Core Viewpoint - The excessive consumption of sugar-sweetened beverages (SSBs) is leading to a significant increase in chronic diseases globally, including diabetes and cardiovascular diseases, with alarming trends observed particularly in China [5][8][11]. Group 1: Global Impact of Sugar-Sweetened Beverages - A study published in *Nature Medicine* analyzed health data from 118 countries and found that in 2020, SSBs were responsible for 220,000 new cases of type 2 diabetes (T2D), accounting for 9.8% of global new cases, and 120,000 new cases of cardiovascular diseases (CVD), representing 3.1% [8][9]. - The research also indicated that SSBs were linked to approximately 340,000 deaths globally, with T2D-related deaths at 80,278 and CVD-related deaths at 257,962 [8][9]. Group 2: The Situation in China - A study by the Chinese Center for Disease Control and Prevention revealed that from 1990 to 2019, deaths related to SSB consumption in China surged by 95%, rising from a low base to 46,633 deaths in 2019 [11]. - The proportion of deaths attributable to SSBs increased from 0.34% to 0.46%, indicating that nearly 1 in every 200 deaths is directly related to these beverages [11]. - Ischemic heart disease (IHD) and diabetes were identified as the two leading causes of death linked to SSBs, with IHD-related deaths reaching 42,098 in 2019, reflecting a 95% increase over 30 years [12]. Group 3: Health Risks Associated with SSBs - A long-term study published in *The American Journal of Clinical Nutrition* found that daily consumption of over 500ml of SSBs increases the risk of asthma by 19% and chronic obstructive pulmonary disease (COPD) risk by 53% [13][14]. - The study also highlighted that artificially sweetened beverages (ASBs) pose even greater risks, with a 34% increase in COPD risk and a 10% increase in asthma risk for those consuming two cups daily [13][14].

Investment Rating - The industry investment rating is "stronger than the market," indicating an expected increase of over 10% in the industry index relative to the CSI 300 over the next six months [59]. Core Insights - The food and beverage sector experienced a slight increase of 0.89% in July 2025, with notable performances from liquor and cooked food, while overall trading volume remained low at 32.698 billion shares [1][7]. - From January to July 2025, the food and beverage sector recorded a cumulative decline of 3.50%, underperforming the market index, with the sector ranking second to last among 31 primary industries [5][12]. - The valuation of the food and beverage sector is at a ten-year low, with a current valuation of 13.93 times earnings, while liquor is even lower at 11.98 times [5][14]. - In July 2025, 52.34% of individual stocks in the sector saw price increases, indicating a significant improvement in stock performance compared to the previous month [21][24]. - Investment opportunities are recommended in the liquor, soft drink, health products, baking, and snack sectors for August 2025, with a specific stock portfolio suggested [54][56]. Summary by Sections 1. Market Performance - The food and beverage sector saw a slight increase of 0.89% in July 2025, with significant gains in cooked food, health products, liquor, and meat products, while other sub-sectors declined [1][7]. - The total trading volume for the sector in July was 32.698 billion shares, reflecting a month-on-month increase of 1.509 billion shares but a decrease of 19.525 billion shares from the peak in April [1][7]. 2. Valuation - As of July 31, 2025, the food and beverage sector's valuation stands at 13.93 times earnings, which is low compared to historical data, with liquor at 11.98 times [5][14]. 3. Individual Stock Performance - In July 2025, 52.34% of stocks in the food and beverage sector increased in value, with health products and dairy products showing strong performance [21][24]. - Specific stocks such as liquor brands and baked goods showed signs of recovery, with notable increases in their stock prices [21][24]. 4. Investment Trends - The food and beverage manufacturing sector has seen a continuous increase in fixed asset investment, with a year-on-year growth of 22.9% in 2024 and 16.0% in 2025 [28]. - The report highlights the potential for growth in emerging markets within the food and beverage sector, such as pre-prepared meals and baked goods, reflecting a shift in consumer preferences towards higher-quality and more diverse food options [53][54].

