18 years, and strategically accelerated the high-end, Qiaqia Foods increased the prices of his eight categories of melon seeds by about 6%-14.5%. Shuanghui Development increased the prices of some meat products. 10%. Hengshun Vinegar will raise the price of five products including mature vinegar and cooking wine by 10%-15%. The result is to effectively drive the improvement of the company's profitability and operating performance. For example, after the price increase of Hengshun Vinegar, the gross profit margin of vinegar products increased by about 2.4%.

   Chart 17:Price growth of leading companies in the food and beverage industry p>

  

   Note: The average price of liquor is yuan/bottle

   Data source: Wind, Hua'an Securities, such as the Institute of Finance.

   3. Industry advantages

   Industry valuations continue to rise, and liquor condiments are emerging in large numbers

   1. The food and beverage industry leads the market in ten-year growth rate

   The food and beverage industry led the market in ten-year growth. From January 1, 2010 to September 18, 2020, the Shanghai Composite Index rose 1.8%, and the Shanghai and Shenzhen 300 rose 32%. Among Shenwan’s 28 first-level sub-sectors, the top five growth rates were food and beverage, leisure services, household appliances, computers, and electronics. The cumulative growth rates were 388%, 280%, 248%, 218%, and 211%, respectively. The beverage sector led the market in terms of gains.

   Chart 18: Since 2010, the growth rate of food and beverage ranks first in Shenwan's first-level industry

  

   2. Excellent business model has created a large number of liquor condiments.

   There are a total of 12 in the food and beverage industry in the past decade from 2010 to 2020. There are two rules for the emergence of double stocks and tenfold stocks: First, the tenfold stocks of liquor and condiments are produced in large numbers. There were 10 ten-fold stocks in the liquor and condiments sector. The remaining two industries are evenly distributed and are the leaders of new categories born under the new consumer trend. Second, in the long run, ten times stocks are mainly driven by performance. Valuation-driven opportunities often result in extremely low valuations due to industry or company crises.

In the past ten years, the    liquor sector has produced 5 ten times stocks and 3 5-10 times stocks. Among them, Moutai saw the highest increase, reaching 20 times since 2010. Most of the remaining wine companies have achieved substantial growth in performance and repaired valuations since the low point caused by the industry crisis in 2014. The condiment sector has produced 5 ten times stocks and 1 5-10 times stocks in the past ten years. Yihai International has the highest growth rate. Since its listing in 2016, it has reached 40 times, of which the valuation has increased by 11 times. This is mainly due to market concerns about connected transactions in the early days of listing. As a result, the proportion of related-party transactions has decreased, the market has deepened its understanding of its competitive advantages, and its valuation has risen sharply. Most of the remaining condiment companies benefited from sustained growth in performance or double-click on valuation performance.

   Exhibit 19: 2010-2020 ten-fold stocks in the food and beverage industry are mainly concentrated in the liquor and condiments sector in the past ten years.

  

The    liquor and condiment sector is the “fertile ground” for the food and beverage industry, which is rich in bull stocks, and is derived from an extremely excellent business model. From a long-term perspective, the most important factor that determines the rate of return on investment in consumer products is the competitive landscape. Only in industries where the competitive landscape is stable and clear can the original companies continue to enjoy the dividends of economic development and harvest a large amount of cash for a long period of time. Otherwise, whether it is the entry of capital from outside the industry or the competition between enterprises in the industry, a large amount of cash flow will be consumed, and even the original enterprises will be constantly replaced by new enterprises in the competition. Liquor and condiments have a very stable and clear competitive landscape, and its roots come from their extremely excellent business models.

   First, the consumption of liquor and condiments is highly viscous. The characteristics of high stickiness make the consumption fundamentals of the two industries stable and can exist for a long time. Second, the products are highly differentiated and have an extremely long life cycle. A high degree of differentiation can displace competition and produce a number of high-quality companies. The product life cycle is extremely long, there is almost no trend or technological impact, and will not be easily subverted by latecomers. Third, liquor and condiments are "friends of time". With the accumulation of time, the barriers formed by the brand of liquor companies and the barriers built by channels by the condiment companies have been continuously strengthened. Liquor has strong social attributes, and old-famous wines have strong brand barriers and continue to deepen. Condiment downstream catering consumption accounts for a high proportion. On the one hand, since catering companies change new brands will cause changes in the taste of dishes, they will not easily change brands once they use habits; on the other hand, the resources of high-quality distributors in the seasoning industry are limited, and new companies It is difficult to grab high-quality distributor resources for channel expansion.

   Chart 20: Five wine appraisals in the history of famous liquors, liquor companies build barriers with brands and continue to accumulate

  

  Data source: Oriental Information, GF Securities, such as the Financial Research Institute

   Figure 21: Condiment catering channels account for a relatively high proportion, and barriers are built by channels And continue to accumulate

  

  Data source: Such as the Institute of Financial Research

   3. Food and beverage valuations continue to rise, and are currently at an absolute high level

  thisDue to the impact of the epidemic in the first half of the year, the entire food and beverage industry was relatively severely affected, showing obvious differentiation. The performance of necessities in the first quarter exceeded expectations. On the one hand, the consumption field must be selected as a purely domestic demand target, coupled with the rigid demand attribute, the demand growth is relatively fast, and the performance is highly certain. On the other hand, industries such as liquor and beer related to the Spring Festival and catering scenes have been dragged down by the epidemic, and their performance has been sluggish. However, since the second quarter, as the epidemic has been gradually brought under control, the economy has basically been well-oriented, and the economy of optional consumption has continued to pick up. Especially in the liquor sector, the increase has reached 55.8% since the second quarter, the largest increase among all the sub-sectors in the food and beverage industry.

