In 2018, the demand for food and beverage industry in China generally recovered. The cumulative growth of total profit in the second quarter remained above 20%.



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In 2018, the demand for food and beverage industry in China generally recovered. The cumulative growth of total profit in the second quarter remained above 20%.
 
    Condiment categories are a good investment choice under the three dimensions of insufficient liquidity, downward economic growth and low market risk appetite. From the perspective of the industry as a whole, the defense characteristics of food and beverage began to be stronger than the offensive characteristics in the second half of this year. From the perspective of investment categories, liquor has been the best among the horizontal growth rates of all consumer goods in the past three years, followed by condiments. For 18 years, we continue to be optimistic about the traditional food and beverage industry with high barriers: high-end liquor, traditional condiments and large-space health food industry (mainly dairy products). In addition, it is considered that the future differentiation of liquor is intensifying, and the famous wines with a superiority of more than 300 yuan are outstanding, which is the best choice.

    I. Analysis of the development status of food and beverage industry

    1. Analysis of the relative relationship of the food and beverage industry

    First of all, from the current main business income data, wine and beverages recovered rapidly in the four major industries, reaching 10.8% in 2018Q2, which is only lower than the pharmaceutical manufacturing industry.
消费四大行业主营业务收入(累计同比增速%)
Revenue from the main business of the four major industries (accumulated year-on-year growth rate)
Revenue from the main business of the four major industries (accumulated year-on-year growth rate)

Source of data: public information

    Related Report: Research Report on Market Analysis and Forecast and Investment Direction of China's Food and Beverage Industry Published by Zhiyan Consulting Network

    From the perspective of various sub-sectors of food and beverage, liquor has shown a squeeze-type growth, and high-end liquors such as Maotai and Wuliangye showed much faster growth than the industry; normal-temperature yogurt and high-end white milk maintained high growth rate, driving the overall upgrade of liquid milk. Imported beer and imported wines still maintain a good growth rate when the volume is getting bigger; the ultra-high-end and high-end milk powder market is expanding rapidly; the brand of leisure halogen products such as the tasteless and Zhouhe ducks is expanding; the leading short-baked bread brands such as Tao Li accelerate the substitution of miscellaneous brands. .

    Looking back, consumption upgrades are expected to continue to promote the proportion of high-end and brand products, and the leaders of all segments of the industry as high-end and brand products will long-term gains in consumer upgrades, and the industry's advantageous position will be further consolidated.

Consumer Confidence Index


Source of data: public information

    The weighted average growth rate of the liquor industry in the next three years is 26.87%, ranking first in several industries such as pharmaceutical biology, household appliances, textile and garment, light industry manufacturing, and retail trade.

The weighted average of the industry's revenue growth in the next three years in the liquor industry


Source of data: public information

    2, the industry chooses condiments, liquor and health

    From the perspective of quantity and price, the traditional food industry represents the essence of food culture, has a very high viscosity, and can be consumed repeatedly. Due to the low concentration and viscosity, it is possible to increase the price and maintain the long-term growth of the performance and the stability of the valuation.

    Although these companies generally have a slower growth rate and a smaller scale, they can grab market share through state-owned enterprise reforms and outreach acquisitions. These measures can be considered as catalysts.

    Second, the growth rate of the industry

Growth rate of wine, beverage and refined tea manufacturing


Source of data: public information

    The wine and beverages have maintained growth since 2017 and entered 2018Q2. The cumulative total profit growth remained above 20%, much higher than the growth rate of the main business income, the gross profit margin increased, and the profitability increased.

Non-wine food manufacturing growth rate


Source of data: public information

    The demand for food and beverage industry has generally recovered. The cumulative year-on-year growth rate of wine, beverage and refined tea manufacturing revenues has increased since the second half of 2016, and has declined since June 2017. Since the beginning of 2018, the year-on-year growth rate of revenue has rapidly rebounded from 7.7% to 11.9% in April. , increased by up to 4.2pct. The cumulative year-on-year growth rate of food manufacturing revenue has been significantly increased since 2017. As of April 2018, the cumulative year-on-year growth rate was 8.8%, which has increased by 0.5pct since November 2017.

