2026 Mid-Year Food & Beverage (Baijiu) Industry Investment Strategy: The Darkest Moment Has Passed, Baijiu Will Embrace New Opportunities (20260730)

English summary

1. From the framework model, look at the current state of the baijiu industry since 2025. Baijiu cycle clock theory: the hour hand → supply-demand model (including economic factors) determines the industry cycle; the minute hand → company nature determines the entrepreneur cycle; the second hand → entrepreneur cycle determines the enterprise cycle. Baijiu industry performance remains the main source of excess returns, and the slowdown in performance growth in 2025 dragged returns. In 2025, the industry entered the 'bottom of adjustment period' stage, with both volume and price declining. It is expected that in 2026, the industry will enter a repair stage of deep adjustment led by leading liquor companies (with price repair contributing significantly). Based on the still positive mass consumption, gradual recovery of business consumption, and expected continued damage to government consumption, the sector's performance is expected to turn positive from negative starting in Q2 2026 (improving sequentially), entering the bottom inflection range. 2. Review of 2013-2015: PE turned before EPS. The introduction of external policies and exposure of safety incidents were the triggers for the baijiu industry entering an adjustment period in 2013, and internal imbalances made consumption, price, and channel adjustments inevitable. We believe the current baijiu industry adjustment is similar to 2013-2015. ...