Investment Rating - The investment rating for the Chinese consumer staples sector is "Outperform" for multiple companies including Guizhou Moutai, Wuliangye, and Yili [1]. Core Insights - In July 2025, among the eight key tracked consumer staples industries, six maintained positive growth while two experienced negative growth. The industries with single-digit growth include catering, soft drinks, frozen foods, condiments, dairy products, and beer, while the only declining industry was Baijiu [30]. - The growth rate of most industries has deteriorated compared to the previous month, with five industries showing a decline in growth rates and three showing improvement. The new alcohol ban and adverse weather conditions are significant negative factors impacting the sector [3][30]. Summary by Industry Baijiu (Chinese Liquor) - For the high-end and above Baijiu segment, July revenue was 19 billion yuan, down 4.0% year-on-year, with cumulative revenue from January to July at 243.1 billion yuan, a decrease of 0.8% [10]. - The low-end Baijiu segment saw July revenue of 11 billion yuan, down 3.9% year-on-year, with cumulative revenue from January to July at 115.9 billion yuan, down 12.8% [12]. Beer - The domestic beer industry reported July revenue of 17.6 billion yuan, a year-on-year increase of 0.6%, with cumulative revenue from January to July at 111.9 billion yuan, up 0.7% [15]. Condiments - The condiment industry generated July revenue of 36.6 billion yuan, a year-on-year increase of 1.1%, with cumulative revenue from January to July at 261.6 billion yuan, up 1.6% [17]. Dairy Products - The dairy industry reported July revenue of 38.4 billion yuan, a year-on-year increase of 1.1%, with cumulative revenue from January to July at 267.8 billion yuan, up 0.3% [19]. Frozen Foods - The frozen food industry had July revenue of 7.58 billion yuan, a year-on-year increase of 1.7%, with cumulative revenue from January to July at 64.5 billion yuan, up 1.4% [21]. Soft Drinks - The soft drink industry reported July revenue of 71 billion yuan, a year-on-year increase of 2.7%, with cumulative revenue from January to July at 425 billion yuan, up 2.5% [23]. Catering - The catering sector generated July revenue of 16.7 billion yuan, a year-on-year increase of 4.4%, with cumulative revenue from January to July at 103.9 billion yuan, up 3.0% [25].

Investment Rating - The report assigns an "Outperform" rating to several companies in the essential consumer goods sector, including Haidilao, Youran Dairy, Jiumaojiu, Modern Farming, Dasheng Holdings, Yihai International, Aoyou, and China Feihe, while Budweiser APAC is rated as "Neutral" [1]. Core Insights - The report highlights a general decline in spot cost indices for six categories of consumer goods, while futures indices primarily increased [38]. - The spot cost indices for dairy products, soft drinks, frozen foods, beer, instant noodles, and condiments changed by -2.92%, -2.46%, -1.88%, -1.78%, -1.58%, and -1.29%, respectively, while the futures cost indices changed by -1.52%/+1.64%/-1.77%/+3.57%/+0.84%/+2.89% [38]. Summary by Category Beer - The spot cost index decreased by 1.78% month-on-month, while the futures index increased by 3.57% [39]. - Year-to-date, the spot and futures indices have changed by -4.54% and -5.08%, respectively [39]. Seasonings - The spot cost index decreased by 1.29% month-on-month, while the futures index increased by 2.89% [40]. - Year-to-date, the spot and futures indices have changed by -1.7% and -3.2%, respectively [40]. Dairy Products - The spot cost index decreased by 2.92% month-on-month, and the futures index decreased by 1.52% [41]. - Year-to-date, the spot and futures indices have changed by -3.87% and -1.08%, respectively [41]. Instant Noodles - The spot cost index decreased by 1.58% month-on-month, while the futures index increased by 0.84% [42]. - Year-to-date, the spot and futures indices have changed by -4.43% and -3.07%, respectively [42]. Frozen Foods - The spot cost index decreased by 1.88% month-on-month, and the futures index decreased by 1.77% [43]. - Year-to-date, the spot and futures indices have changed by -2.95% and -3.6%, respectively [43]. Soft Drinks - The spot cost index decreased by 2.46% month-on-month, while the futures index increased by 1.64% [44]. - Year-to-date, the spot and futures indices have changed by -5.91% and -5%, respectively [44].

