A research report from Guotai Haitong Securities indicates that the CPI showed signs of recovery in February 2026, while the CPI-PPI spread has entered a phase of volatile narrowing, leading to a marginal weakening of cost benefits for the food and beverage industry. Based on the relationship between CPI and costs, and the transmission chain from gross margins to pricing power, the key investment themes in the mass-market consumer goods sector are: 1) leading condiment companies with strong distribution channels and product competitiveness, clear price increase expectations, and high dividend attributes, as well as leading restaurant supply chain companies with significant volume and price growth elasticity; 2) leading companies with national expansion and blockbuster product strategies, along with strong dividend intentions, and high-growth regional leaders; 3) investments in leading dairy enterprises and top-tier dairy farms; 4) leading raw material, snack, and beverage companies with advantages in product categories and distribution channels. The main views of Guotai Haitong are as follows:

The marginal recovery of CPI, the low-level recovery of PPI, and the narrowing CPI-PPI spread indicate that the food and beverage industry is in the "final stage" of cost benefits and the "early stage" of a price increase cycle. Reviewing historical price cycles, the report identifies CPI as the core anchor for stock performance, with the CPI-PPI spread determining profit elasticity. During periods of CPI above 1% and an expanding CPI-PPI spread, the food and beverage sector tends to exhibit stronger financial and stock performance. In February 2026, China's CPI increased by 1.3% year-on-year, marking the highest growth rate since January 2023. Improvements in PPI at the supply side are transmitting costs to CPI, while demand-side policies to "stimulate consumption" are gradually being implemented. The improving trend in CPI is expected to continue, benefiting companies with strong pricing power.

The recovery in CPI brings demand restoration and improved bargaining conditions, highlighting the importance of monitoring changes in gross margins and the rebuilding of pricing power among leading companies. Raw material costs typically account for 65% to 85% of the operating costs of mass-market consumer goods leaders, with key variables including agricultural products such as soybeans, white sugar, raw milk, and barley, as well as packaging materials like glass, PET, corrugated paper, and aluminum. In an environment of rising PPI and moderate CPI inflation, industries with higher concentration demonstrate stronger cost control and price increase capabilities, accelerating the exit of smaller, inefficient producers and potentially increasing market share for leading companies.

Amid expectations of price increases, focus on companies with strong pricing power. Theme one: condiments and restaurant supply chains benefiting from the synergy of costs and pricing power. The condiment sector is in the early stage of cost increases, coinciding with the five-year mark since the last price hike cycle. The recovery in CPI provides a foundation for a new round of price increases. Attention should be paid to rising industry concentration, which enhances pricing power and transmission efficiency for leading companies. In the restaurant supply chain, demand for quick-frozen and compound seasoning products has stabilized, entering an upward price cycle. Theme two: beer, characterized by relatively stable costs, high industry concentration, and pricing power elasticity. As dining-out scenarios gradually recover, costs for imported barley remain low, while packaging material costs have partially reversed. Focus on beer companies' efforts to develop premium products and penetrate new channels, driving average selling price and structural upgrades. Theme three: the dairy industry chain, where cost benefits are fading and pricing power is gradually recovering. Upstream dairy farming is seeing milk prices recover from loss-making levels, potentially releasing profit elasticity and ensuring financial statement improvements. With expectations of a raw milk cycle recovery, midstream dairy companies benefit from price increases, reduced price competition, and product structure upgrades. Subsequent price hikes and discount reductions may help pass cost pressures to the end market, improving profitability. Monitor changes in raw milk prices and terminal discount rates as signals of pricing power recovery. Theme four: snacks and soft drinks benefiting from structural cost advantages. The snack sector is relatively fragmented, with varying abilities to pass on costs and implement price increases. Recent declines in core raw material costs, such as sunflower seeds and konjac flour, may boost gross margins. Soft drink companies continue to benefit from lower sugar costs, coupled with recovering consumption scenarios, supporting steady growth for leading companies. Focus on leaders with supply chain advantages, product category strength, and distribution capabilities.

Risk warnings: CPI recovery and consumer demand may fall short of expectations; raw material and packaging costs may rise more than anticipated; market competition could intensify.