Revenue growth in wine, beverage and refined tea manufacturing industry rebounded year-on-year


Source of data: public information

Food manufacturing revenue growth has rebounded since 2017


Source of data: public information




Source of data: public information

    The willingness of residents to consume has increased, and rural consumption expenditure is higher than that of urban areas. Since 2017, the domestic consumer confidence index has continued to improve steadily, which strongly supports the sustained recovery of consumption. Under the background of precision poverty alleviation and the transformation of shanty towns in third- and fourth-tier cities, the disposable income of residents has increased significantly. Compared with urban residents, the increase in disposable income and per capita consumption expenditure of rural residents has been significantly faster.

Domestic consumer confidence data has increased significantly since 2017


Source of data: public information

The disposable income of urban and rural residents has increased significantly since 2017 (%)


Source of data: public information

Per capita consumption expenditure of rural residents has increased faster than urban residents (%)


Source of data: public information

    The actual purchasing power of third- and fourth-tier cities is better than that of first- and second-tier cities. The prices of third- and fourth-tier cities are lower than the cost of housing. The pressure on residents to buy houses is lower than that in first- and second-tier cities, and the actual purchasing power is higher. With the increase in the income of residents, the actual purchasing power of the third- and fourth-tier city residents after the impact of house price factors is removed, and the consumption potential is greater. Therefore, consumer confidence in third- and fourth-tier cities has also increased significantly in recent years, and is higher than first- and second-tier cities.

Third- and fourth-tier cities may have higher consumer confidence index


Source of data: public information

The difference between the average house price of each city and the annual disposable income of residents


Source of data: public information

    From the income level, the gap between different levels of cities is not large. At the income level, we select the income of fresh graduates and taxi drivers, as well as money as an important indicator to measure the current public income. Second-tier cities (Hangzhou), in addition to higher spending on money, neither the income of taxi drivers nor the income of recent graduates have formed a large gap with other third- and fourth-tier cities. The income gap between residents of different levels is gradually decreasing.

Taxi driver income by region


Source of data: public information

Graduate income from all regions


Source of data: public information

    In the medium and long term, more well-off families in the future will come from third- and fourth-tier cities. With the increase in income levels in third- and fourth-tier cities, as well as lower living costs and housing prices, more middle-class families (well-off families) will come from third- and fourth-tier cities and become the main force of consumption growth. According to estimates, by 2022, the proportion of middle-class cities from third- and fourth-tier cities will increase from 18% in 2002 to 39%, while the proportion in first- and second-tier cities will fall from 83% to 61%.

The proportion of middle class in cities at all levels (%)


Source of data: public information

    (The total sample size is 266 cities, and the forecast data for 2022. The sample cities are divided into four levels based on the economic development and political importance of the city. The first line: nominal GDP in 2010> 932 billion yuan; second line: nominal GDP in 2010 It is 1,200-9,320 billion yuan; the third line: nominal GDP in 2010 was 22-120 billion yuan; fourth-line: nominal GDP in 2010 <22 billion yuan)

    The sinking of modern channels has accelerated the upgrading of consumption in low-tier cities. Large supermarkets and convenience stores are accelerating the sinking of channels, and leading e-commerce companies are also increasing the online and offline layout of low-tier cities. With the popularization of the Internet in recent years, online shopping in the third and fourth tiers has gradually become popular and has gradually become the main force of power elimination. Taking Jingdong as an example, more than 50% of its users are currently from the third and fourth tier cities.

According to the statistics of Ali, the proportion of purchases in first- and second-tier cities during the double eleventh period has been declining year by year, and the proportion of Jingdong users in the third- and fourth-tier cities has exceeded 50%.


Source of data: public information

    Food and beverage leading companies are more likely to benefit from sinking channels. According to statistics, Yili's penetration rate topped the list, reaching 89.6% in 2017, and consumers hit a total of 1,218 million. On the basis of high penetration rate, benefiting from channel sinking, consumers' annual growth rate still reached 6%. Mengniu has become a fast-moving consumer brand that has touched over 1 billion in addition to another consumer. In addition, Haitian maintained a strong momentum and used channel advantages to increase penetration. Consumers' exposure increased by 6%, and the 2017 ranking rose to fourth.

