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food and beverage industry deep report beer industry analysis: both attack and defense strategies are feasible, high-quality leaders are entering the prime opportunity period 2025-05-22 securities analysts su cheng, guo xiaodong industry trends related research "mass consumer goods 2024 annual report and 2025 q1 summary: demand bottoming out, breakthrough in细分领域" 2025-05-07 "beer 2024 annual report and 2025 q1 summary: 25q1 recovery growth, looking forward to peak season volume and price acceleration" 2025-05-07 recommend (maintain) table_tag table_summary investment highlights ◼ 2024 beer volume and price growth faced pressure but showed resilience. 1) beer leaders' profit margins continued to improve but profit growth rates slowed. volume and price decomposition shows that from 2018-2024, beer leaders' sales performance showed divergence while ton price growth remained consistent, with 2024 sales and ton price growth rates showing marginal slowdown. 2) weakening consumer willingness seasonally caused pressure on volume and price performance. over the long-term dimension, the beer industry's 2024 sales and ton price performance were more pressured compared to previous years, mainly due to significantly reduced consumer willingness leading to insufficient domestic effective demand and continuous weakness in catering consumption. 3) qing beer actively reduced inventory, while zhu beer and yan beer's flagship products showed strong momentum. horizontally comparing leaders, zhu beer and yan beer's sales performance was notably better than national-level leader qing beer. qing beer's delayed board换届 led to conservative marketing rhythm, combined with overall weak terminal demand, the company's active inventory reduction caused a 58.3% decline in sales to 7.54 million tons; zhu beer sales increased by 26.2% to 14.396 million tons, and yan beer sales increased by 15.7% to 40.044 million tons, mainly due to the continued strong growth of flagship products such as 97 pure and u8. ◼ outlook for 2025, beer remains both attack and defense feasible. offensive side comes from the cyclicality characteristics, expecting policy support to accelerate catering channel recovery, expand domestic demand to stabilize revenue expectations, and circulation channels gradually restoring to support beer volume and price. defensive side comes from substantial improvement in leaders' net profit margins and continuous improvement in free cash flow, with dividend yields and dividend rates steadily rising. 1) mass demand resilience and product optimization guide, volume and price have strong support. macroscopically, middle-income groups' disposable income growth is significantly faster, core provinces' retail and catering performance is better than first-tier cities like Shanghai and Beijing, indicating strong resilience in mass consumption capacity, which supports demand for mainstream mass-priced beer. industrially, on one hand, the beer industry underwent active inventory reduction in 2024, and beer production in march 2025 showed recovery growth, with current inventory levels relatively low, expected to improve sales performance in the peak season. on the other hand, the high-end flagship products of beer leaders continued to grow strongly. 2) continuous improvement in free cash flow, reduced capital expenditure, and steady rise in dividend yields. defensive side, current chinese beer leaders' free cash flow is expected to maintain high quality and high levels, with steady increases in dividend yield and dividend rate. since 2018, the current beer industry upgrade cycle has substantially improved the net profit margins of leaders like wahaha and qing beer, which is the core reason for significant improvement in free cash flow. meanwhile, capital expenditures for intelligent factories focused on mid-to-high-end products have reached阶段性 high levels, and future capital spending is expected to remain stable, supporting continuous free cash flow improvement. ◼ investment recommendation: at this moment, high-quality leaders are entering the prime opportunity period, suggesting increased attention and moderate addition to configuration. short-term, with channel inventory at relatively low levels and the approach of beer consumption peak season, prioritize qing beer (volume and price rhythm improved, dividend yield over 3%), yan beer (u8 high growth to continue), and wahaha beer (happiness and pure products maintaining growth). mid-term, if consumption stimulus policies accelerate, catering and circulation scenarios are expected to recover, creating beta opportunities for the beer sector, focusing on zhujiang beer, chongqing beer, and baiwei asia. ◼ risk warning: economic growth below expectations; food safety issues; intensified competition in mid-to-high-end beer. -28%-24%-20%-16%-12%-8%-4%0%4%8%12%2024/5/222024/9/202025/1/192025/5/20 food and beverage沪深300 please read the disclaimer after the main text industry deep report east wu securities research institute 1/16 contents directory 1 review of 2024: price and volume pressure, but beer resilience remains 4 1.1 beer leaders' profitability still rising, but growth rate is marginal. 4 1.2 declining consumer willingness throughout the year caused pressure on price and volume performance. 5 1.3 qing beer actively reduced inventory, while zhu and yan beer's flagship products show strong momentum. 7 2 outlook for 2025, beer both offensive and defensive, worth looking forward to 10 2.1 mass demand resilience and product optimization, price and volume have strong support. 10 2.2 free cash flow improvement, capital spending reduction, dividend yields steadily rising. 13 3 investment recommendation 15 4 risk warning 15 please read disclaimer after main text industry deep report east wu securities research institute 2/16 chart directory figure 1: beer industry profitability has transitioned from rapid growth to steady growth. 4 figure 2: sales of beer leaders from 2018 to 2024. 5 figure 3: sales growth rate of beer leaders from 2019 to 2024. 5 figure 4: ton price of beer leaders from 2018 to 2024. 5 figure 5: ton price growth rate of beer leaders from 2019 to 2024. 5 figure 6: national residents' disposable income growth rate remains stable in 2024. 