In the past few years, we have seen great changes in people’s consumption behavior under the influence of the epidemic, resulting in changes in the market competition pattern of some food and beverage segments. After careful analysis, we believe that the demand change affected by the epidemic is still relatively short-term (even if the epidemic may last for a period of time), and the long-term logic of the industry has not changed fundamentally. With the improvement of the epidemic, We believe that the original market competition pattern will even be strengthened.
Affected by the epidemic, we have observed several changes in residents’ Consumption: 1. Under the epidemic, residents’ Consumption Willingness has decreased, and low-cost channels have grown rapidly, including temporary food sales and group purchase channels, which have rapidly obtained consumption flow in the past two years. 2. Consumers pay more attention to health, including commodities with “nutrition” labels such as milk, sugar free foods and sugar free drinks, which are recognized by consumers. 3. Due to the restrictions on going out, the traffic of supermarkets has decreased greatly, and the consumption has been transferred to the Internet, convenience stores and other channels. Prefabricated foods are in large quantities in emerging channels. 4. As the population flows back to the cities below the third and fourth tier, the consumer market performance of the cities below the third and fourth tier will be better than that of the first and second tier cities.
The change of consumption behavior has brought certain changes to the competition pattern of the industry. 1. Under the impact of group purchase channels, many enterprises have launched low-cost products in response to the impact, while some non mainstream brands have increased their market share through these channels by virtue of price advantages. Condiments are more obvious. Many regional small brands seize market share through group purchase channels at low prices; 2. The traditional companies that focus on business supermarket channels have experienced relatively difficult operation in the past two years, and their market share has been seized by other competitors; 3, the return of population, the consumption changes of the three or four line city and rural market, Baijiu consumption is more obvious, since the end of last year, the consumption of liquor, the second high-end liquor consumption is significantly better than high-end.
However, we believe that the short-term changes in the competition pattern have not fundamentally affected the changes in the company’s competitive barriers, even though the epidemic may continue for some time. If large enterprises can make timely adjustments in the changes, with the improvement of the epidemic situation, the original market competition pattern will even be strengthened. It is suggested to pay attention to the industry leading companies whose valuation is lower than the historical average valuation: Kweichow Moutai Co.Ltd(600519) , Wuliangye Yibin Co.Ltd(000858) , Inner Mongolia Yili Industrial Group Co.Ltd(600887) , etc.
Risk tips:
The economic recovery is less than expected, and the epidemic has led to lower consumer demand than expected; The company’s operation is not as good as market expectations.
Review of Hong Kong Stock Market:
This week, the essential consumption index of Hong Kong stocks rose or fell by – 3.74%, of which the key companies rose or fell by – 6.24% for Budweiser Asia Pacific, 0.13% for nongnongshan spring, 5.66% for China Wangwang, 1.99% for Master Kong Holdings, 3.55% for China Feihe, 5.45% for Zhou Heiya, 15.98% for Yihai international and 7.06% for China Resources beer
