The strangeness and buying points of this round of liquor bull market from the perspective of liquor cycle history

Liquor is a consumer product whose success depends on quality, channels and brands. Brands have three attributes: popularity, reputation, and the right to raise prices. The right to increase the price comes from the occupation of the mind. In addition to providing use value, the product also has spiritual value, so that the product has the ability to obtain excess returns.

There is no absolute relationship between channels and brands. Some liquors develop channels first, and realize that products are first imported, eye-catching, and finally in the heart. Some liquors first form a strong brand in the region, and then form a strong brand through publicity, investment, and brand-led channels. nationalize.

There is no absolute strength between nationalization and regionalization. Although nationalization theoretically has a higher ceiling, it is the strength of spatial distribution, not the spatial breadth of brand distribution, that determines the strength of a brand.

Generally speaking, the foundation of quality product brand, but it does not mean that the quality must be very good, and it can be passed. For brands, the most important thing is to tell stories and tell spiritual attributes. Many brands are developing and improving quality at the same time, instead of waiting for invincible quality to develop quality.

Of course, for mature consumer goods, the brand is the core interest rate, and channels and quality are the support. To a certain extent, quality is the service brand, because quality is a value judgment, and there is no absolute good or bad, but depends on Position, the position of consumers is a manifestation of brand power.

The perfect consumer product is: high quality (meaning that it is consistent with the brand and recognized by consumers), stable in channels, and strong in brand power (with consumption stickiness and the right to raise prices). Taking Moutai as an example, it is perfect. At present, it is not wise to weaken the channels and increase the proportion of self-operated business from a long-term perspective.

From the past history, the liquor industry, as a strong consumer product, also has cycles, mainly the macro environment and monetary policy. Further, as a policy city, my country’s economy has long been driven by foreign trade and infrastructure (real estate). After China’s entry into the WTO, the economy has taken off and welcomed Come to the first round of the bull market in liquor.

The high valuation was superimposed on the impact of the financial crisis. In 2008, the stock price of the liquor sector suffered a “double kill” in valuation performance. The first round of the liquor bull market came to an end, and the liquor sector entered a period of adjustment. However, the “four trillion” investment drove the second round of the liquor bull market, and the performance of liquor quickly recovered, driving up the valuation and ushering in the second wave of the liquor bull market.

The third round of the liquor bull market is very interesting. The ratio of residents’ income to the price of Maowu in 15 years has reached an all-time high. Driven by private consumption, the liquor industry began to recover structurally. At the same time, prices rose to destock, and real estate soared, further driving the outbreak of liquor demand. Until 2018, when “housing and not speculating”, liquor began to face performance pressure, and its stock price was cut in half in large quantities.

The fourth round of the bull market is very strange. From the end of 2019 to the present, the driving force of the bull market comes from the rise of private consumption + the extremely substantial improvement of foreign trade. The performance of liquor has grown rapidly for four consecutive years from 2019 to the present.

Looking back on history, the bull market of baijiu is supported by performance. The performance comes from the liquor being drunk. Why? One is the relationship between government and business, and the other is private consumption. The former is tied to infrastructure and real estate, and the latter is related to private consumption.

Beginning in the second half of 2021, the domestic epidemic situation is severe, the foreign trade environment has deteriorated, and a very strange phenomenon has appeared in liquor: the performance continues to grow rapidly, but the stock price begins to adjust.

From the perspective of demand, infrastructure and real estate have little effect on economic transformation, the real estate industry is likely to come to an end, and there is not much room for infrastructure construction. In the future, the consumption of liquor is mainly related to the consumption capacity of the private sector, and the per capita disposable income is bound to the volume and price of liquor.

I won’t say what everyone’s income has been in the past few years during the epidemic.

So I was thinking, this round of liquor market, the performance has not started to kill, the stock price fell inexplicably, but it is definitely not over.

The growth rate of liquor has dropped significantly in the second quarter of 2022, so what about the performance in the second half of the year? The recovery of the economy cannot be so fast. It is inferred that the 2023 interim report may have single-digit growth or negative growth in the context of this year’s high base. How will it be estimated at that time?

This is why I think the current valuation of liquor is reasonable in terms of price-earnings ratio, but I still dare not buy liquor stocks.

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