China Merchants Securities: Q1 2025 beer sales are stabilizing as expected, which is likely to drive a natural recovery in structure

According to the Zhitong Finance APP, China Merchants Securities released a research report stating that beer sales have stabilized as expected, with hopes for structural recovery. The beer industry's peak season sales in 2024 are under pressure, affecting the overall performance for the year. Major companies are actively adjusting inventory through increased investment and controlling shipments, while cost benefits continue to drive improvements in net profit margins. In 2025, the industry is expected to be lighter, with Q1 sales showing signs of recovery and overall performance generally improving. From a yearly perspective, the improvement in peak season sales is significant not only for sales recovery but also for the expected increase in consumption in on-premise channels, which is likely to drive a natural recovery in structure under low expectations and a low base.

Key Points from China Merchants Securities:

Industry sales are low at first and high later, with profitability still improving

According to the National Bureau of Statistics, from January to December 2024, the output of China's large-scale beer enterprises is expected to decline by 0.6% year-on-year to 35.213 million kiloliters, marking the first decline since 2018, excluding the impact of the pandemic in 2020, indicating pressure on industry demand. However, the sales pattern shows low sales initially and high later, with listed companies' net profit margins still improving, and Q1 2025 sales achieving recovery.

Leading brands are affected by on-premise consumption, while small breweries show strong momentum

For key enterprises, in 2024, leading beer brands are under pressure due to damage to national on-premise channels and insufficient consumer confidence. However, small breweries like Yanjing U8's national expansion and Zhujiang 97 Pure Draft's provincial upgrades are driving revenue growth that outpaces the industry, with impressive profit performance. In terms of volume and price, the total sales of major listed companies in 2024 decreased by 2.4% year-on-year to 26.833 million tons, weaker than the cumulative beer output of large-scale enterprises, with leading brands significantly underperforming compared to small breweries. The growth rate of ton price slowed to 1.0%, with Zhujiang and Yanjing leading the way. Q1 2025 sales overall show recovery, but ton price performance remains under pressure due to structural and promotional influences.

Proper cost control continues to yield cost benefits

On the cost side, in 2024, benefiting from the decline in barley and major packaging material costs, the industry's ton cost generally shows a decrease. In Q1 2025, cost benefits continue overall, and with the backdrop of sales recovery, scale effects are evident, with the decline in ton cost expanding on a month-on-month basis. On the expense side, in 2024, under external environmental pressures, beer companies further tapped potential, with management expense ratios generally declining, though the decline is relatively limited. Sales expenses vary among companies due to different stages of product development. In Q1 2025, except for Yanjing, which increased channel expenditure leading to a year-on-year rise in sales expense ratio, other companies achieved a contraction in expense ratios against the backdrop of revenue recovery.

Revenue performance varies, but net profit margins still improve

In 2024, although beer companies show varied revenue performance, under the backdrop of cost benefits and rational expense inputs, the industry's net profit margin still achieved an increase (+0.85 percentage points). The revenue recovery in Q1 2025 drives an overall restoration of net profit margins, but the trend still shows that small breweries outperform leading brands, with Chongqing Brewery's profitability under pressure due to a high base.

Risk Warning: Extreme weather impacts, unexpected cost increases, intensified industry competition, etc