PET prices declined month on month, marginally easing consumer goods cost pressure in June

Overview

This report tracks changes in major raw material and industry cost indices for China staples in June 2026, covering PET, pulp, aluminum, raw milk, barley, sugar, soybeans, palm oil, proteins and condiment ingredients. Overall, packaging material cost pressure eased in June as PET prices declined month on month, providing cost tailwinds for certain food and beverage segments. However, agricultural commodity price trends, El Niño weather impacts and regional supply-demand changes remain sources of uncertainty.

Core views

The core conclusion is that cost pressure improved marginally but has not disappeared entirely. PET prices fell from their May highs to approximately RMB 7,000/ton, easing packaging cost pressure for beverages, condiments and pet food. The soy sauce cost index declined 4.9% month on month, the beverage index declined 3.9%, and the compound condiment index declined 2.2%. For raw milk, the supply-demand balance continued to improve, with rebalancing in 2H26 expected to be supported by herd reductions, lower imports and a moderate recovery in demand. Relative headwinds include still-elevated PET prices year on year, higher pulp prices year on year, rising prices for certain proteins and starches, and potential disruption from El Niño to agricultural output in rainfall-dependent regions such as Southeast Asia.

Analysis framework

The report uses a monthly cost-index tracking framework that combines spot raw material prices, import volumes, supply-demand indicators, company cost exposure, hedging policies and gross margin changes to compare beer, condiments, dairy, beverages, snacks, frozen foods and pet food. The analysis also incorporates weather expert calls and tracking of urban temperatures and precipitation to assess potential disruptions to agricultural commodity prices.

Methodology notes

• Cost TrackingChina Staples Cost Index

  Tracking raw material cost changes by segment and company

  The report maps prices of raw materials including PET, pulp, aluminum, raw milk, barley, soybeans, sugar, oils, meat and seafood to unit costs and cost indices for different consumer goods segments, in order to assess gross margin pressure or tailwinds.

• Earnings SensitivityTheoretical Cost Impact Analysis

  Impact of raw materials on unit COGS and GPM

  The report compares pure cost benefits with Goldman Sachs' forecast ranking for average gross margin expansion, showing that frozen foods rank relatively high in both pure cost benefits and gross margin improvement, while pet food ranks relatively low in gross margin expansion.

• Weather and Agricultural RiskEl Niño Expert Call and Weather Tracking

  Impact of weather anomalies on agricultural supply and prices

  The expert call considered the current El Niño potentially one of the strongest levels since 1950, increasing confidence in drought or flooding in certain regions, particularly affecting rainfall-dependent agricultural countries.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Beer Segment

  Highly affected by barley, aluminum and packaging material costs

  Strengths

  Barley hedging prices are expected to decline by mid- to high-single digits year on year, while lower aluminum prices month on month should help reduce the June cost index.

  Weaknesses

  Barley import prices rose both month on month and year on year in May; a subsequent rebound in agricultural commodity prices could weaken cost benefits.

  Comparison

  Beer ranked behind frozen foods and ahead of pet food in the pure cost benefit ranking.

  Risks

  Barley prices, aluminum prices, exchange rates and a weaker-than-expected recovery in demand.

• Condiment Segment

  Affected by soybean, sugar, PET, monosodium glutamate and soybean oil prices

  Strengths

  The soy sauce and compound condiment cost indices declined significantly month on month in June, indicating clear cost tailwinds.

  Weaknesses

  Cost structures and pricing power vary across companies.

  Comparison

  The soy sauce cost index declined more than the compound condiment index month on month, making soy sauce the most prominent cost beneficiary in the report for June.

  Risks

  Rebounds in soybean, sugar and oil prices, as well as intensifying competition on the demand side.

• Dairy Segment

  Key variables are raw milk supply and demand, imported milk powder and domestic demand

  Strengths

  Raw milk prices were stable, imports of milk powder and dry dairy products declined significantly, and herd contraction supported supply-demand rebalancing.

  Weaknesses

  The recovery in demand is still described as moderate, and margin improvement requires continued supply-demand repair.

  Comparison

  Unlike beverages and condiments driven by packaging materials, dairy depends more on supply-demand rebalancing.

  Risks

  A weaker-than-expected recovery in demand, changes in imports, feed costs and milk price volatility.

• Beverages and Snacks

  Affected by PET, sugar, palm oil, aluminum, pulp and category-specific raw materials

  Strengths

  The beverage index declined 3.9% month on month in June, with PET, sugar, palm oil and aluminum providing cost tailwinds.

  Weaknesses

  Higher pulp prices month on month partially offset the improvement in certain packaging costs.

