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Banquets Go Under the Table in China, Squeezing Food and Beverage

Stocks in this article: CCSC CGA HTHT HOT

It's hard to pinpoint listed companies that will gain as the parties rage on quietly and market analysts aren't normally on the guest lists. In my experience as an occasional guest of these events before the would-be bans, nameless local companies would provide a lot of the food and beverage, such as tea leaves harvested in China and seafood from Chinese aquaculture farms. High-end Chinese cuisine relies more on natural, wet-market style ingredients than on foods processed by major labels. Banquets and receptions usually take places at state-run hotels or on the property held by whatever Party unit or government office is hosting an event.

Still, the parties probably won't take the fizz out of U.S. soft drink brands such as Coca Cola (KO) and PepsiCo (PEP) as their sodas appeal to Chinese women, who per custom seldom drink alcohol in public.

PepsiCo found a Chinese partner this year to make the sales and distribution of drinks easier, while Coca Cola announced in 2011 that the company and its partners would invest $4 billion in China from 2012 to 2014.

Those culturally authorized to drink are veering increasingly toward grape wine rather than high-end grain alcohol considered a traditional banquet staple. The default red wine for China is stuff bottled by Hong Kong-listed, mainland China-based vintner Dynasty Fine Wines Group (0828.HK), and its share prices have fallen hard since peaking in October 2011.

Some parties use major hotels and their catering services, though Chinese company events turn up more often there than government events do. (This trend will reach its annual peak toward the end of January as China starts celebrating Lunar New Year.)

Among the caterers that might serve your portfolio is the Great Wall Sheraton Hotel Beijing. The Great Wall hotel belongs to the U.S.-based, international Starwood Hotels & Resorts (HOT), with properties in a chain of on-the-move Chinese cities. Party animals headed even higher up the hog may pick the St. Regis Beijing, also a hotel under Starwood.

But those planning a low-key, whodunit kind of party might go with something like the Nasdaq-listed Hanting Inns & Hotels, China Lodging Group's (HTHT) budget chain that claimed 639 properties in 100 cities a year ago along with steady revenue growth. Its share prices have climbed on the whole since a mid-year trough.

For Hanting, I see festive returns in a low-key 2013 if it keeps the minibars stocked and doors locked on its private rooms.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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