CITIC Construction Investment: The inflection point of this round of liquor adjustment period is approaching, and the liquor sector ushered in allocation opportunities at the bottom of the cycle

The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that looking at the price strategies of high-end wine companies in the countercyclical cycle, a fundamental inflection point is approaching, and the present may allocate opportunities for the bottom of the ten-year cycle. The liquor industry's “five bottom stages” (policy base, inventory bottom, wholesale price bottom, production and marketing bottom) resonates with the capital market's “three low and one high” (low expectations, low valuation, low public offering positions, high dividends). Combined with recent market strategies being implemented one after another, the bank believes that the current round of liquor adjustment is about to reach an inflection point, and capital market expectations are ahead. The liquor sector ushered in allocation opportunities at the bottom of the cycle.

CITIC Construction Investment's main views are as follows:

2012-2015 review: High-end alcohol volume and price pressure resistance tests in the context of the “Three Gong Consumption” ban. The leading price dispute established a high-end brand pattern. At the end of 2012, the Central Committee's “Eight Regulations” were introduced and implemented. Demand for government consumption of liquor declined sharply, and the industry fully entered a period of adjustment. The high-end wine price dispute, the key price strategy changes at the beginning of the adjustment period tested the brand value stress test, and the impact on the pricing strategies of wine companies throughout the adjustment period.

Review 2016-2021: Mass consumption has risen, consumption upgrades have accelerated, and the volume and price of high-end alcohol have risen sharply. At the end of 2015, the “monetization of shed” real estate had a new boom and abundant liquidity in 2020-2021, driving the wealth effect of residents and improving corporate efficiency. Liquor embarked on a path of high-end and centralized consumption upgrading, and the “drink less, drink better” concept drove the next famous brands to achieve a sharp rise in volume and price.

Revision 2022 - 2025: The liquor industry is gradually moving from stock to a phase of contraction. Leading wine companies have achieved the ultimate growth in performance, and prices are under pressure due to sales pressure. Since 2022, macroeconomic indicators such as social zero, CPI, PPI, and real estate investment have gradually weakened. Demand for liquor converted from old and new kinetic energy has entered the inventory stage, and until the implementation of the new alcohol ban in 2025, leading wine companies have achieved revenue growth through market expansion and inventory increases in 2024, and then the overall decline in performance growth in 2025. During this period, the upward channel for high-end alcohol prices was blocked, and the transmission of price increases was weak.

Investment advice

The “five bottom stage” of the liquor industry is approaching, and the inflection point of the cycle can be expected: in the short term, unreasonable consumption restrictions at the policy level are gradually being relaxed. The most pessimistic moment in liquor sales is over. With the marginal improvement in PPI and the implementation of measures to stimulate domestic demand, liquor sales are expected to bottom out in the middle of the year; liquor companies are in the stage of clear performance and channel inventory removal. Generally, expectations for the Spring Festival and 2026 are more cautious, compounding the “siphon effect” of the Spring Festival, or speeding up inventory digestion to improve channel health. Looking at the medium to long term, recent adjustments in Maotai's product strategy have accelerated the emergence of a price base in the industry. Using iMaotai as the direct sales engine and channel marketing transformation, even if the batch price loosens due to flying volumes, the bank expects the deviation from 1,499 yuan to be relatively manageable, and the industry's price base will be reached. As the market is concerned about future consumer demand, small and medium-sized enterprises have withdrawn and leaders have suspended production capacity expansion. The bank expects liquor production to fall below 4 million kiloliters in 2025, and demand-side liquor is still indispensable in specific domestic scenarios. As wine companies' marketing strategies change to better suit the preferences of “Gen Z”, the fundamentals of liquor consumers are still relatively stable.

The liquor sector is “three low and one high”, and the allocation value is outstanding. The capital market's expectations for the liquor industry have continued to weaken. Since 2021, the annualized yield has been negative. The liquor sector's valuation level and public offering positions are all low. Leading wine companies have strengthened dividend returns and market value management, and the liquor sector allocation is cost-effective. It is one of the few sectors in the capital market where undervaluation is compounded to reach an inflection point. Currently, the historical quantile of the liquor sector is within 15%, and there is support at the bottom of the sector's valuation. From a financial perspective, the share of public fund holdings continued to weaken. At the end of the third quarter of 2025, heavy holdings in the liquor sector accounted for only 5.52% of public fund holdings. If passive fund holdings are excluded, active fund holdings in the liquor sector share 25Q2 will enter a low allocation stage, and the sector's capital “chips” are relatively clean. Furthermore, in response to the policy call, listed wine companies all promised dividend rates and dividend amounts, attached importance to investor returns, actively participated in market repurchases, increased holdings by major shareholders, stabilized stock price trends, and stabilized market expectations.

High-end wine is a trend vane in the industry cycle, and it is optimistic that the industry will bottom out before it recovers. Reviewing stock price performance during the 2013-2015 liquor adjustment period, leading wine companies were the core weather vane for bottoming out in the industry cycle, taking the lead in bottoming out fundamentals and recovering stock prices. Standing in the 2026 liquor cycle, the bank recently drastically adjusted its business strategy and adjusted the product price logic. It is also cautious about expectations for the new year. In the “five bottom stages” of the industry and the “three lows and one high” resonance with the capital market, the bank is optimistic that the stock price performance of high-end liquor is superior to that of the industry.

Risk Alerts

The recovery in demand falls short of expectations. Economic growth has decelerated in recent years due to factors such as the macroeconomic environment, and national income growth has also been affected. The future pace of recovery in the short to medium term residents' income growth rate and the pace of increase in consumption power may fall short of expectations;

Liquor stocks have fallen short of expectations. Currently, liquor stocks are being removed. Liquor companies' performance is declining to improve channel health. If sales recovery falls short of expectations, inventory bottoming will be delayed, and the inflection point of the industry cycle will be extended.

High-end demand continues to be sluggish, and high-end prices will be under pressure.

Food safety risks. Food safety issues have always been a hot topic of consumers' attention in recent years. Although enterprises in the industrial chain have continuously improved the level of production quality control, there are still risks related to food quality and safety due to the long industrial chain and many links and enterprises involved.