  Comparison

  The beverage cost decline was significant, but the improvement may diverge due to pulp prices and brand competition.

  Risks

  A rebound in packaging material prices, intensified promotions and volatility in consumer demand.

• Frozen Foods

  Affected by chicken, pork, sugar, fruit, shrimp, starch and butter prices

  Strengths

  The report shows frozen foods ranked first in the average pure cost benefit ranking, and Goldman Sachs' forecast ranking for gross margin expansion also placed it first.

  Weaknesses

  Cost trends diverged in June, with lower chicken, pork, sugar and fruit prices partially offset by higher shrimp, starch and butter prices.

  Comparison

  Frozen foods ranked higher in cost benefits than pet food and condiments.

  Risks

  Volatility in protein, seafood, starch and cold-chain demand.

• Pet Food

  Affected by chicken, PET, starch and duck meat costs

  Strengths

  Pet food costs declined in June due to lower chicken and PET prices.

  Weaknesses

  Higher starch and duck meat prices partially offset the cost improvement.

  Comparison

  Pet food ranked above compound condiments and beverages and snacks in the pure cost benefit ranking, but ranked lower in Goldman Sachs' forecast ranking for gross margin expansion.

  Risks

  Overseas business costs, exchange rates, divergence in raw materials and competitive pressure.

Key data

• PET PriceApproximately RMB 7,290/ton as of June 30, 2026Up approximately 17% year on year and 18% year to date; fell month on month to approximately RMB 7,000/ton in early July.
• Year-on-Year Changes in PET, Pulp and Aluminum Prices+29% / +15% / +16%The corresponding month-on-month changes were -11% / +3.5% / -2.2%, with packaging material pressure easing due to the decline in PET.
• Imported Milk Powder Volume20 kt, May 2026Down 60% year on year, supporting the view of improving raw milk supply and demand.
• Imported Dry Dairy Product Volume99 kt, May 2026Down 26% year on year.
• Herd SizeDown 4.2% year on year in May 2026Supply contraction should help rebalance raw milk supply and demand in 2H26.
• Barley Import PriceUp 1% month on month and 2% year on year in May 2026The report expects 2026 barley hedging prices to decline by mid- to high-single digits year on year, potentially benefiting beer costs.
• Soy Sauce Cost IndexDown 4.9% month on month in June 2026Primarily driven by declines in soybean, sugar, PET and monosodium glutamate prices.
• Beverage Cost IndexDown 3.9% month on month in June 2026Primarily driven by declines in PET, sugar, palm oil and aluminum prices.
• Compound Condiment Cost IndexDown 2.2% month on month in June 2026Primarily driven by declines in soybean oil and PET prices.
• Hot Pot Ingredients Cost IndexUp 0.2% month on month in June 2026Mainly due to increases in shrimp and starch prices.

Impact & implications

For China staples equities, the marginal improvement in the June cost environment should help ease gross margin pressure, particularly in beverages, condiments, beer and some frozen food segments benefiting from lower packaging material, sugar, oil and certain protein prices. If raw milk supply and demand continue to rebalance in 2H26, pressure on dairy margins may ease further. However, as some raw material prices remain elevated year on year and weather disruptions may affect agricultural supply, the sustainability of earnings improvement will continue to depend on price hedging, inventory cycles, end-market demand and companies' pricing power.

Risks

• Some packaging materials, including PET, remain elevated year on year; if the month-on-month decline does not persist, cost pressure may rise again.
• El Niño may increase the probability of drought in Australia, Indonesia and Southeast Asia and affect output in rainfall-dependent agricultural countries.
• Higher fertilizer prices may weaken crop resilience in low-income countries, amplifying the impact of extreme weather on agricultural supply.
• Rising prices for certain raw materials, including pulp, shrimp, starch and butter, may offset other cost tailwinds.
• The recovery in end-market demand, companies' pricing power and inventory cycles will determine whether lower costs translate into gross margin improvement.

What to watch

• Whether PET spot prices can stabilize around RMB 7,000/ton or continue to decline.
• Progress toward raw milk supply-demand rebalancing in 2H26, including herd reductions, imported milk powder volumes and the recovery in domestic demand.
• Barley hedging policies and the actual 2026 procurement costs of beer companies.
• The actual impact of El Niño on agricultural supply in Southeast Asia, Australia and South America.
• Subsequent month-on-month trends in the cost indices for soy sauce, beverages, compound condiments and frozen foods.
• Whether companies' gross margins improve in line with cost indices, particularly changes in GPM in 2Q26 and thereafter.