   The biggest risk facing the food and beverage industry is still valuation. From an absolute level, the current price-to-earnings ratio has reached 46.7, and the 10-year historical valuation level has reached 98.9%, which is the second highest valuation level among all the A-share sectors. The increase in relative valuation is not too small, at least half of it has gone through. From the perspective of the dynamic changes in valuation, the future performance growth of stocks is also difficult to support the current valuation. However, we also mentioned that the food and beverage industry has many subdivisions and serious internal differentiation. The historical water level of liquor valuation is close to 100%, while the valuation level of soft drinks is only 16%.

   Chart 22: Food and beverage industry valuation level over the years

  

   Exhibit 23: Valuation of each segment of food and beverage

  

  Food The main reason for the high valuation of beverages is that the A-share investor structure and investment philosophy have changed, and the industry leaders have undergone valuation reconstruction. On the one hand, a large amount of institutional funds enter the market, and they pay more attention to good companies with relatively certain long-term logic and are willing to hold these good companies for a long time. On the other hand, the performance growth of the leading food and beverage industry itself is also in a position of comparative advantage. For example, liquor is optional on the surface, but in fact it also has the attribute of rigid demand. High-end liquor is absolutely required in business banquets, and low-end liquor is also just required for self-drinking in some areas. This brings sustainable growth to the liquor sector that cannot be underestimated.

   Fourth, subdivided areas

   Brands, products, channels, and management levels build a moat together, leading to obvious competitive advantages

The growth of    consumer products companies mainly depends on two factors. One is the prosperous performance of the long-term track, that is, the research and judgment of consumer trends under the background of the big era, and the second is the implementation of products, channels, brands, and companies. Growth in management level. The growth trajectory of the Coca-Cola Company is very representative. The birth of Coca-Cola originated from the prohibition of alcohol in the United States in 1885. The founder wondered if he could invent a non-alcoholic beverage, and thus developed the product Coca-Cola. The reason why Coca-Cola has become a leader on the soft drink track has become a cultural symbol. In addition to its unique product flavor, all-round marketing is also an indispensable condition. From the category point of view, in addition to launching Sprite, Fanta and other brands to stick to the main business of carbonated beverages, Coca-Cola began to enter the non-carbonated beverage industry such as tea beverages and fruit juices in the 1960s. While maintaining a balanced product structure, it takes into account the needs of different groups of people to form a clear product echelon. From the perspective of channels, Coca-Cola's global expansion is one of its important means to build a beverage empire. From a marketing perspective, Coca-Cola’s marketing approach has shifted from emphasizing the deliciousness and refreshing of products to strengthening the penetration of American culture. There is a data that Coca-Cola’s investment in marketing reached 100,000 US dollars in 1900, which is definitely not a small amount. The number, which creates another competitiveness of consumer products, that is, its brand.

   1. Liquor: The competitive landscape is first, and the certainty of high-end liquor is more prominent

   (1) The industry has entered a stage of squeezing growth, The competitive landscape of enterprises has become the main factor in the leading industry.

   Liquor takes into account both consumption and investment, and with its cyclical nature, the industry is in a stage of slow growth in total volume expansion and rapid increase in concentration. At present, from the perspective of the industry, the output of the liquor sector is basically a small single-digit growth, returning to a relatively normal state. From 2003 to 2012, the liquor industry was in a cycle of total expansion. The income of liquor gold has maintained double-digit growth for ten years, and the growth rate and output growth trend are moderate. Under the total growth cycle, output drives rapid revenue growth. The liquor industry began to recover in 2015, The industry’s revenue and profits once again usher in high growth, but this time the industry’s recovery to prosperity is not the entire industry, but the recovery represented by the leader and famous wine-prosperity is the main reason. The core logic that drives the industry recovery and growth is consumption upgrade With the concentration of brands, the cyclicality of the industry is significantly weakened. At this stage, price has become the main factor driving income growth. Prices are mainly affected by multiple factors such as product structure upgrades, consumption upgrades, and wealth differentiation.

   Chart 24: 2003-2013 industry revenue growth is consistent with output growth trends, and after 2014 it is consistent with price trends

  

  Data source: Wind, Guotai Junan Research Institute, such as Financial Research Institute

   Under the structural cycle, the volume slows down and the price rises , Profits have increased steadily, and industry differentiation has increased. Affected by the epidemic in the first half of 2020, the output of liquor companies above designated size was 3.502 million kiloliters, a year-on-year decrease of 8.6%. Sales revenue was 273.67 billion yuan, a year-on-year decrease of 1.3%. The profit was 72.99 billion yuan, a year-on-year increase of 2.2%. The industry is clearly differentiated. The profit of first-line liquors such as Kweichow Moutai and Wuliangye will still maintain a growth rate of 13% and 22% in the second quarter of 2020. In the long run, the industry is mature, the structure is stable, and the development trend of the industry's high-quality concentration will not change.