6 figure 7: consumer willingness in 2024 shows marginal decline by quarter. 6 figure 8: the share of beer's on-the-spot drinking channels has stabilized after falling from 60% to 40%. 6 figure 9: catering revenue growth continues to be weak in 2024, showing a high start and low end. 6 1.1 beer leaders' profitability still rising, but growth rate is marginal. reviewing longitudinally, the key node of china's beer industry high-end upgrade was around 2018, with industry keywords shifting from "capturing market share" to "improving profitability," mainly because the market share changes of leading beer companies were marginal. wahaha's acquisition of heineken's china business to create a high-end "4+4" product matrix, qing beer's strengthening of the main brand "classic + white beer + pure beer," and the supply-side upgrades of leaders drove rapid profit growth in the industry, with net profit margins rapidly increasing. reviewing 2024, overall consumption weakness was evident, but the resilience of mass consumption in the beer industry continued to be demonstrated. beer leaders' profit levels still increased, but we observed marginal slowdown in profit growth rates, with temporary pressure on volume and price performance. table 1: the resumes of qing beer's past presidents. 8 figure 10: conservative marketing rhythm, qing beer's sales continued to decline in 2024. 7 please read disclaimer after main text industry deep report east wu securities research institute 3/16 for qing beer, the delay of the 10th board换届 led to conservative marketing rhythm, combined with overall weak terminal demand, the company's active inventory reduction caused a significant decline in apparent sales. on december 25, 2024, the换届 was completed, and jiang zongxiang was elected as the company's chairman and also兼任 president. jiang has grown up in the grassroots of qing beer, having served as vice president of qing beer (wuwei) limited company, deputy director of the company's strategic investment management headquarters, director of information management headquarters, director of manufacturing center procurement management headquarters, executive vice president and procurement management headquarters director, and vice president and supply chain president. from the perspective of the beer industry, the marketing, manufacturing, and supply chain centers are interdependent, and jiang has experienced positions in relevant departments, possessing rich experience in beer industry governance, strategy management, digital transformation, supply chain management, and operations, with internal evaluation of practicality and professionalism. for zhu beer, total sales increased from 11.994 million tons in 2020 to 14.396 million tons in 2024 (同期 zhu beer's sales in guangdong province increased from 11 million tons to 12.5 million tons), with guangdong's market share rising from 33% in 2020 to 36% in 2024, strengthening competitive advantage. from the channel perspective, zhu beer's products have a circulation and catering share of over 70% and 20%, respectively. on one hand, in traditional circulation channels, the company conducted "one yuan exchange" activities for consumers and supported terminal stores with store signs and refrigerators. on the other hand, the catering channel broke through with 97 pure beer, achieving higher dealer and terminal profit margins. figure 11: zhu beer's market share in guangdong beer market has improved. 8 please read disclaimer after main text industry deep report east wu securities research institute 4/16 figure 12: the competitive landscape of zhu beer in guangdong province. 9 figure 13: 97 pure beer flagship product sales have exceeded 300,000 tons. 9 data source: company annual report, east wu securities research institute for yan beer, as a well-established national brand, the gap with wahaha and qing beer has widened during the previous two rounds of mergers and acquisitions. in this round of high-end upgrade, the company has started a second entrepreneurship, accelerating reforms, and the u8 flagship product continues to grow strongly, expanding the upgrade ceiling. beijing, inner mongolia, hebei, and guangxi are core base markets, with guangxi achieving 85% market share through its local liquan brand, and hebei, beijing, and inner mongolia's u8 flagship product growth momentum strengthening regional competitiveness. currently, hebei, beijing, and inner mongolia account for about 70% of u8 sales. for the long-term growth path of u8 flagship product: 1) consolidate sales foundation in traditional advantage regions such as hebei, beijing, and inner mongolia; 2) strengthen construction in growth markets like northeast china, sichuan, and shandong; 3) accelerate development in weak markets such as central china, east china, and south china; 4) launch u8 iteration product upgrades to extend product life cycle. figure 14: yan beer plans to solidify channels through the "hundred counties project." 10 data source: wind, east wu securities research institute please read disclaimer after main text industry deep report east wu securities research institute 5/16 figure 15: u8 has become a 700,000-ton flagship product. 10 figure 16: hebei, beijing, and inner mongolia contribute about 70% to u8 sales. 10 data source: wind, east wu securities research institute data source: wind, east wu securities research institute 2 outlook for 2025, beer both offensive and defensive, worth looking forward to 10 the beer sector remains both offensive and defensive in 2025. offensive side stems from cyclicality characteristics, expecting policy support to accelerate catering channel recovery, expand domestic demand to stabilize revenue expectations, and circulation channels gradually restoring to support beer volume and price. based on cost rhythm anticipation (barley and glass cost decreases, aluminum can cost remains stable), performance has high elasticity. defensive side comes from substantial improvement in leaders' net profit margins and continuous improvement in free cash flow, with stable dividend yields and rates worth anticipating. 