Five factors of concern to the consumer goods industry in 2022: in the second half of 2021, the overall consumer industry suffered another blow from the epidemic, and the consumer sentiment fell into a low tide. In the first half of 2022, Considering (1) the uncertainty of the epidemic situation is still high, (2) the consumption power needs to be restored, (3) the supply chain may be blocked, (4) the price of raw materials continues to be high, and (5) the higher base, the overall consumer industry will still face higher uncertainty. In this context, we summarize the five major factors that need to be focused on consumer industry investment in 2022, helping investors find higher investment targets in uncertain consumption environment. We expect that sports goods, beer, Baijiu, dairy products, cosmetics and other industries will be equipped with the following factors. Enterprises with strong brand power and operation ability will continue to grow and expand market share in 2022. However, the short-term uncertainty in catering, condiments, ready-made tea, supermarkets, department stores and other industries is still strong, but a strong recovery signal is expected in the second half of 2022.
1、 Growth certainty of the consumer industry: when the investment environment of the overall market is in a high risk state, The growth certainty and resilience of the company’s consumer sub industry are particularly important for reducing investment risks and ensuring investment returns, which are mainly reflected in (1) obvious growth potential and driving force, (2) rigid demand and demand (3) Low policy risk. We believe that among all consumption sectors, dairy, sportswear, beer, cosmetics, etc. have high certainty.
2、 Strong brand power: on the one hand, brand power measures consumers’ cognition of the brand, on the other hand, it also represents consumers’ recognition of consumer enterprises’ products, services and culture. Strong brand power helps enterprises maintain the growth of sales revenue by seizing the market share of competitors when the overall market demand decreases. Our research shows that Li Ning has the strongest brand power among all sportswear brands, which also explains why it can maintain a rapid growth rate in the adversity of the industry.
3、 Ability to control channels and terminals: effective control of channels largely determines the strength of consumer goods companies. With the development of the logistics industry and the deepening of digitization, direct retail and omni channel e-commerce have become the future development direction of the consumer goods industry, because they can help brands reach more consumers, provide personalized and customized consumption experience, and obtain more valuable consumer insights to feed back the brand.
4、 Ability to resist rising raw material prices: since the second half of 2020, the prices of various commodities have risen sharply. We expect that the cost pressure caused by the rise in raw material prices will continue at least in the first half of 2022. We believe that consumer sectors with high concentration, low product substitution, low price elasticity, high barriers to competition and large space for high-end products are more likely to pass on cost pressure to downstream consumers by raising prices or improving product structure.
5、 Quality and valuation of financial statements: we believe that it is wise to choose consumer goods companies with high quality of financial statements (including profit quality and net cash level) as the investment target under the condition of low overall market uncertainty and high risk.