   Chart 25: The long-term high-quality, centralized development trend of the liquor industry remains unchanged

  

  Source: Guotai Junan Research Institute, such as Financial Research Institute

  In the past ten years, the industry structure has undergone major changes. At the end of 2019, there were 20 listed liquor companies, accounting for less than 2% of the industry. In 2019, it contributed 43% of the industry's revenue and 56% of the profit. Small and medium-sized liquor companies are under certain pressure. The industry’s cakes are concentrating on top enterprises. The total amount of the industry has changed slowly and the competitive landscape has been reshaped drastically. Even among listed companies, the gap in operating levels is still relatively large. The head premium of outstanding listed companies will exist for a long time.

   The epidemic has magnified the long-term advantages of famous wine companies, and the main seats in the industry will be reserved for leaders with deep brand heritage and a few distinctive brands. The sudden outbreak of the epidemic has a strong impact on the demand side in the short term, but from the perspective of industry development trends, under the external impact of the epidemic, the logic of upgrading product structure and increasing brand concentration will be accelerated. In the face of the epidemic, the famous wine strategy is strong and the channel has strong anti-risk ability, but it is possible to use the opportunity to accelerate the increase in share and strengthen the competitive advantage. The non-famous wine companies are more difficult under the impact of the epidemic. After the epidemic, famous wine companies will use their brand power and cost investment advantages to accelerate the squeeze of the market share of small and medium-sized enterprises and accelerate the increase of brand concentration. Future potential targets are more scarce, and industry seats are becoming fewer and fewer.

   Exhibit 26: The proportion of the revenue of the six famous wines in the industry

  

   Note: The six famous wines refer to Moutai, Wuliangye, Laojiao, Yanghe, Fenjiu, and Gujing

   Chart 27: The proportion of the profits of the six famous wines in the industry

  

  Note: The six famous wines refer to Moutai, Wuliangye, Laojiao, Yanghe, Fenjiu, Gujing

   Besides , The proportion of foreign shares held by the leading liquor companies continues to increase, and the valuation system of the liquor sector is also being reshaped. It is manifested in two aspects. The first is that the leading valuation enjoys a clear brand premium and certainty premium, such as Kweichow Moutai. The second is that the pattern and track are becoming more and more important, and the long-term growth space determines the absolute valuation, such as the sub-high-end varieties of Shanxi Fenjiu. The short-term valuation is in a relatively high position, but it is a fragrance-type leader, and the sub-high-end is still in the channel of faster expansion, so absolute valuation is more important than relative valuation.

   (2) High-end liquor: demand expansion, certainty and steady increase

   High-end liquor is the most representative Chinese luxury product. Consumers of high-end wines are high-net-worth individuals, and the market price needs to continue to rise as the wealth and income of the target population increase. From the perspective of more than 10 years, the long-term growth space of high-end wine is the largest. Based on the 5-year compound growth rate, high-end wine is the fastest, with the certainty of long-term steady growth, and the most certainty.Strong. GF Securities predicts that benefiting from the prosperity of the luxury goods market and the low rise of local brands, it is expected that the compound growth rate of high-end liquor demand in the next five years will be more than 15%, and the market will expand from about 130 billion yuan in 2019 to more than 280 billion yuan in 2024.

   The high-end liquor business model is extremely certain, the competition pattern is clearest, and the certainty of steady growth in performance is strong. The pattern of high-end wine is the clearest. After two decades of precipitation, there are only three major “players” left in the high-end wine industry, Maowulu, and it will be very difficult to build a new high-end wine brand. The three brands of Moutai, Wuliangye, and Guojiao 1573 basically account for more than 95% of the income of high-end liquor, and the pattern is basically solidified. The three high-end liquor brands have formed an obvious brand echelon, there is no direct competition, and the competition pattern is optimal. A major change in the pattern of the three high-end liquor brands in the past ten years is that Moutai’s brand status is far ahead of the other two brands. Its revenue market share has risen from 36% in 2008 to 60% in 19 years, and sales accounted for 60% of the market. The rate has risen from 33% in 2008 to about 48% in 19, and it is in a leading position in the entire high-end wine market.

   Chart 28: Moutai’s market share in 2008 was slightly lower than that of Wuliangye

  

   Chart 29: The market share of Moutai’s sales in 2019 is 1.4 times that of Wuliangye

  

   But from the perspective of Moutai’s planning, it needs to maintain the price gap with competing products to maintain its ultra-high-end image, so it will not increase the volume without limit. According to the production plan of Moutai Distillery, the production capacity of Moutai will be expanded in 2020. After reaching 56,000 tons, there will be no expansion in the short and medium term, corresponding to the production capacity of 45,000-50,000 tons of finished wine in 2024. If the high-end wine is expected to be expanded to 100,000 tons in 24 years, the 50,000 tons overflowing demand from Moutai will be mainly undertaken by Wuliangye and Guojiao.

   The price of high-end liquor has remained firm, and sales have recovered well. From the perspective of sales, high-end liquor sales have recovered best after the epidemic. Moutai recovered to the level of the same period last year, Wuliangye recovered 80% to 90%, and sub-high-end and mid-range wines recovered 70% to 80% overall. In the second half of the year, the marginal improvement in liquor demand and sales will continue. In particular, most consumers postpone the banquet until the Mid-Autumn Festival and National Day holiday, which is expected to usher in retaliatory consumption.

