Food and drink consumption toughness, long-term layout value is high

Liquor, seasoning and fermentation products, brine products, etc., the proportion of fund heavy warehouse improved. As of 23Q3, the food and beverage segment includes liquor (7.47pct, year-on-year -1.02pct, month-on-month +1.10pct), dairy (0.10pct, year-on-year -0.31pct, month-on-month -0.12pct), and pre-processed food (0.09pct, year-on-year). Year-on-year -0.05pct, month-on-month -0.05pct), beer (over 0.29pct, year-on-year -0.33pct, month-on-month -0.15pct), other alcohol (over 0.01pct, year-on-year +0.001pct, month-on-month -0.03pct) sectors were over-allocated by fund companies; Liquor, seasoning and fermentation products, brine products, soft drinks, baked goods fund excess ratio improved from the previous quarter.

2. Liquor: The overall steady growth, high-end wine and strong real estate wine toughness

1) In terms of liquor, channel inventory is under short-term pressure, and the performance of liquor enterprises continues to differentiate. In terms of high-end liquor, the approval price fell slightly, Guizhou Moutai increased the ex-factory price to enhance the certainty, Wuliangye Q3 growth rate improved quarter-on-quarter, and Luzhou Laojiao made more active payments. In terms of high-end liquor, under the background of gradual recovery of consumption, channel inventory has increased, and the approval price of some high-end single products has been adjusted back, which is a good opportunity for wine enterprises with core competitiveness to expand their share, and also a good opportunity for wine enterprises in economically strong regions to consolidate barriers. 2) The liquor sector as a whole, 2023Q1-3 total revenue/performance +15.9%/+18.9% year-on-year.

2.1 Liquor sector: leading the growth of food and beverage industry

White wine board led to the growth of the food and beverage industry. 2023Q1-3, the total revenue/performance of white wine board +15.91%/+18.92%, leading the growth of the food and beverage industry. Profitability continues to improve. In 2023Q1-3, the gross profit margin/net profit margin of the liquor sector was 80.39%/39.51%, with the same ratio of +0.62/+0.70pct.

2.2 High-end wine shows toughness, and the second-high-end wine continues to differentiate

The liquor industry is growing in squeeze mode, and the price increase is the main driving force of the industry growth. According to the data of the National Bureau of Statistics, in 2022, the revenue of China's liquor industry was 662.65 billion yuan, an increase of 9.6%, and the total profit was 220.17 billion yuan, an increase of 29.4%. The revenue growth was mainly from the price increase. In 2022, China's liquor production was 6.712 million liters. It was down 5.6 per cent from a year earlier. In the first three quarters of 2023, China's liquor production was 3.066 million liters, down 9.0% year-on-year.

The concentration of the liquor industry continues to increase, and the share and profit are concentrated in the head liquor enterprises. In 2022, the total revenue of A-share listed wine enterprises accounted for 53.78% of the revenue of liquor enterprises above designated size, an increase of 32.91pct compared with 2015; While the revenue accounted for more than 50%, the profit accounted for more than 80%, and the total profit of listed wine enterprises in 2022 accounted for 82.03% of the total profit of white wine enterprises above designated size, an increase of 19.59pct compared with 2015. The number of liquor enterprises above designated size continues to decrease, according to the data of the China Wine Association, there will be 963 in 2022, a decrease of 482 compared with 2018. High-end liquor prices are more resilient. 2017-2022, according to the National Development and Reform Commission on the 36 large and medium-sized cities consumer price statistics show that the average retail price of high-grade liquor, mass liquor showed an increasing trend. Since the end of 2022, affected by fluctuations in economic and consumption scenarios, the average price of high-end liquor and mass liquor has declined, while the price of high-end liquor is more resilient.

Since 23 years, the liquor industry has gradually entered a new round of adjustment period. According to the view of China Liquor Association, China's liquor industry and liquor market have entered a new round of adjustment period. In recent years, the industry has experienced rapid growth, but overcapacity and problems in sales channels have led to inventory pressure and price inversion, which have been exacerbated by the damage to the consumption scene in 20-22 years. Overall, the liquor industry has entered a new round of cyclical adjustment, and the consumption scene has been damaged to accelerate the market reshuffle. 23Q2, Q3 total amount of contractual liabilities of liquor sector -4.57%, -1.91% year-on-year; Liquor circulation represents the temporary pressure on the income of Huazhi wine line. This year, the banquet scene outperformed the business scene. In the past 23 years, with the recovery of the consumption scene, the liquor market has gradually recovered, but the channel pressure is still on, and the banquet scene is better than the business and group buying scene.