GF Securities released a research report stating that in the mass consumer goods sector, the industry is undergoing channel transformation, with consumers pursuing "cost-effectiveness + high value". To adapt to consumption trends and channel changes, Chinese mass consumer goods companies need to focus on demands for cost-effectiveness, health, convenience, and functionality. Leading companies in subdivided sectors with strong product capabilities are expected to benefit. Additionally, overseas expansion by mass consumer goods leaders presents development opportunities.

Regarding liquor, after four years of adjustment, 2025 is expected to witness a double bottom in "valuation + performance", with the sector entering a mid-cycle buying point. The ratio of dividend yield to 10-year government bond yield is relatively high, showing attractive allocation value. The company is optimistic about demand recovery after industry clearing.

GF Securities' main viewpoints are as follows:

**Snacks: Traffic Switching, Intensifying Differentiation** (1) Revenue side: Differentiation in sector prosperity intensified in Q2 2025. Catalyzed by snack retail stores, konjac hit products, and Sam's Club orders, Wanchen, Weilong, Yanjin, and Youyou Foods maintained double-digit growth even during the off-season. Meanwhile, companies with diminishing traffic elasticity entered transformation and adjustment periods, such as Jinzai, Ganyuan, and Three Squirrels. (2) Profit side: Operating leverage further amplified profitability differences within the sector. Under the impact of raw material price fluctuations and industry competition, most companies faced pressure on the profit side. However, Weilong leveraged supply chain advantages to mitigate konjac cost impacts, while Wanchen Group's operating leverage elasticity was released, with significant improvements in sales expense ratio and gross margin.

**Chain Stores: Bottom of Operating Cycle, Focus on New Changes** (1) Revenue side: Internal differentiation among chain food companies intensified in H1 2025. Focus on the catalyst chain of "single-store turnaround -> net store closures turning to net openings -> new channels/new store formats". By category, braised food chains still face revenue pressure, while Guoquan and Babi achieved double-digit growth through single-store improvements and new channel contributions. (2) Profit side: From a net profit margin perspective, most companies are at the bottom of their profit cycles. Future focus should be on the sustainability of single-store improvements and new business expansion.

**Frozen Foods: Performance Under Pressure, Leading Companies Show Greater Resilience** In H1 2025, the consumption environment and catering scenario recovery were relatively slow, industry competition was intense, and companies significantly increased spending but did not see significant improvement in sales momentum, which remained weak. Emerging channels became new growth drivers for various companies. Ligao Foods' cost control effectiveness continued, reflecting the effectiveness of its internal reform and efficiency improvement and "product manager" assessment model. Focus in H2 2025 should be on catering recovery and companies' new channel expansion.

**Dairy Products: Industry Differentiation, Leading Advantages Significant** In H1 2025, downstream industry demand remained relatively weak. Dragged down by ambient milk, major dairy companies generally saw declining liquid milk revenues. However, Yili's decline narrowed significantly, Mengniu's performance was relatively flat, and New Hope Dairy achieved rapid growth driven by low-temperature business. In terms of profitability, benefiting from declining milk prices + reduced powder spraying + structural upgrades, dairy companies' profitability generally exceeded expectations. Focus in H2 2025 should be on milk price recovery and peak season market demand changes.

**Health Products: High Prosperity in Domestic New Channels, Overseas Affected by Tariffs** Under channel differentiation in 2025, brand companies were affected by channel traffic, with By-health's decline narrowing. Production companies like Xianlehk expanded new domestic customers in Q2 2025 but were affected by tariffs overseas. Raw material segment subcategories showed high prosperity.

**Risk Warning:** Channel and new product expansion falling short of expectations; intensifying competition; food safety risks.