   Chart 30: The price of high-end liquor is firm, and the dynamic sales are recovering well

  

  Source: Guotai Junan Research Institute, such as the Financial Research Institute

   From the price point of view, high-end wine has a clear price band and a clearer brand positioning. The expansion of high-end demand, the rise of mass consumption and social demand constitute the most basic support for Moutai’s consumption. In recent years, it has accelerated the expansion of Moutai’s social attributes. Therefore, we see that after the epidemic, during the gradual recovery of social and consumer activities, the demand for Moutai has recovered significantly faster than the industry and other high-end liquors. In addition, Moutai’s current round of channel adjustments, the shrinkage of traditional channels has been added to direct sales channels (including contracted KA, e-commerce and direct sales stores). The direct sales model is sold at parity through official guidance prices, resulting in an objective price dual track. In fact Play the role of hunger marketing and enlarge the consumer group. Loose liquidity also magnifies Moutai's financial attributes and boosts Moutai's approval price upward. The supply growth rate of Moutai is basically at the single-digit level, and the demand growth rate exceeds 10%. The tight supply and demand pattern will further intensify in the second half of the year, and Moutai's approval price will likely rise further.

   Figure 31: The social attributes of Moutai appraisal are strengthened and financial attributes are boosted

  

  Data source: Huachuang Securities Research Institute, such as the Financial Research Institute

   Wuliangye has a strong appeal in the thousand yuan price band, From the perspective of brand power, The brand power of Wuliangye is higher than that of Guojiao, and Wuliangye’s new executives quickly made up for shortcomings in the product announcement after taking office, consolidating the brand position. Due to the low threshold for mutual reference in product promotion, it is expected that the order of high-end wine brands will not change in the future. From the product point of view, the pit is the source of Wuliangye’s product strength. The five major expansions in history have established Wuliangye’s strongest product strength among Luzhou-flavor wine companies. Wuliangye and Laojiao respectively expanded their production by 12/100,000 tons, and Focus on advantagesSingle product helps to enhance product strength. From the perspective of channels, Wuliangye uses digital tools to extend its management radius, and rewards dealers with cash and quotas that cooperate with the strategy, in order to achieve the purpose of optimizing the dealer structure and guiding expectations. This year, Wuliangye's marketing reform has been rapidly implemented. The core is that traditional merchants will no longer increase, and the eighth-generation dealers will reduce 4,000 tons, which is expected to be transferred to group purchases and new retail channels will be added. After the channel conversion, whether it can increase profits and thrust becomes the focus. Guojiao's channel model is flexible, with dealers holding shares to establish franchise companies, and different distribution models can be selected according to market conditions. Channel profits include two levels of income from spreads and dividends. After dividends, the dealer group is dynamically controlled.

   Guojiao 1573 has been following the strategy since it implemented the brand franchise model in 2015: keep the approved price and Wuliangye at around 100 yuan/bottle to maintain the product’s cost-effectiveness, and distribute profits through the brand franchise company Maintain a higher level of channel profit margins than Wuliangye. However, with Wuliangye's channel reform in 2019, Guojiao's brand disadvantages have been magnified, channel advantages have been reduced, the rate of increase in approvals is lower than that of Wuliangye, and the gap has been widened. The difficulty of following the strategy will continue to increase in the future. On the one hand, when the approved prices of both Wuliangye and Guojiao are less than 1,000 yuan, the price difference of about 100 yuan/bottle can still reflect the cost-effective advantage, but once the approved prices rise to 1,000 yuan or more, the psychological effect of consumers Will cause 100 yuan is not enough to produce any cost-effective advantage. On the other hand, when the price difference widens, the two will gradually enter two price ranges, which may be considered by consumers as two different products. Since high-end wines are mainly used for social banquets and gifts, prices and demand will interact with each other. The effect of the phenomenon, the more expensive, the greater the demand.

   (3) Sub-high-end liquor: long-term growth flexibility is large, and the seating position is still uncertain

   For the sub-high-end price band, this part of consumption The crowd is the middle class. If you look at the 3-5 year cycle, the expansion speed of the sub-high-end is relatively fast, and the growth flexibility is also relatively large. However, the sub-high-end structure is still changing a lot, and there is greater uncertainty in the seating position. Both Crystal Sword and Dream Blue are tens of billions of single products. Fenjiu Qinghua, Shuijingfang, Guoyuan, Langjiu, Xijiu, etc. are all sub-high-end brands with better development trends. In the future, there will still be new tens of billions of sub-high-end brands. Single product was born. In the short term, most wine companies still receive less payment in the second quarter of 2020. Long-term growth and certainty are more important, and pattern and track are more important. ,

   In this year, the inventory pressure of sub-high-end and mid-end liquor is relatively high. The inventory of Qinghua Fenjiu, Mengzhilan and Guoyuan is generally 1-2 months. From the perspective of price performance, Fenjiu raised the price of Bofen at the end of the first quarter, and increased the price of blue and white at the end of the second quarter. Yanghe continued to control the dream 6+ quota to increase the price, and Gujing Gongjiu strictly controlled the quota of ancient 20 and above products. Maintain price stability.

   looks at the long-term growth value of sub-high-end liquor from a strategic perspective. Shanxi Fenjiu has benefited from the national expansion of the fragrant faucet; the high-end Gujing Gongjiu leads the province, and the nationalization has sounded the clarion call; the present-world advantage of the channel is obvious; Yanghe shares still have the advantage in the nationalization.