Top 10 brands for consumers in China's food and beverage market in 2017


Source of data: public information

    1. Development of the liquor industry

    Looking at the trend of the whole industry, 300 yuan is the watershed of liquor, and the future concentration is improved to differentiate it. The 300 yuan is also the boundary of the upgrade. The growth rate of more than 300 yuan is much more than 300 yuan, and the sustainability is very good. It is expected that the valuation of liquor faucets will not increase much in the next 18 years, but the performance prospects are very impressive, and there is much room for improvement in concentration. In addition, the second-end high-end liquor will increase in terms of quantity, price, profit and market value, and the current PEG value is low.

    The liquor industry has a very clear phenomenon around the price range of 300 yuan:

    Liquor products of more than RMB 300 have grown rapidly, even if marketing has not improved. For example, Wuliangye.

    The overall growth of liquor products below 300 yuan is slow, even the growth of the company with the strongest marketing ability is not obvious. For example, Gujing Gong.

    Selecting more than 300 yuan of liquor samples from various leading companies and liquor samples of less than 300 yuan, the analysis of its core product growth can get important conclusions: the advantages of high-end and sub-high-end liquor categories are obvious, and the growth is fast, from 16 to 18Q1, The average growth rate is above 22%, and the average growth rate from 17Q1 to 18Q1 is the fastest 51.22%. The competition in the middle and low end is fierce, and the overall growth rate is far less than that of liquor over 300 yuan, even in the fastest growing period of 17Q1 to 18Q1. The average growth is only 14.60%

Liquor enterprise core product growth rate (300 yuan or more liquor sample)


Source of data: public information

The growth rate of core products of liquor enterprises (50-300 yuan liquor sample)


Source of data: public information

    From “expansion growth” to “squeeze growth”, the industry has a relatively large supply and fierce competition in the industry. Leading companies are more competitive and more supported by governments at all levels. We expect that both medium and low-priced or regional markets will continue to increase in volume and price. Liquor production and personal consumption

China's liquor production in 2006-2017


Source of data: public information

    From the perspective of demand structure, 2011 experience data shows that political business consumption accounted for 82%, and mass consumption accounted for 18%. In 2016, government business consumption accounted for 55%, and mass consumption accounted for 45%. In 2017, government business consumption accounted for 35%, and mass consumption accounted for 65%. After the current round of industry recovery, the demand structure of liquor has undergone significant changes. The proportion of mass consumption has gradually increased, and it has exceeded the proportion of political business consumption in 17 years. The growth of mass consumer demand is a stable process, there will be no cliff-like decline, and the change in demand structure will lengthen the boom cycle of this round of liquor.


2, the development of the beer industry: low-end demand continues to shrink

    For the first time in more than a decade, negative growth occurred; 2015-5.06%; 2016-0.1%. 2) Imported beer grabs high-end. In 2012-2016, the annual import CAGR growth rate was 42%. 3) Less mergers and acquisitions, less new construction, more shutdowns.

Domestic beer production and growth rate


Source of data: public information

Imported beer quantity and growth rate


Source of data: public information

    The price of tons of wine has increased. The price of tons of wine in various domestic wine companies is concentrated in the range of 2,400 yuan to 3,400 yuan, while the price of tons of wine in overseas wine companies can reach more than 5,000 yuan, and the price of overseas wine enterprises in China can reach 4,000 yuan.

    3. Development of the meat industry

    In 2017, the number of live pigs in domestic listed companies increased by 34% year-on-year. According to Haitong's agricultural forecast, it is expected to increase by 35% in 2018. The number of imported pork has reached a record high in 2016, with a year-on-year decrease of 6% in 2018Q1.

    The average price of domestic pigs in 2018H1 was 11.90 yuan/kg, down 24% year-on-year; the average domestic pig price since April was 10.04 yuan/kg, down 30% year-on-year. We expect pig prices to fall and bottom at least until next year.

In recent years, the gross profit rate and net interest rate of meat products listed companies


Source of data: public information

2018Q1 meat products listed company's revenue increased by 2.3% year-on-year


Source of data: public information

    In 2017, the seven listed companies in the meat industry achieved a total operating income of 87.415 billion yuan, a year-on-year increase of 12%, and the growth rate decreased by 6.21pct. In 2018, 1Q operating income was 22.481 billion yuan, a year-on-year increase of 2.3%, and gross profit margin increased by 0.77pct.