Group 1 - The report highlights the importance of the "15th Five-Year Plan" in shaping China's economic direction amidst complex changes in the development environment, emphasizing the need for a balance between quality and quantity in economic growth [4][5][6] - The macroeconomic policy is expected to maintain stability and continuity, with a focus on implementing existing policies rather than introducing new ones, aiming for a GDP growth target of around 5% for the year [5][6][7] - Consumer spending is a key area of focus, with potential support policies for service consumption being considered, as well as measures to improve living standards and expand consumption demand [5][6][11] Group 2 - The report indicates that investment in infrastructure projects will continue to be a priority, with a focus on optimizing fiscal spending and avoiding new hidden debts [6][7][10] - Monetary policy is expected to utilize structural tools to support key sectors such as technology innovation and small enterprises, while maintaining liquidity in the market [7][11][12] - The report notes a shift in the approach to "anti-involution," with a focus on managing competition in key industries rather than solely addressing low-price competition [8][10][15] Group 3 - The report suggests that the capital market's attractiveness and inclusivity will be enhanced, with a focus on stabilizing and boosting market confidence [17][20] - It emphasizes the need for effective release of domestic demand and boosting consumer confidence, particularly through targeted actions to stimulate consumption [18][20] - The report discusses the importance of institutional reforms and further opening up, particularly in promoting technological innovation and integrating industry and innovation [19][20] Group 4 - The beverage industry is highlighted for its competitive dynamics, particularly regarding the strategic placement of ice cabinets to enhance product visibility and sales performance [24][25][26] - The report notes that leading brands are leveraging early investments in ice cabinet placements to create channel barriers and improve inventory management [24][25][26] - It suggests that the competitive advantage in the beverage sector will increasingly depend on effective operational strategies and the ability to adapt to market demands [25][26]

Core Viewpoint - The report from Zhongtai Securities highlights the importance of freezer displays in driving instant consumption of soft drinks, emphasizing that product exposure and taste are key factors for consumers [1][3]. Group 1: Freezer Impact on Consumption - Freezer displays enhance instant consumption by improving product exposure and maintaining taste quality, leading to increased sales for brands like Nongfu Spring, which saw a rise in freezer numbers from 360,000 in 2019 to approximately 800,000 in 2022, correlating with significant revenue growth in ready-to-drink tea products [1][2]. - Dongpeng has also prioritized freezer investments, planning to increase its freezer count from 74,000 in 2022 to 300,000 by 2024, with projected sales revenue growth of 32.42% and 140.63% for 2023 and 2024, respectively [2]. Group 2: Inventory Management and New Product Launches - Freezer displays facilitate inventory pre-positioning, with an estimated inventory value of 200 million yuan for every 100,000 freezers, allowing traditional brands to quickly replenish stock and shorten supply chain response times [3]. - The strategic placement of new products in freezers helps avoid promotional pressure, enhancing their sales and survival rates through effective resource planning [3]. Group 3: Competitive Landscape and Brand Strategies - Leading brands like Nongfu Spring and Coca-Cola dominate core freezer locations in first- and second-tier cities, creating barriers for newer entrants [4]. - Nongfu Spring employs a strategy of using multi-door freezers to secure prime locations, allowing for a mix of its products and those of other brands, thereby enhancing channel profitability and brand loyalty [4]. Group 4: Accounting Practices for Freezer Investments - There are two main accounting methods for freezer costs: Nongfu Spring uses a depreciation model, while Dongpeng records these costs as current sales expenses [5][6]. - Nongfu Spring's depreciation and amortization expenses increased from 1.2% of total revenue in 2018 to 1.6% in 2019, alongside a rise in deposit income from 574 million yuan to 789 million yuan, a 37.46% increase [5]. Group 5: Investment Recommendations - The report suggests focusing on companies with early investments and substantial freezer inventories, such as Nongfu Spring and Master Kong, as well as Dongpeng, which has aggressively expanded its freezer presence with notable results [7].