   2. Beer: The competitive landscape has improved and the industry’s prosperity has improved

   (1) The competitive strategy has shifted from a price war to a high-end brand. The industry has entered a three-year profit acceleration period

   From 2017, the competition tone of the beer sector has undergone some relatively large changes. In 2013, the inflection point of beer industry output came. The intensified low-end price war by wine companies did not increase sales. On the contrary, capacity utilization rate decreased and profits decreased, and they were forced to enter the stage of closing factories to reduce staff and improve efficiency. From 2013 to 2017, due to factors such as factory closures, fierce industry competition, and national restrictions on consumption by the country, the sales volume and sales revenue growth rate of each beer company declined. In 2017, the company began to change its strategy, from low-price "staking" to high-end and brand-based strategies. Therefore, leading companies began to enter the stage of normalized price increases, and at the same time, the high-end product structure accelerated, and production capacity optimization began to be promoted. From China Resources to Tsingtao Brewery, they have successively started the path of active normalization of price increases and structural upgrades.

   Enter the three-year deterministic profit acceleration phase. From 17 to 20 years, industry profitability improved steadily. The industry profit margin increased from 4% to 7%. At this stage, the improvement was mainly driven by ton price. The cost savings brought by the initial stage of capacity optimization were transferred to high-end promotion expenses and salaries. Improvement, and the profitability improvement rate is stable. Since the beginning of this year, the long-term low-price mentality of beer channels and terminals has been basically reversed, the industry’s factory closures and staff reductions are coming to an end, enterprises have increased their high-end price bands, and the efficiency improvements brought about by capacity optimization, Becoming the core driving force for the acceleration of profitability in the next three years. As the proportion of high-end products is relatively small, the competition is not so intense. The benign state will always continue.

   Chart 32: Beer production capacity peaked and declined after 2013

  

   Exhibit 33: Major beer companies’ closures in recent years

  

  Data source : Huachuang Securities Research Institute, such as the Financial Research Institute

   In the future, the concentration of China's beer industry is expected to increase to 80%+, and the profitability of leading companies is expected to increase simultaneously. The scale effect of the beer industry is significant, and most of the world’s top ten beer production markets have formed a duopoly competition pattern. The CR2 in the American and Japanese beer markets reached 69%/66% respectively. The pattern of more than 70% of my country's provinces has been determined, and the five major leaders have begun to focus on their respective advantageous markets and strategically abandon the disadvantaged markets. It is expected that the concentration of each province is expected to further increase. In the next ten years, CR5 is expected to increase from 75% in 18 years to 80%+. The essence of competition in the beer industry is to obtain profits through an overwhelming market share. The market share is positively correlated with the level of profitability, and the profitability of the leading beer industry is expected to increase.

   (2) The business climate reverses during the year, and the performance is highly elastic

   Since the second quarter of the epidemic, the beer industry’s prosperity has reversed strongly. Demand accelerated recovery, and peak season consumption laid the foundation for the whole year. In August, the output of Chinese beer companies above designated size was 3.78 million kiloliters, a year-on-year decrease of 3.8%. The interim report showed that Tsingtao Brewery's sales revenue in the second quarter increased by 9% year-on-year and 49% from the previous quarter, Chongqing Beer's second-quarter revenue increased by 20% year-on-year, and Zhujiang Beer's second-quarter revenue increased by 7% year-on-year. Most of the listed companies achieve a profit growth rate of 10%-20%, and their profits have greater flexibility. With good year-on-year sales growth, increased capacity utilization, and prominent price increases for some brands, 20 years will start a three-year cycle of accelerated profitability in the industry.

   Chart 34: Beer industry output and growth rate from 2019 to 2020

  

   Chart 35: 2017-2020H1 major listed beer company profit growth rate

  

   3. Condiments: The industry has a broad space for development, and the competitive landscape is stable and the concentration continues to increase

   (1) The industry is expected to maintain a high level of prosperity in the next 5 years Revenue is expected to maintain a compound growth rate of about 10%

   In 2019, the condiment industry revenue was 418.2 billion yuan, with a compound growth rate of 12% from 2010 to 2019. The huge development space of the condiment industry mainly benefits from several factors: First, the continued steady growth of mass catering. The intake of food condiments per kilogram in catering channels is 1.7 times that of household channels. Benefiting from the development of food delivery, mass catering is expected to continue to grow steadily in the future, which will promote the growth of condiment sales. Second, there is a clear trend of refined home cooking. Compared with the previous phenomenon of one bottle of oil, salt, sauce and vinegar in the family, there are currently more varieties of family seasoning. For example, soy sauce is split into soy sauce and light soy sauce according to its function, and oyster sauce and cooking wine are gradually entering the family kitchen. Third, the increase in residents' income promotes the consumption upgrade of the condiment industry. For example, soy sauce is currently being upgraded to high-end umami soy sauce, which promotes an increase in the average price of the industry; rising cost pressure drives industry leaders to actively increase prices, and small companies that cannot follow the increase are subject to cost The pressure gradually withdrew from the industry, and the industry average price increased.

   Chart 36: Condiment industry revenue of 418.2 billion yuan in 2019

  

   (2) The competitive landscape is stable, with many high-quality companies and strong profitability

   Seasoning is a good business. The industry has a long life cycle and slow changes in the industry. It is difficult for new substitutes to subvert the existing structure. The strong ones who have already participated are always strong. In addition, condiments can be priced differently, and the industry can continue to upgrade consumption and have strong profitability; and companies in the industry can adopt differentiated competition strategies to avoid price wars and create a group of high-quality companies with strong profitability.