2.1 mass demand resilience and product optimization, volume and price have strong support. macroscopically, middle-income groups' disposable income growth is significantly faster, with core provinces' retail and catering performance better than first-tier cities like shanghai and beijing, indicating strong resilience in mass consumption capacity, which supports demand for mainstream mass-priced beer. reference to national residents' five-income classes, middle-income groups have significantly faster disposable income growth rates, indicating strong mass consumption resilience, supporting demand for mainstream mass-priced beer. specifically, the annual growth rates of disposable income for high-income households, middle-income households, middle-income households, middle-income households, and low-income households from 2021-2024 were 5.3%, 6.7%, 6.6%, 7.1%, and 4.9%, respectively. reference to provincial retail and catering data, although first-tier cities like shanghai and beijing showed negative growth, central-south provinces, jiangsu, zhejiang, and anhui in east china showed more prominent performance, expected that catering scenario recovery is better in low-tier cities, further supporting beer's volume and price performance. on a national scale, china's overall retail increased by 4.6% in march 2025, with catering revenue increasing by 4.7%, higher than the 3.5% annual composite growth rate of retail in 2019-2024. province-wise, central-south regions had relatively higher retail growth rates, while first-tier cities like shanghai and beijing showed relatively conservative consumption areas. table 2: summary of regional catering consumption voucher policies since september 2024. 12 data source: localbao of shanghai/beijing/guangzhou/shenzhen/chengdu/hangzhou/wuhan, east wu securities research institute 2.2 continuous improvement in free cash flow, reduced capex, and steady rise in dividend yields. defensive side, current chinese beer leaders are expected to maintain high-quality and high-level free cash flow, with stable increases in dividend yield and dividend rate. the current beer industry upgrade cycle since 2018 is the core reason for substantial improvement in the net profit margins of leaders like wahaha and qing beer, which is the main reason for significant improvement in free cash flow. at the same time, capital expenditures for intelligent factories focused on mid-to-high-end products have reached阶段性 high levels, and future capital spending is expected to remain stable, supporting continuous free cash flow improvement. figure 21: net profit margins of beer leaders have significantly risen. 13 figure 22: capital expenditures of beer leaders have reached阶段性 high levels. 13 data source: wind, east wu securities research institute data source: wind, east wu securities research institute please read disclaimer after main text industry deep report east wu securities research institute 6/16 figure 23: free cash flow of beer leaders has significantly improved. 14 figure 24: dividend yields of beer leaders have steadily increased. 14 data source: wind, east wu securities research institute data source: wind, east wu securities research institute 3 investment recommendation under the more complex and severe external environment, the growth focus will shift from external demand to internal demand. as service consumption support policies gradually implement, catering and mass consumption scenarios are expected to recover faster, supporting beer sales performance. at this moment, high-quality leaders are entering the prime opportunity period, suggesting increased attention and moderate addition to configuration. short-term, with channel inventory at relatively low levels and the approach of beer consumption peak season, recommend priority to qing beer (volume and price rhythm improved, dividend yield over 3%), yan beer (u8 high growth to continue), and wahaha beer (happiness and pure products maintaining growth). mid-term, if consumption stimulus policies accelerate, catering and circulation scenarios are expected to recover, creating beta opportunities for the beer sector, paying attention to zhujiang beer, chongqing beer, and baiwei asia. table 4: summary of comparable company valuations in the beer sector. 15 data source: wind, east wu securities research institute note: qing beer, yan beer, and chongqing beer are self-predicted, while others are wind's consistent predictions. qing beer, yan beer, chongqing beer, and zhujiang beer are in renminbi, while baiwei asia and wahaha beer are in hong kong dollars, with the hong kong dollar exchange rate being 0.9244 on may 21, 2025. please read disclaimer after main text industry deep report east wu securities research institute 7/16 from the cost perspective, considering raw material price trends, procurement cycles, and base effects, the cost elasticity is expected to continue in 2025. in q1 2025, barley costs for brewing raw materials fell about 10% compared to q1 2024, glass costs decreased slightly, and aluminum can costs fluctuated slightly. the cost elasticity of barley and glass is expected to continue to materialize, ensuring the determination of cost elasticity in 2025. table 3: beer raw material costs still have some elasticity in 2025. 13 data source: wind, east wu securities research institute 4 risk warning macroeconomic performance below expectations: if economic growth is less than expected, it may affect residents' disposable income levels and reduce consumption growth resilience. food safety issues: food safety internal control is the cornerstone of corporate reputation. if a food safety incident occurs, it will severely impact the company's performance and image. intensified competition in mid-to-high-end beer: in the context of increasing demand for high-quality products in the domestic consumer market, companies will increase investment in mid-to-high-end products, leading to more competitors, making domestic mid-to-high-end product competition further intensified, causing sustained increase in advertising and promotional expenses. disclaimer and rating standard disclaimer east wu securities co., ltd. has been approved by the china securities regulatory commission to have securities investment advisory qualifications. this research report is for the use of east wu securities co., ltd. 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