CITIC Construction Investment: The turning point of this round of the Baijiu adjustment period is approaching; the Baijiu sector is entering a cyclical bottom allocation opportunity

China Securities Journal Research Report points out that the “five bottom stages” of the liquor industry (policy bottom, inventory bottom, sales bottom, batch price bottom, production and sales bottom) resonate with the “three lows and one high” in the capital market (low expectations, low valuation, low public fund holdings, high dividends). Combined with recent market strategies being implemented one after another, as the Spring Festival peak season approaches, we believe that the current round of white liquor adjustment cycle is nearing its turning point. The capital market’s expectations are leading, and the white liquor sector is entering a cycle bottom allocation opportunity.

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Fifteen Years of White Liquor—Analyzing High-End White Liquor Volume and Price from a Product Perspective, Counter-Cyclically

Counter-cyclically analyzing the volume and price strategies of high-end liquor companies, the fundamental turning point is approaching. Currently, this may be a bottom-of-the-decade cycle allocation opportunity. This article reviews the changes in volume and price of high-end liquor from 2012-2016, 2016-2021, and 2022-2025, analyzes current company strategies and industry cycles, and forecasts the future volume and price trends of high-end liquor. The “five bottom stages” of the white liquor industry (policy bottom, inventory bottom, sales bottom, batch price bottom, production and sales bottom) resonate with the “three lows and one high” in the capital market (low expectations, low valuation, low public fund holdings, high dividends). Combined with recent market strategies being implemented one after another, as the Spring Festival peak season approaches, we believe that the current round of white liquor adjustment cycle is nearing its turning point. The capital market’s expectations are leading, and the white liquor sector is entering a cycle bottom allocation opportunity.

Reviewing 2012-2015: Under the background of the “Three Public Consumption” ban, high-end liquor volume and price resisted pressure testing, and leading brands’ price competition laid the foundation for the high-end brand pattern. At the end of 2012, the Central Government’s “Eight Regulations” were introduced and implemented, sharply reducing demand for government procurement of liquor, and the industry fully entered an adjustment period. The price competition among high-end liquors, especially the key price strategy changes at the beginning of the adjustment period, tested brand value pressure, and their impact persisted throughout the adjustment period on companies’ volume and price strategies.

Reviewing 2016-2021: The rise of mass consumption and accelerated consumption upgrading led to simultaneous increases in volume and price of high-end liquor. At the end of 2015, the “housing reform monetization” brought a new round of real estate boom, and from 2020-2021, ample liquidity promoted the realization of residents’ wealth effects and improved corporate profits. White liquor embarked on a path of high-end and centralized consumption upgrading, driven by the concept of “drink less but better,” with famous brands achieving simultaneous volume and price growth.

Reviewing 2022-2025: The white liquor industry is gradually shifting from stock to shrinking phase. Leading liquor companies have achieved performance growth through extreme operations, but prices are under pressure due to sales pressure. Since 2022, macroeconomic indicators such as social retail sales, CPI, PPI, and real estate investment have gradually weakened. The demand for white liquor, transitioning from old to new momentum, entered a stock phase. By 2025, with the implementation of new liquor bans, from 2022-2024, leading companies expanded market share and increased inventories to achieve revenue growth, but by 2025, earnings growth will be fully downgraded. During this period, the upward channel for high-end liquor prices was blocked, and price increases transmitted less effectively.

Investment Recommendations:

The “five bottom stages” of the white liquor industry are approaching, and the cycle turning point can be expected: In the short term, unreasonable consumption restriction measures from the policy side are gradually relaxing, with obvious marginal improvement trends. The most pessimistic moment for white liquor sales has passed. With PPI marginally improving and measures to stimulate domestic demand being implemented, white liquor sales are expected to bottom out around mid-year; companies are currently in a stage of clearing performance and destocking channels, with cautious expectations for Spring Festival and 2026. Coupled with the “siphon effect” during the festival, inventory digestion may accelerate, improving channel health. In the medium to long term, recent adjustments in Moutai’s product strategy have accelerated the emergence of industry batch price bottoms. Using Moutai as a direct sales engine and channel marketing transformation, even if volume increases and batch prices loosen, we expect the deviation from 1499 yuan to be relatively controllable, and the industry batch price bottom will arrive. Regarding concerns about future consumer demand, the exit of small and medium enterprises and the suspension of capacity expansion by leading companies, we estimate that the bottom will be when white liquor production falls below 4 million kiloliters in 2025. White liquor remains indispensable in specific domestic scenarios, and as liquor companies’ marketing strategies shift to better suit “Generation Z” preferences, the fundamentals of white liquor consumers remain relatively stable.

The “three lows and one high” in the white liquor sector highlight its allocation value. The capital market’s expectations for the white liquor industry have continued to weaken, with annualized returns since 2021 being negative. Valuation levels and public fund holdings are both low. Leading companies have increased dividends and market value management, making the white liquor sector highly cost-effective for allocation. It is one of the few sectors with low valuation and approaching a turning point. Currently, the sector’s historical percentile is within 15%, supporting a valuation bottom. From a capital perspective, public fund holdings have continued to weaken, with the proportion of holdings in the third quarter of 2025 being only 5.52%. Excluding passive fund holdings, active fund holdings in the white liquor sector in Q2 2025 entered a low-allocation stage, with relatively clean “chips” of capital. Additionally, listed liquor companies respond to policy calls, with leading companies promising dividend payout ratios and amounts, emphasizing investor returns, actively participating in market buybacks and major shareholder share increases to stabilize stock prices and market expectations.

High-end liquor is a barometer of industry cycles, and its bottoming out is expected to precede the industry. Reviewing the stock performance during the 2013-2015 white liquor adjustment period, leading companies were the core indicators of industry cycle bottoms, achieving fundamental and stock price recoveries first. Looking ahead to the 2026 white liquor cycle, recent significant strategic adjustments and product volume-price logic changes also reflect cautious expectations for the new year. In the resonance of the “five bottom stages” of the industry and the “three lows and one high” in the capital market, we are optimistic that high-end white liquor stocks will outperform the industry.

Risk Warning:

Demand recovery may fall short of expectations. In recent years, macro factors have slowed economic growth, and national income growth has been affected. The pace of recovery in residents’ income growth and consumption power in the medium and short term may not meet expectations.

White liquor inventory destocking may fall short of expectations. Currently, white liquor is in a destocking phase, with company performance declining to improve channel health. If sales recovery is weaker than expected, inventory bottoming will be delayed, extending the industry cycle turning point.

High-end demand remains weak, and high-end prices will face pressure.

Food safety risks: Food safety issues have remained a hot topic among consumers in recent years. Although industry chain companies have continuously improved production quality control, due to the long industry chain and many involved enterprises, food safety risks still exist.

(Source: Caixin News)