  The condiment industry has a stable structure. The leading Haitian flavour industry’s main business soy sauce has a solid position and is expanding into multiple categories, harvesting market share in the condiment industry. Its market share in 19 years was 4.7%, and it is expected to continue to increase in the future. As the seasoning industry has obvious product differentiation and differentiated pricing, it can accommodate multiple high-quality companies, such as high-quality soy sauce companies Zhongju High-tech, Qianhe Flavour Industry, compound seasoning leader Yihai International, Tianwei Food, and vinegar industry Leading Hengshun vinegar industry, Fuling pickled mustard tuber, leading pickled mustard industry, etc.

   Chart 37: Concentration in each sub-industry of condiment has room for improvement

  

  Source: Wind, GF Securities Research Institute, such as Financial Research Institute

   (3) Catering supply chain empowers the growth of condiments

>

   The catering supply chain will bring condiments a high-growth track in the next five years. In terms of the condiment channel structure, the income from catering, households, and food processing channels accounted for 50%, 30%, and 20%, respectively. The market share of condiment head companies in the catering side is very high, which is a manifestation of the brand's channel power, and there are many actions that can be done in the future. Will open up room for growth for the industry. In 2019, the revenue of my country's catering industry was 4.7 trillion yuan, with a CAGR of 11.4% in 10-19. The cost of food and beverage ingredients in my country accounted for 41.31% of the revenue of the catering industry, corresponding to revenue of 1.9 trillion yuan in 19 years. The increase in dining out is expected to promote the CAGR of food and beverage ingredients in the next 5 years to maintain 5-10%, and promote the standardization and large-scale development of catering companies. The most important liquor in the food sector has an annual sales caliber of about 600 billion yuan, which is much smaller than that of catering. Other sub-sectors such as quick-frozen food revenue of 134.2 billion yuan, compound seasoning revenue of 76.1 billion yuan, the scale gap is still very large. The industry linked to catering can quickly gain empowerment. The rapid growth is relatively leading.

   Chart 38: Condiment industry catering revenue accounted for 50%

   Chart 39: Catering industry scale and growth rate

  

   Learn from the United States Japanese catering semi-finished products development experience, compound seasoning will benefit the most from the catering supply chain reform. In the 1980s, the increase in the rate of restaurant chains in Japan, the substantial increase in rent and labor costs and other factors promoted the rapid development of condiments. The sales growth rate of Japanese condiments from 1980 to 1990 reached 35%. The rapid development of the American fast food chain industry in the 1950s also promoted the rapid development of condiments. In the 1950s, the compound growth rate of American conditioning products reached 39%.

   During the first half of the epidemic, consumers went out to eat fewer meals and increased family meals, which significantly increased the penetration rate of compound seasonings in household channels. Benefiting from the recovery of catering in the second half of the year, the recovery of catering in the second half of the year will increase the number of consumers going out to eat. The catering channel has gradually recovered from the trough, and the growth rate of the catering channel will increase month-on-month. That is, the compound seasoning material industry is still expected to maintain high growth. And during difficult times in the industry, the leader has a strong ability to seize market shares, and the market share is expected to increase rapidly

   4. Dairy products: the industry grows steadily, and the duopoly has differentiated competition

   (1) Liquid milk industry demand benefited from the upgrading of third and fourth-tier consumption upgrades, and is expected to maintain a compound growth rate of about 5%

   2019 dairy industry revenue 347.1 billion yuan , It is expected that the future revenue will maintain a compound growth of about 5%. In the division of the dairy sub-industry, 95% of its revenue comes from liquid milk. In 2019, liquid milk revenue was 328.4 billion yuan, with a compound growth rate of 4.3% from 10 to 19 years, and both volume and price rose. However, the significant decline in industry sales growth since 2015 is mainly due to: First, the demand is gradually saturated, and the industry has transitioned from a high-speed growth period to a mature period. Second, since 2014, various dairy companies have raised prices and upgraded their product structure, reducing the production of low-end products, resulting in the loss of some terminal demand. Since 2018, industry demand has rebounded, mainly due to consumption upgrades and the rise of dairy consumption in third- and fourth-tier cities. It is expected that liquid milk revenue is expected to maintain a compound growth rate of about 5% in the next five years.

   Chart 40: The growth rate of the liquid milk industry has picked up slightly since 2018

  Data source: Bloomberg, such as the Institute of Finance Research

   Chart 41: First-line demand growth is slow, down The demand in tier cities is relatively strong

  

   From the perspective of the prosperity of various sub-sectors of dairy products, the cheese industry The boom is the highest. In 2019, the cheese industry has revenues of about 10 billion yuan. It is benchmarked against the mature Japanese market. Cheese is the direction for the upgrade of dairy products. The per capita cheese consumption in my country/Japan in 19 years was 0.1/2.2 kg respectively, and there is a lot of room for the development of my country's cheese market. However, my country's cheese market is still in the early stage of development, with fewer industry competitors, and it belongs to the blue ocean market. The liquid milk industry has entered a mature stage, and pasteurized milk is currently the most prosperous in the liquid milk industry. In 2019, the revenue of pasteurized milk is 30 billion yuan, and it is expected to maintain a compound growth rate of about 10% in the next five years. In the future, as the share of pasteurized milk increases, the advantages of room temperature milk may be weakened. However, the radiation radius of the low-temperature milk source is limited, the logistics requires the entire cold chain (including transportation/dealers/terminals, etc.), and it takes time for the Chinese people to form a low-temperature food consumption habit. It is expected that the proportion of low-temperature will be steadily increasing.

