The Zhitong Finance App learned that Guotai Junan released a research report saying that the snack industry supply chain integration is a trend. The single-product scale effect unleashes the increase in superposition snack companies' control over the upstream, and opens up profit space for enterprises. At present, the bank believes that the snack industry is still in the stage of diversification of categories and channel expansion. Continued improvement in corporate production efficiency is a trend, and the sector's performance resilience will continue. We are optimistic about the flexible release of performance driven by snack sector channels, category dividends, and the medium- to long-term growth of leading companies. Recommended additions: Three squirrels (300783.SZ), Jinzai Food (003000.SZ), Yanjin Shop (002847.SZ), Qiaqia Food (002557.SZ), Weilong Delicious (09985), Ganyuan Food (002991.SZ).

Guotai Junan's views are as follows:

From a “small workshop” to a “steel jungle” - a brief analysis of the path of the snack industry:

The essence of snack food is to transform agricultural products into general products that are easy to distribute on a large scale. Due to factors such as the regional nature of food culture and entry barriers, the industry is inherently prone to “small workshops”; in the process of forming categories, channels, and supply chains in the process of development, the production side gradually evolves from small workshops to large-scale production, and the category shifts from Western imported products to “Chinese snacks” leading demand, and channels are gradually diversified, driven by retail efficiency improvements; overall, it is believed that the snack industry is more diversified by retail efficiency improvements and red red. Driven by external forces such as profit, industrial development The intrinsic drivers are relatively weak.

From “small but scattered” to “big and strong” - Discussion on the positioning and possibilities of the snack industry:

1) The bank found that the local snack industry is still in a relatively early stage. Compared to overseas markets and other local manufacturing industries, local companies still have a lot of room in terms of share, and there is still great potential for improvement at the brand, product and channel levels. The bank believes that the degree of branding of products and homogenization of content determines how difficult it is to integrate the industry. Snack foods have a high degree of heterogeneity and low brand accumulation, making them more vulnerable to channel, competition, and upstream restrictions. 2) The bank believes that the domestic snack industry has the foundation for the birth of large enterprises, but it requires “both long and short” capabilities, and needs to seize channels and category opportunities to achieve rapid share expansion in the short term, but in a longer dimension, it is necessary to continue to build supply chain advantages and establish brand awareness, thereby continuously strengthening bargaining power over raw materials, consumers and channels.

On the countercyclical ability and sustainability of the snack sector:

The performance of snack foods showed strong countercyclicality, mainly due to: 1) Structural dividends from channels and categories. At the channel level, retail efficiency has improved, and the revenue flexibility of enterprises that have successfully captured channel transformation opportunities continues to be unleashed. At the category level, consumption demand for local snacks is still in a period of total expansion. It is easy for local snack companies to create popular items, achieve supply creation demand under a low base, and further open up revenue flexibility; 2) Continuous improvement in enterprise efficiency. Supply chain integration in the snack industry is a trend. The single-product scale effect unleashes superposition snack companies' increased control over the upstream, opening up profit margins for enterprises. At present, the bank believes that the snack industry is still in the stage of diversification of categories and channel expansion. Continued improvement in corporate production efficiency is a trend, and the sector's performance resilience will continue.

Investment suggestions: It is recommended to increase holdings of the three squirrels that have led to a reversal in performance due to marketing reforms; Jinzai Foods, which continue to change in categories and channels; it is recommended to increase holdings of Qiaqia Foods, which show an improving trend in revenue, and Ganyuan Foods, which benefit from the target market.

Risk factors: food safety, management team turnover, etc.