Summary of Key Points from Conference Call Records Industry Overview - **Food and Beverage Sector**: The overall situation in the food and beverage sector is currently at a historical low in institutional holdings, with the food and beverage index declining for four consecutive years since 2021. The fundamentals and expectations are also at low levels, making it a potential time for bottom-fishing opportunities [2][3][4]. Key Insights and Arguments - **Snack Sector**: The snack sector is expected to rebound as new products are launched and the third quarter enters a peak sales season. Short-term data is anticipated to improve, with a significant verification point in Q1 2026 during the Chinese New Year, which is expected to show impressive growth due to a low base [1][3]. - **Konjac Products**: The konjac category continues to grow, with companies like Wei Long and Yan Jin adjusting their SKUs and channels, leading to short-term performance pressure. Yan Jin is expected to maintain a growth rate of 20-25% in the second half of the year [1][4]. - **Wan Chen Company**: The resignation of the chairman and the appointment of new management is seen as a positive development. The company is expected to open 1,000 to 2,000 new stores in the first half of the year, with a projected net profit of around 250 million RMB [1][5]. - **Frozen Food Sector**: The frozen food sector is under pressure, with Anji experiencing single-digit revenue growth and profit decline due to various factors including a ban on alcohol and price fluctuations. The company aims for close to 10% revenue growth in the second half of the year [1][7]. Additional Important Content - **Diverse Performance Among Snack Companies**: Companies like Yan Jin and Wei Long are performing well, while others like Gan Yuan are facing challenges due to channel changes. Gan Yuan's revenue is expected to remain flat or slightly decline, and the company is focusing on new product promotions [1][6]. - **Beer and Seasoning Sectors**: The beer sector faced challenges in Q2 due to external factors and a ban on alcohol, but cost reductions have helped maintain overall industry profits. Recommended companies include Yanjing, Zhujiang, and China Resources [2][9]. - **Dairy Sector**: The dairy sector is experiencing a high level of activity, driven by travel and hot weather. Companies like Yili and Mengniu are expected to show improved performance, with Yili's liquid milk revenue expected to remain stable [2][20]. - **Market Dynamics**: The market for soft drinks and dairy products is competitive, with companies like Nongfu Spring recovering from a low base and showing significant growth. The decline in PET prices is beneficial for profit margins [2][16][17]. Conclusion The food and beverage sector is currently navigating through a challenging environment, with varying performances across different categories. Opportunities for investment exist, particularly in the snack and dairy sectors, while caution is advised in the frozen food and beer sectors due to ongoing pressures.

Investment Rating - The report suggests a positive outlook for certain Japanese consumer companies, particularly Asics, Pan Pacific International Holdings, Fast Retailing, and Asahi Group, due to their optimistic profit growth prospects [5]. Core Insights - High temperatures in June boosted sales of beverages and summer clothing, while duty-free consumption saw a significant decline [2][13]. - The consumer confidence index in Japan rose to 34.5 in June, the highest in four months, indicating improved consumer sentiment [7]. - The report highlights a mixed performance across different sectors, with essential goods showing resilience while discretionary spending faced challenges [4][26]. Summary by Sections Macro Overview - The consumer confidence index increased to 34.5 in June, up from 32.8 in May, with all sub-indices showing improvement [7]. - Core CPI rose by 3.3% year-on-year in June, a decrease from 3.7% in May, indicating a slowdown in inflation [9]. - The producer price index (PPI) increased by 2.9% year-on-year in June, reflecting easing cost pressures for producers [11]. Essential Consumption - Drugstore same-store sales showed positive growth, with PPIH, 7-Eleven, and Aeon reporting increases of 4.5%, 2.0%, and 2.1% respectively [3][15]. - Beverage sales turned positive due to high temperatures, with Suntory and Asahi reporting year-on-year sales growth of 1% and 9% respectively [18]. - The overall beer industry faced challenges, with Asahi's domestic revenue declining by 1% and Kirin's by 2% [20]. Discretionary Consumption - Clothing sales remained robust, with Workman and Uniqlo reporting same-store sales growth of 15.0% and 6.4% respectively [28]. - Restaurant same-store sales growth slowed, with major brands like Food&Life and McDonald's showing increases of 14.5% and 3.6% respectively [26]. - Department store sales continued to decline, with a 7.8% year-on-year drop in June, primarily due to a 40.6% decrease in duty-free sales [34]. Stock Market Performance - In June, the retail sector index rose by 3.7%, while the food and beverage sector increased by 0.7% [42]. - The report notes significant inflows into retail and food and beverage ETFs, indicating investor interest in these sectors [5].