   (2) Duopoly market share reached 43%, forming differentiated competition

   The liquid milk industry has a clear duopoly competition pattern, with CR2 market share Reached 43%. Yili and Mengniu have a market share of 22.4% and 20.7%, respectively, and Guangming ranks third with a market share of 4.2%. Throughout history, the market share of duopoly has continued to increase, and the gap has always been small, and the market share of other companies has gradually decreased. The duopoly gradually differentiates competition-Yili expands horizontally to create a food market. ; Mengniu focuses on dairy products and builds a dairy industry chain vertically.

   Chart 42: Duopoly competition in the liquid milk industry is obvious

  

   The dairy industry is expected to resume growth in the second half of the year. The impact of the epidemic on dairy products is mainly reflected in the reduced demand for gifts and increased promotions during the Spring Festival-room temperature yogurt (An Muxi, Chunzhen) and high-end white milk (Deren Su, Jindian) accounted for 50%+ of the gifts. The home isolation period has passed in the second half of the year. Consumers will resume visiting relatives and friends, and the demand for dairy products is expected to resume. Companies are expected to make efforts in the second peak season of the Mid-Autumn Festival and National Day to ensure steady income growth throughout the year. In addition, the problem of the freshness of high-end products caused by the decrease in the demand for gifts during the Spring Festival has been resolved in the first half of the year-the shelf life of high-end products is 6 months.

   5. Snack food: the impact of the epidemic is small, and the industry has a large room for growth

   (1) Demand for casual snacks has increased during the epidemic

   snack foods refer to foods that are restricted from consumption and consumption outside of the meal time. They mainly include casual halogen products, candies and preserves, bread, cakes and pastries, puffed foods, roasted seeds and nuts and biscuits. During the epidemic, snack foods mainly benefited from the increase in C-end demand. During the epidemic, the time spent at home became longer, and consumers' demand for casual snacks increased. Looking at the less affected offline supermarket channels and online channels by channel, the sales situation Good. According to the Q1 financial data, the revenue and profit of snack food companies whose main channels are distribution and online are growing positively, which is better than that of the food and beverage sub-sectors such as liquor and beer. Consumers are more concerned about health, product safety and hygiene due to the epidemic, and tend to choose products with strong brands and packaged products. The industry concentration is expected to increase. Q2 With the recovery of omni-channel manufacturing and logistics, it is expected that snack food companies are expected to achieve steady growth in the second quarter.

   Exhibit 43: Snack food company's revenue in the first half of the year has a positive growth

  

   Chart 44: The sales of Ali's snack foods in March increased by 17% year-on-year

  

  Data source: GF Securities Research Institute, such as the Financial Research Institute

   (2) The snack food market has a vast space, and the penetration of e-commerce has increased and the expansion of categories has promoted industry growth

   China's snack food market has a huge space. According to Frost&SuAccording to data from llivan, industry sales in 18 years have exceeded one trillion yuan, and sales in 19 years have reached 1.14 trillion yuan. The CAGR for 2012-2019 was 12.3%. Although my country's snack food has a large market scale, its per capita consumption is still far behind that of the United States, Britain, Japan, South Korea and other countries. The current per capita consumption of snack food in South Korea is 2.6 times that of my country, and that in the United States is 4 times that of my country. Compared with developed countries abroad, my country's snack food industry still has greater room for growth.

   E-commerce penetration increase and category expansion are expected to drive revenue growth of about 10% CAGR in the next three years. From the perspective of sales channels, snack foods can be divided into supermarkets, individual retail distributors, e-commerce channels and other channels, with revenues accounting for 52%, 23%, 13% and 12% respectively. From 2010 to 2019, China's snack food e-commerce channel retail sales increased from 0.3% to 13%. With the integration and development of e-commerce and offline channels, the industry is expected to continue to expand into third- and fourth-tier cities, rural markets and overseas markets in the future, and it can provide consumers with a better shopping experience and inject new momentum into the development of the industry. Secondly, snack food companies continue to innovate products, launching dozens or even thousands of new products every year, which is an important driving force for the growth of the industry. Considering the increase in the per capita consumption capacity of Chinese residents, the penetration of e-commerce channels and the sinking of the low-end market, the continuous innovation of superimposed snack foods, and the diversification of consumption scenarios continue to highlight, the leisure snack industry is expected to continue its rapid growth, which is expected to maintain about 10% Compound growth rate.

   Chart 45: The scale of China's snack food industry exceeds one trillion

  Data source: Frost&Sullivan, such as the Institute of Finance

   Figure 46: E-commerce penetration rate increase is the growth driver of the snack food industry

  Data source: public information, such as the Institute of Financial Research

   6. Meat products: The economy is stable, and the product structure is promising Continue to upgrade

   (1) Cost down period, stable industry growth

   The industry’s prosperity is stable, cost down cycle, product Structure and price increase dividends are expected to appear. my country’s meat product industry has entered a mature period. Since 2019, the overall income and net profit of meat products have accelerated. This is mainly due to the increase in the cost of coverage of the company through price increases and product structure upgrades-the overall meat product listed company in 2019 The growth rates of revenue and net profit were 31% and 21% respectively. In the future, the industry's sales volume will grow at a low rate and will grow steadily. Revenue growth will mainly depend on price increases. The main method of price increase is to upgrade the product structure. And the pork down cycle, product structure and price increase dividends are expected to be released.