Shuanghui's development profitability and pig price have a reverse trend


Source of data: public information

    4. Development of the dairy industry

    In 2017, the domestic macro economy has risen steadily, and the transmission to the end consumer demand has rebounded. The demand and flexibility of low-line cities have rebounded, especially contributing to the recovery of the dairy industry. In the short term, we judge that the dairy industry in 2018 is still expected to maintain a relatively prosperous market demand.

    First of all, the paddock is clearing, the production capacity of the ranch continues to increase, and the milking rate of dairy cows is also increasing. Secondly, the raw milk yield is improved, the small-scale milk production efficiency is improved, and there is room for improvement in the future. Third, the overcapacity of dairy products, raw milk demand has not improved very well, the upstream supply is currently oversupplied, the original milk does not have the reason for the price to rise sharply. Finally, the scarcity of high-quality milk sources is obvious, coupled with the country's restrictions on large-sized powder and the accelerated clearing of small pastures. The integration of upstream enterprises is the first step, and the integration of the entire industry chain will be carried out simultaneously.

Number of Chinese dairy cows (thousands)


Source of data: public information

    The price of boxboard and raw milk as raw materials is on the rise, especially for cardboardboards.

Changes in raw material prices


Source of data: public information

    According to relevant data, the market share of the two leading companies in the dairy industry (Yili, Mengniu) has increased from 34.9% in 2012 to 43.8% in 2017. In the next five years, we are expected to further increase to over 50%.

A-share dairy products listed company income and growth rate


Source of data: public information

Domestic raw milk price trend (yuan/kg)


Source of data: public information

    In short, from the perspective of the industrial chain, it is now the time when dairy products are under the greatest pressure, and the future will get better and better. After discussing the trend of raw materials, let's talk about the four driving forces of growth and profitability to promote the growth of the dairy industry: First, in terms of volume growth, the demand for third- and fourth-line dairy industry is accelerating, and the growth rate of yogurt and lactic acid bacteria is over 20%, thus making Second, still in terms of volume growth, the trend of milk beverage has been in place, beverage milking has begun to accelerate, and it is good for light asset companies, and cross-border seizures are in the ascendant. Third, from the perspective of price growth, yogurt replacement White milk, yogurt has a large situational attribute, and the price increase is large. Fourth, from the perspective of concentration, with the optimization of the industry pattern, the second-line Guangming, Sanyuan and Hong Kong stock dairy companies are in trouble.

    5. Development of the condiment industry

    The growth rate of the condiment industry is relatively fast in various sub-sectors of food and beverage, and the economy is relatively high: In 2017, the five listed companies in the sauce vinegar condiment industry realized a total operating income of 22.58 billion yuan, a year-on-year increase of 14.5%; the net profit of the mothers was 45.7. 100 million yuan, a year-on-year increase of 26%; 1Q18 sauce vinegar seasoning industry 5 listed companies achieved a total operating income of 7.03 billion yuan, an increase of 14.6%; net profit of the mother returned 1.6 billion yuan, an increase of 29.4%

A-share condiment listed company income and growth rate


Source of data: public information

A-share condiment listed company's profit and growth rate


Source of data: public information

    In recent years, the concentration of the condiment industry has continued to increase, but the current CR5 revenue is still less than 15%. In contrast, in Japan, where the eating habits are similar, the top five manufacturers in the condiment industry account for 60% of operating income. On the whole, the concentration of the Chinese condiment industry continues to increase, but there is still much room for improvement in the future.

    Third, the development trend of food and beverage industry

    1. Brand ip and cross-border development

    The animations and movies of the same name for the three squirrels (snacks) and Jiang Xiaobai (white wine) were broadcasted this year. Both IP animations are based on purely high-quality content and are based on brand emotions.

    The professionalism of those animations is more than that of ordinary countries. Many viewers don't even know that their bodies are snacks and liquor. This move not only expands brand awareness and trust, but also greatly promotes brand rejuvenation.

    In the near future, when major industry brands will emerge with outstanding and well-known ip images, multi-brand joint names will launch co-branded animations or real-life movies in a script similar to the Avengers.