Core Viewpoint - The beverage industry faces significant challenges in translating sustainability commitments into quantifiable emission reductions, with current progress lagging behind the required pace to meet net-zero targets set for 2030 and 2050 [1][12]. Emission Tracking: Current Status - The beverage industry has shown a 10% improvement in carbon emissions compared to 2021 predictions, but the current compound annual reduction rate of -1.7% is far below the -7.8% needed to meet the 1.5°C temperature control target [2][3]. - If the current reduction pace continues, carbon emissions are projected to reach 1.2875 billion tons by 2030, exceeding the interim target of 1.25 billion tons by 3% [3]. - By 2050, emissions are expected to remain at 920 million tons, representing an 83% gap from the net-zero target of 160 million tons [3]. Sectoral Differences in Emission Reduction - Different beverage categories exhibit varying progress in emissions reduction, with wine leading at a 38.4% reduction, followed by beer and fruit wine at -26.4%, dairy and alternatives at -16.1%, ready-to-drink beverages at -8.3%, and hot drinks at -6.8% [5]. - Conversely, categories like spirits and soft drinks have seen increases in emissions by 94.6% and 10.5%, respectively, primarily due to improved reporting and increased production [5]. Decarbonization Strategies: Insights from CSOs - A survey of Chief Sustainability Officers (CSOs) from leading beverage companies revealed that only 17% are fully satisfied with their carbon reduction progress, while 66% are cautiously optimistic [7]. - Regarding net-zero targets, 40% of CSOs are confident in achieving their goals, while 60% express concerns about meeting certain benchmarks [7]. - The industry is actively pursuing decarbonization across the value chain, with 57% of CSOs adopting new agricultural practices and 71% implementing packaging reduction measures [8][10]. Investment and Structural Challenges - The beverage industry is characterized by gradual improvements rather than breakthrough changes, with key challenges including insufficient commercial value of decarbonization initiatives and low internal consensus [11]. - To overcome these barriers, companies need to integrate sustainability goals with core business strategies, enhance cross-departmental collaboration, and develop robust business case evaluations for long-term benefits [11][12]. Future Outlook - Despite the challenges, there is a positive momentum in the beverage industry towards achieving sustainability goals, with a focus on critical areas for investment and improvement [12]. - Companies are expected to increase decarbonization investments by 25% in 2025, reflecting a cautious yet optimistic approach to funding sustainability initiatives [10].

Group 1 - The "anti-involution" policy is intensifying and is expected to become a sustained investment theme, requiring nationwide unified market construction and optimization of performance assessment mechanisms for high-quality capacity export by Chinese enterprises [1] - Currently, the implementation of related policies is not yet comprehensive, and the market remains in a phase of trading expectations, with low-cycle manufacturing varieties likely to become the main trading focus [1] - A quantitative indicator system has been developed to score and rank cyclical manufacturing sectors based on their "involution" degree and potential for reversal, highlighting industries with high "involution" and significant reversal potential as worthy of attention [1] Group 2 - The cobalt price is expected to rise due to a significant decrease in imports, with June's wet-process cobalt intermediate product imports dropping by 61.63% month-on-month and 43.14% year-on-year, leading to a cumulative import decline of 11.10% [2] - The extension of the export ban from the Democratic Republic of Congo is anticipated to further reduce inventory levels, with expectations of continued declines in July and a potential drop in smelting enterprise inventories by August and September [2] - The market is expected to transition to a state of low raw material inventory, which may significantly support prices, presenting investment opportunities in the rising cobalt market [2] Group 3 - The soft drink industry is projected to maintain cost advantages through 2025, with leading companies expected to have relatively controllable profit fluctuations [3] - New trends in the industry indicate stronger growth potential in segments such as sugar-free tea, health water, sparkling water, carbonated tea, and energy drinks, leading to recommendations for strong soft drink leaders [3]