The baijiu sector is accelerating its consolidation phase and searching for a market bottom, while consumer staples continue on a recovery path that underscores their increasing value proposition.
Baijiu: Consolidation and Bottom-Fishing Amid a Subdued Peak Season
Examining both volume and price indicators for the recent Mid-Autumn Festival and National Day holiday period, the baijiu market reveals a mixed picture. On the volume front, sales remain dependent on the recovery of drinking occasions, and with certain scenarios still under pressure—such as some corporate banquets and gift-giving—year-on-year sales momentum during this peak season is expected to face headwinds. On the price side, however, the outlook is relatively more positive, as wholesale prices for key products like Feitian Moutai, Puwu, and Moutai 1935 have trended upward since July, bolstering market confidence. Meanwhile, the industry continues to exhibit pronounced divergence across brands and price segments. Nationally recognized baijiu names and strong regional players are leading the brand charge, while the 100-300 yuan price band is performing best, reflecting greater resilience in mass-market consumption. With the second quarter of 2026 bringing deep adjustments to baijiu financials, we believe the industry is currently within a bottoming range. As earnings cleanup eases the burden on balance sheets, quality brands are well-positioned to gradually stabilize and improve.
Consumer Staples: Recovery Intact, Value Proposition Strengthens
After a short-term pullback in high-frequency consumption data during the second quarter, consumer staples are showing signs of marginal stabilization, and we project a further moderate improvement in the third quarter. Interim results reveal notable divergence in performance across sub-sectors and companies: health-focused foods continue to see rising penetration and sustained growth; leading snack franchise chains are expanding store networks rapidly while maintaining steady same-store sales and improving profitability, resulting in leading earnings growth; the restaurant supply chain and condiments sectors are benefiting from gradual improvements on both the supply and demand sides. We anticipate that leaders such as Foshan Haitian Flavouring and Food Company Ltd (SH: 603288) may see further operational improvements in the third quarter, extending the recovery trend through the year; several beverage and beer leaders are outperforming their sub-sector averages, and with expectations having moderated, their valuations now offer compelling value; the inflection point in the raw milk cycle is becoming increasingly evident, driving improvements among dairy and dairy-farming leaders. In the second quarter, Inner Mongolia Yili Industrial Group Co., Ltd (SH: 600887) (after impairment adjustments) and China Mengniu Dairy Company Limited (HK: 02319) achieved steady growth, with dairy farming outfits highlighting the elasticity of combined meat-and-milk synergies. With trading volumes clearing out, we see strong conviction in a bottoming rebound for growth-oriented and oversold consumer staples names.
In the restaurant supply chain space, Anjoy Foods Group Co., Ltd (SH: 603345) has announced plans to establish a joint-venture factory in Indonesia, with an intended investment of no less than USD 74.25 million, accelerating its global expansion strategy. We believe that with the arrival of the peak dining season in the second half of the year, demand-side conditions for the restaurant supply chain sector are poised for marginal improvement. Should sell-through exceed expectations, the sector—trading at low valuations and low expectations—could deliver significant outperformance.
Risk factors to monitor include increased macroeconomic volatility, intensifying industry competition, and food safety incidents.