Goldman Sachs: Focus on Three Major Themes in China's Consumer Staples, Bottoming Opportunities Emerge in 2026

Goldman Sachs published a research report indicating that last year, China's consumer staples industry exhibited a "differentiation between the first and second half of the year," with the anti-corruption policy released on May 18 becoming a key watershed. Before the policy was introduced, the industry performed steadily; however, after the policy, weak demand and deflationary pressures led to the industry underperforming the market. Nevertheless, some companies still achieved growth through product cycles, market share increases, or stable shareholder returns, such as NONGFU SPRING (09633.HK), Zhongchong (002891.SZ), WH Group (00288.HK), Master Kong (00322.HK), and BUD APAC (01876.HK).

Looking ahead to 2026, Goldman Sachs believes that the industry's recovery still depends on the re-inflation process and policy direction, with expanding domestic demand becoming a top priority, focusing on three major themes: (1) bottoming out or trend reversal; (2) channel restructuring and the impact of private labels; (3) competitive dynamics and cost trends.

The firm expects the industry to bottom out in the second half of the year, particularly with the cyclical recovery of spirits and dairy, as well as growth in ready-to-drink scenarios such as beer, condiments, and prepared foods. It is anticipated that spirits will gradually recover in the second half of this year, mainly due to the warming of business banquets and high-end demand, although channel inventory pressures still need to be addressed in the first half. The dairy sector may achieve a supply-demand rebalancing in the second half due to ongoing production cuts upstream and policy support. Categories related to dining (such as beer, condiments, and prepared foods) will benefit from a low base effect and cyclical recovery.

Goldman Sachs pointed out that industry competition is intensifying and differentiation is significant. The food and beverage industry is highly competitive, requiring companies to increase promotional efforts and new product launches; the beer industry faces intensified price competition; while the competitive environment for leading companies in condiments and prepared foods is relatively favorable.

Goldman Sachs recommends focusing on growth stocks in the first half of 2026, with a gradual shift towards value stocks as bottoming opportunities emerge in the second half. Overall, Goldman Sachs is optimistic about the long-term growth potential of the beverage industry and holds a more optimistic view on the recovery of condiments, prepared foods, and dairy