Core Viewpoint - The inventory cycle in the liquor industry is influenced by multiple factors including production rigidity, demand elasticity, channel dynamics, and policy regulation. The industry is currently in the late stage of active destocking, expected to transition to restocking by the end of 2025. Structural changes such as price differentiation, increased concentration, and consumer segmentation will reshape the competitive landscape. Companies need to build brand moats, optimize channel efficiency, and innovate products to navigate through the cycle, while investors should focus on leading high-end brands and strong regional players, avoiding liquidity risks associated with small and medium enterprises [2][20]. Group 1: Nature of the Inventory Cycle - The essence of the liquor inventory cycle is the mismatch between supply rigidity and demand elasticity [2][3]. - High-end liquor production involves a long cycle with significant lag in capacity release, making it difficult for companies to respond quickly to market demand changes, leading to inventory pressure [3]. - Seasonal demand characteristics drive inventory levels, with major holidays accounting for 30%-40% of annual sales, necessitating advance stockpiling [4]. Group 2: Inventory Cycle Phases and Historical Patterns - Since 2010, the liquor industry has experienced six complete inventory cycles characterized by alternating phases of restocking and destocking [7]. - The current cycle is in the active destocking phase, which began at the end of 2023 and is expected to conclude by the end of 2025, marked by longer duration and smaller amplitude due to increased industry maturity and slower economic growth [7]. Group 3: Price Differentiation - High-end liquor (priced above 800 RMB) shows resilience due to strong brand barriers and demand primarily driven by business and investment needs, with inventory turnover days maintained under six months [9]. - Mid-range liquor (300-800 RMB) is significantly affected by macroeconomic conditions, with a 25% inventory backlog expected in 2024, leading to increased inventory turnover days for some brands [10]. - Low-end liquor (below 300 RMB) is closely tied to regional markets and banquet consumption, with varying performance based on local economic conditions [11]. Group 4: Policy and Macroeconomic Impact - Proposed reforms in consumption tax could increase tax burdens by 10%-20%, disproportionately affecting small and medium enterprises while larger firms may offset costs through price increases [13]. - Economic growth is projected at around 5% in 2025, with increasing disposable income but also heightened consumer segmentation, benefiting high-end liquor while putting pressure on lower-end products [14][15]. - The younger generation's preference for lower-alcohol and healthier products is reshaping demand, potentially extending inventory cycles as traditional products take longer to sell [16]. Group 5: Structural Changes in the Industry - The concentration of the liquor industry is increasing, with the top six companies holding an 86.24% market share, allowing them to leverage brand, channel, and capacity advantages [18]. - Regional leaders are finding growth through deepening banquet channel engagement and expanding into the mass market, although they face challenges in competing with products priced above 300 RMB [19]. Group 6: Future Trends and Company Strategies - A turning point in destocking is anticipated in the second half of 2025, with high-end liquor leading the restocking phase, while mid-range and low-end products lag by 1-2 quarters [21]. - Companies are advised to control volume and maintain prices, focusing on core products and enhancing direct sales and e-commerce channels to shorten inventory turnover [22]. - Product upgrades are essential, with a focus on cultural IP and healthier options to meet the demands of a segmented consumer base [23].