   (2) Large room for product structure upgrade

   Domestic meat product consumption is in the stage of upgrading high-temperature to low-temperature meat products, and the product structure is upgraded big space. According to Bloomberg data, the consumption of low-temperature meat products in my country in 2018 was still low, and the consumption accounted for only 30-40%. Compared with the US meat market (low temperature accounted for more than 90%), my country's low-temperature meat products There is more room for development. In addition, the leader Shuanghui has launched the low-temperature meat product business in response to the consumption upgrade trend, which is expected to nurture consumers and promote the upgrading of industrial product structure.

   Exhibit 47: Steady growth in revenue and profit in the meat industry

  

   Exhibit 48: The consumption level of low-temperature meat products in China is still low

  

   data Source: GF Securities Research Institute, such as Financial Research Institute

   5. Development Trends

   New era spawns new opportunities, channels, products, and industries Accelerated changes in the pattern

   1. Channel model changes: the outbreak of e-commerce channels brings high growth opportunities for companies

   procurement scenarios From the traditional farmer’s market toSpeed ​​up the transformation to modern channels. After the impact of the epidemic, on the one hand, it will promote the management and rectification of the traditional farmer’s market, on the other hand, it will also make young consumers more inclined to purchase through modern channels. The infrastructure construction of information and logistics networks will bring profound changes to the food and beverage industry. The information network is that we see that now with the rise of live broadcasts, Internet celebrity products are emerging one after another, the food and beverage industry has entered a stage of relatively good business returns, and emerging categories are also worthy of attention. The logistics network refers to the trend of channel transformation such as KA, fresh produce chain, e-commerce home delivery and other channels.

   Around 2012, the e-commerce channel exploded. A group of online snack food companies seized the opportunity and achieved rapid growth. From 2011 to 2019, the scale of online shopping increased from 0.8 trillion yuan to 7.5 trillion yuan, with a compound annual growth rate of 32.3%, and the penetration rate in the total retail sales of consumer goods rose from 5% to 15%. The casual food online CAGR exceeded 20%, and the corresponding growth of traditional channels such as supermarkets and supermarkets fell into a bottleneck. The CAGR dropped from 26% in 2010-2015 to 0.4% in 2015-2020. Representative companies such as Three Squirrels, from 2014 to 2019, the compound growth rate of operating revenue was 62%. From 2016 to 2018, the revenue of several major e-commerce platforms accounted for 90%, 90%, and 83% of their total revenue, respectively. %, the rapid growth of online channels has promoted the company's rapid growth into a tens of billions of giants. Another example is Liangpin Store, which started offline in 2006 and entered online in 2012. At present, the online channel sales account for 55%, which has effectively promoted the rapid growth of the company.

   Exhibit 49: Online business distribution of the three squirrels

  

  Data source: Three squirrels prospectus, such as the Financial Research Institute

   2. Product category changes: B-end food packaging trends accelerate, C-end pre-products benefit

   strong>

   The outbreak of the new crown epidemic in 2020, on the one hand, will give rise to the accelerated trend of C-end chaining and online delivery to home, which will accelerate the speed of packaging food, and at the same time, it will be like self-heating small hot pot, self-heating rice, etc. Pre-products that focus on facilitation will also accelerate their volume. On the other hand, for the B-end, the trend of chain catering has intensified. From 2003 to 2018, the average number of chain restaurants in my country continued to increase, with a compound annual growth rate of approximately 11.4%. Compared with the concentration of the US catering industry, the current CR50 in China is only about 5%. It is expected that as the concentration of China's catering increases, the proportion of chain catering in China still has a large room for improvement.

   Under the trend of chain catering, the central kitchen highlights the advantages of stability and accelerates the growth of upstream food demand. For food safety, stability and cost considerations, chain catering is more inclined to purchase standardized semi-finished products. For example, the demand for hot pot ingredients has steadily increased, maintaining a compound growth rate of more than 15%. Chain catering purchases quick-frozen food instead of manual processing, and the quick-frozen industry maintains a compound growth rate of more than 10%. At present, major companies in the industry dominate the C-end business. Compared with Japan's fast-frozen food catering downstream, which accounts for more than 60%, there is still a lot of room for development .

   Chart 50: The average number of chain restaurants continues to increase

  

   Exhibit 51: Comparison of TOP50 share of Chinese and American catering industry

  

Data source: Foresight Industry Research Institute, such as the Financial Research Institute

   3. Changes in the industry structure: concentration will accelerate, and leading advantages will become more apparent p>

The short-term impact of the    epidemic is severe, forcing some small brands and small companies to withdraw. At the same time, dealers will also favor brand companies with stronger strength and better long-term channel reputation. Therefore, the advantages of leading companies will be further magnified in terms of financial strength, dealer management decisions, consumer brand recognition, etc. This is clearly reflected in many sub-sectors such as liquor, dairy, braised products, and snack foods. .

   VI. Full analysis of key investment targets

  

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