The Zhitong Finance App learned that CITIC Securities released a research report saying that the liquor sector is currently at the end of the cycle, at the end of the cycle, and bottom-line signals such as price, inventory, and expectations have already appeared. Looking ahead to 2027, the bank determines that supply and demand in the liquor industry is expected to achieve a new equilibrium — demand is expected to recover weakly under macro-catalysis and a low base, supply is expected to shrink further but competition intensifies. In the long run, the industry is expected to steadily enter a benign recovery stage. Although there is still some pressure on the domestic demand side, the current valuation already reflects pessimistic expectations for medium- to long-term development of many industries. Also, considering that the liquor sector currently has strong dividend value and future demand expectations are shifting to potential poor expectations, the bank suggests increasing the allocation of leading wine companies at the bottom of the industry.
CITIC Securities's main views are as follows:
Liquor is in the late stages of the polishing cycle and is at the end of the cycle
Since the beginning of 2026 (2026/10/20), the Liquor Index (CITIC) has been -12.3%, outperforming the Shanghai and Shenzhen 300 Index by 2.0 pcts and losing the Wandequan A Index by 3.0 pcts. Yingjiao Gongjiu (+5.8%) is the only liquor company to record positive earnings. The liquor sector suffered significant losses in the first half of the year, benefiting from the impact of liquidity. It has been more than five years since the current round of adjustments in the liquor industry peaked in 2021. The industry has successively gone through four stages: weakening demand, declining batch prices, accumulation of channel inventory, and clearing of statements. Since 2026, the liquor industry has also completed the vast majority of clean-up in various dimensions such as price, inventory, channel, and performance. Currently, it is in the late stages of refining and finishing, and bottom-line signals such as price of famous wine, channel inventory, and market expectations have appeared.
2027 outlook: supply and demand are expected to achieve a “new balance”
Industry demand is expected to achieve a weak recovery under macro-catalysis and a low base: 1) at the macro level, the recovery on the production side opens up channels for business recovery, and policy shifts to form the largest option; 2) at the industrial level: the decline in demand narrows quarterly, and the mismatch between supply and demand is being digested; 3) At the level of low base effect: the reporting base after continuous clearance has fallen to its lowest level in recent years. Industry supply is expected to shrink further but competition is intensifying: 1) Active contraction in shipments from leading wine companies: from the pursuit of scale to healthy growth, the shipping side is expected to continue to restrain in 2027; 2) Accelerate share concentration towards the head: competition in the industry will become more intense in 2027.
Bonus deposit first, fix options later
The liquor sector currently has strong dividend value. Up to now (10/20), the liquor sector's dividend rate (TTM) is 4.6%, +2.97 percentage points compared to the 10-year treasury bond spread, which is the highest range in history. Leading wine companies continue to increase shareholder returns, which is expected to gradually increase the margin of investment safety in the liquor sector. In terms of relative valuation, the price-earnings ratio (TTM) of the CITIC Liquor Index is 20.1x, falling back to the bottom range in the medium to long term. The current valuation has reflected pessimistic expectations in many industries, gradually completing pricing on the most conservative assumptions of long-term contraction in demand and a downward shift in the performance center of wine companies. However, if domestic demand picks up in the future, liquor as a consumer asset with prominent procyclical attributes, the demand elasticity will far exceed the basic non-growth assumption implied by the current valuation. It is expected that the sector will have a large margin of expectation and room for repair.
Beer is experiencing sales and cost pressure, so it is recommended to lower expectations appropriately
The peak beer season in 2026 has passed. The beer industry maintained a good start in the first quarter, supported by the misalignment of the Spring Festival and steady phased catering; the second quarter was affected by macroeconomics, and the overall situation was weak, changing from month to month; in the third quarter, under the influence of heavy rain, the decline further widened to medium to high units. The bank expects industry sales to decline throughout the year, and overall tonnage prices will rise steadily, driven by leading high-end strategies. On the profit side, affected by the decline in production scale, it is expected that there will be some pressure on the profit side of various enterprises. Looking ahead to 2027, the bank determined that the industry is still at the stage of “stable volume and price stability and profit pressure”. It is recommended that expectations for the sector be lowered appropriately, while paying attention to the pressure brought about by rising costs of raw materials such as aluminum and barley. The industry's excess revenue proposal focuses on two aspects: one is a regional leader that improves internal management efficiency, is driven by large single products, and increases in tonnage prices; the other is to focus on leading enterprises with sufficient cost locking, strict cost discipline, and low profit base.
Risk factors:
Macro consumer demand falls short of expectations; competition in the liquor and beer industry intensifies; the price market performance of core products in the liquor industry falls short of expectations; the risk of high channel inventories; the recovery of food and beverage consumption falls short of expectations; food safety issues, etc.
Investment Strategy:
Currently, the liquor sector is in the late stages of the cycle, at the end of the cycle, and bottom-line signals such as price, inventory, and expectations have appeared. Looking ahead to 2027, the bank determines that supply and demand in the liquor industry is expected to achieve a new equilibrium — demand is expected to recover weakly under macro-catalysis and a low base, supply is expected to shrink further but competition intensifies. In the long run, the industry is expected to steadily enter a benign recovery stage. Although there is still some pressure on the domestic demand side, the current valuation already reflects pessimistic expectations for medium- to long-term development of many industries. Also, considering that the liquor sector currently has strong dividend value and future demand expectations are shifting to potential poor expectations, the bank suggests increasing the allocation of leading wine companies at the bottom of the industry. Excess beer mainly seeks leading local companies and leaders with high market share potential to increase their market share. New alcoholic beverages focus on the market style and the company's new product distribution pace.