The Zhitong Finance App learned that Ping An Securities released a research report saying that channel selection is essential for the development of wine companies. Being able to grasp popular channels and choose models that meet the development of wine companies themselves according to local conditions can effectively promote revenue growth. As a lubricant for economic activity, the channel model is highly related to macroeconomic policies, economic environment, and consumption environment, so it is also constantly being updated. For wine companies, execution and innovation are the core competitiveness. At the same time, in the era of stocks, competition for liquor will shift to parallel channels and brands.

Focus on the targets: Kweichow Moutai (600519.SH), Wuliangye (000858.SZ), Luzhou Laojiao (000568.SZ), Jinshiyuan (603369.SH), Gujing Gongjiu (000596.SZ), Yingjia Gongjiu (603198.SH), Shanxi Fenjiu (), and other companies that have good consumer awareness and are actively promoting channel reform. 600809.SH

The main views of Ping An Securities are as follows:

Liquor channel: diversified development, progress through iteration

Since 1949, China's liquor channels have successively experienced: 1) 1949~1978: the era of planned economy, unified national procurement and marketing; 2) 1978-1988: Early stage of reform and opening-up, low channel openness, dominated by state-owned sugar and wine companies; 3) 1989-1996: price liberalization of famous wine, gradual breakdown of the sugar and wine company system, and the rise of dealers; 4) 1997-2002: The restaurant market is prosperous, and dealers are taking the initiative; 5) 2003-2012: Golden multi-channel resonance, and the rise of tobacco hotels/group purchases for 10 years; 6) 2013 to present: Complex development, including the three categories of “manufacturer led”, “dealer led”, and “win-win cooperation”. Wineries choose flexibly according to their own circumstances and stage of development. Each channel model has its own advantages and disadvantages, showing the three major trends of online, digitalization, and refinement as a whole.

Online: Platform subsidies help e-commerce grow rapidly

After experiencing the epidemic for three years, consumer behavior is more rational, the importance of “cost performance” is prominent, and e-commerce platforms generally put price power first. As a high-value standard product, liquor has become a key target of subsidies. E-commerce platforms attract customers by subsidizing liquor, which in turn drives overall transactions. According to Magic Mirror Insight, in 2023, the online sales volume of liquor/spirits was 90 billion yuan, an increase of 78% over the previous year. Kweichow Moutai and Wuliangye ranked top 2 in sales on multiple platforms such as Tmall, JD, and Douyin. While online channels are driving sales, too low subsidy transaction prices also have an impact on the original price system. The problem of high online counterfeiting rates also exists. Looking forward to the future, we will work with major wineries to strengthen online governance. Ping An Securities expects the industry to be further standardized and developed.

Digitalization: Empowered by digitalization, the rise of red envelopes that scan codes

Under macroeconomic pressure, the consumer industry has become the primary task of wineries to promote sales and remove inventory. Red envelopes are based on an information-based system, which can: 1) supplement channel profits and increase sales enthusiasm; 2) increase bottling and sales, and reduce inventory pressure; 3) check and prevent counterfeiting, reduce smuggling, and maintain market order; therefore, they have become a tool for normalization in major wineries. However, in the fierce market competition, the marginal utility of scanning red envelopes has declined, and dealers may have a certain impact on the price market after they have converted red envelopes profits. Looking forward to the future, Ping An Securities believes that more refined management is the key, maintaining the relationship between volume and price is the key, and marketing innovation will continue to change under digital empowerment.

Refinement: Direct sales of famous single products, strengthen control and increase profits

Distribution channels are more cost-effective for most liquor companies, but for large single products with consumer awareness, direct sales channels are more attractive, considering that: 1) they can keep more profits within listed companies; 2) they have greater control over end consumers and prices, and can better grasp the pace of delivery. In recent years, high-end liquors represented by Maowu have continued to increase their direct sales channel layout, and the share of direct sales has continued to increase. Among them, Maotai is in a relatively leading position, and the volume of iMaotai has driven a rapid increase in direct sales revenue.

Risk warning:

1) Impact of macroeconomic fluctuations: Sub-industries such as liquor are greatly affected by the macroeconomy. If the macroeconomic downturn has a big impact on industry demand.

2) Consumption recovery falls short of expectations: Under the slowdown in macroeconomic growth, national income and employment have been affected to a certain extent. The recovery in consumer spending capacity and desire in the short term may fall short of expectations, thus affecting the recovery of the consumer sector.

3) Food safety issues: Food safety is related to consumers' personal safety and is a red line for industry development. Once food safety issues occur, they will have a huge negative impact on the industry, and it may take a long time for the industry to recover.

4) Industry competition increases risk: Deterioration in the competitive landscape will definitely affect the price system of the food and beverage industry. Competition in the liquor industry is more incentive, or it may adversely affect the industry.