    2. Close to consumers, segmentation features and needs

    The market for functional beverages will expand further to meet the different internal body needs of consumers. Instead of spreading the general concept of healthy products, we will further introduce functional beverages such as fat-reducing, hypoglycemic, clearing the stomach and refreshing the brain. For the external needs of consumers, an upgraded version of new and old products such as portable, high-value, and inhaled models will be introduced. Products are closer to consumers, with consumers' intuitive feelings and needs as marketing points.

    3. Offline experience store helps break through online traffic bottlenecks

    As the whole industry squeezes into the online market, various marketing advertisements have invaded the consumer's attention, and the exposure cost of advertising and online stores is also rising rapidly.

    The continuous growth and continuous exposure brought by the offline store investment is more in line with the sustainable development needs of enterprises and brands. Even companies that used to sell on the Internet and e-commerce platforms have begun to lay down the line. A variety of living halls and experience stores are their vanguards.

    4. Strengthening brand marketing strategy

    Traditional food and beverage companies rely on a large and extensive regional distribution chain to monopolize the snack and beverage market.

    However, in recent years, water brands such as Yibao have used the spread of online content to break the geographical restrictions and seize the main consumers in the future. The sales channels of beverages are now dominated by convenience stores and couples, and the rapid development of online purchases is gradually changing the distribution chain.

    In order to stabilize the market share, drinking water enterprises such as Nongfu Spring will inevitably strengthen the word-of-mouth communication on the Internet. Rather than relying on the distribution network established earlier.

    5. Fast food upgrades and innovations intensify

    The efficiency of the take-out platform in occupying the market is as fast as the take-away brother. The instant noodles and convenience companies have been stagnant in the research and development of new products, but now they have to innovate.

    In the past, only chicken legs, tomato eggs, and large rows of simple lunches were quickly incorporated into hot pots and vegetables. The hot pot and other dishes are difficult to satisfy in general take-out, and it has become a breakthrough for the convenience class. How to ensure that the food has a certain taste, while cold storage of more dishes that can not be eaten, has become the mainstream of research and development.

    6. Improve the transparency of food production, and restore consumer trust and word of mouth

    For the production of ingredients, in the past only the milk brand, KFC and so on will be described in the copy. It is a pity that various social events and rumors have made these advertising words unbreakable.

    However, it is indispensable to reinstate the confidence of the people in the food and beverages and in the selection of food production and ingredients. When plasticizers are added with plasticizers, the use of waste oil in restaurants has become an inherent impression of consumers. Breaking this “prejudice” will capture the market. But healthy food production should not only exist in commercials. Brands that have confidence in the source of food and production bases can turn production bases and ingredients into experience halls, launch activities offline, and ferment online reputation, so that consumers can regain their confidence in eating.

    7. The technological revolution has spawned a new diet

    Although synthetic foods and beverages are not well known in China, many manufacturers are already researching high-tech foods produced in such laboratories. And gradually reduce their cost.

    From ordinary synthetic beef to expensive molecular foods, their precise nutritional value will attract a large number of consumers who care about environmental protection and health, so this will be the most important category of food and beverage development in the future.

    8. Joint overseas expansion of Internet companies

    Past Chinese companies go out to sea, or use more exotic items, such as liberation shoes, Laoganma, spicy strips and other novelty products. Or the acquisition of mature foreign companies, to control the country, as a pioneer invading overseas.

    But new channels have emerged recently. Companies headed by Ali and Tencent use China's population advantage and footprints throughout the world to pay Alipay and WeChat to millions of stores in overseas regions such as the United States.

    As the world's leading payment method, Alipay WeChat is obviously not just to meet Chinese tourists, but to cut the two sharp edges of foreign markets. At this time, Chinese local enterprises are able to climb the Internet to the sea, and cooperate with the Internet platform to provide rich and high-quality export products and expand the brand's overseas popularity.

    The food and beverage market in 2018 will usher in even more drastic changes. In recent years, emerging marketing and technical means such as brand ip construction, content marketing, new retail, and food cold chain supply will shift from the current concept of concept and water testing to the stage of full-scale outbreak. Healthy and convenient diet is no longer a slogan, but a practical development direction that meets the different needs of consumers. It is also the strategic goal of every company, brand and practitioner.