Kweichow Moutai: ‘Elite’ alcohol model is China’s most respected agency

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Kweichow Moutai is a luxury spirit favoured by Chinese politicians and businesspeople looking to impress.Image copyright Getty Images

A drinks maker has turn out to be China’s most respected publicly-listed firm, overtaking the nation’s greatest financial institution.

Kweichow Moutai is a luxurious spirit favoured by Chinese politicians and businesspeople trying to impress.

The firm’s share worth has risen dramatically this yr, pushing its worth to new highs.

Despite producing one in every of China’s most prestigious manufacturers, few individuals could have heard of it exterior of the nation till now.

As its worth has risen, Kweichow Moutai has leapfrogged Industrial & Commercial Bank of China (ICBC), the world’s largest industrial financial institution by belongings, to turn out to be the nation’s most respected public firm.

Its share worth has rocketed greater than 20% to this point this yr in keeping with information from Refinitiv and it is without doubt one of the few Chinese listed firms whose share worth has exceeded 100 yuan (£11, $14).

Chinese tech large Alibaba is extra invaluable, however is not listed in China. Huawei, one other well-known Chinese firm, is privately owned.

Based on Monday’s closing share costs, Kweichow Moutai is at the moment valued at greater than 1.8tn yuan. ICBC is at the moment value just below 1.8tn yuan.

What is Kweichow Moutai?

Kweichow Moutai has an uncommon company construction. It is partially state-owned and partially publicly-listed on the Shanghai Stock Exchange.

Formed in 1999, Kweichow Moutai is the world’s most respected liquor firm, having surpassed UK-based Diageo three years in the past.

It manufactures and distributes a novel model of baijiu, a transparent and colourless liquor which is taken into account China’s nationwide spirit.

Baijiu usually has an alcohol content material of between 35% and 60% by quantity.

John Watkins, an alcohol business skilled who has labored extensively in China, mentioned: “Doing shots with Moutai is part of the business culture and accelerates building trust and friendships.”

Talking concerning the producer, he added: “It appears from the outside to be a well-run company that will be able to generate sustainable and growing profits as China’s consumer market grows and has more and more purchasing power.”

Why is it so prestigious?

Kweichow Moutai was a favorite drink of People’s Republic of China’s (PRC) founding father Mao Zedong who famously served it at state dinners throughout US President Richard Nixon’s go to to China in 1972.

In 1974, the US Secretary of State Henry Kissinger informed Deng Xiaoping, China’s future paramount chief: “I think if we drink enough Moutai we can solve anything.”

Such glowing endorsements made Moutai the model of selection for the elite, vital at enterprise banquets and a show of wealth and energy.

“It is considered as a status symbol because of the high price and limited supply, which I believe it is part of Moutai’s marketing and sales strategy,” mentioned David Liu, an analyst and common baijiu drinker based mostly in Shanghai.

Image copyright Getty Images

Why has its share worth instantly shot up?

Shares in Kweichow Moutai have risen for the reason that coronavirus pandemic broke out in China, whereas different alcohol manufacturers have seen their values fall.

Kweichow Moutai is usually drunk at home so gross sales haven’t been dented like rival manufacturers who rely closely on bars and golf equipment which have been closed throughout virus lockdowns.

The luxurious model can be benefitting from the US-China commerce struggle.

“Right now, with rising patriotism from delight in how China has to this point contained Covid-19 and anger on the US from Trump’s commerce struggle, Chinese are more and more shopping for home manufacturers and merchandise out of patriotism.

“This is true from sports apparel to cosmetics to alcohol,” mentioned Shaun Rein, founding father of the China Market Research Group.

He added that as a result of Chinese cannot travel abroad on pricey purchasing journeys to Europe, they’re spending on home luxurious consumption as an alternative.

How a lot does it value?

Buyers commonly spend about as much as 900 yuan (£91, $127) for a bottle of Kweichow Moutai baijiu however the worth can rise dramatically for uncommon and good vintages. Some bottles promote for as much as $20,000.

Although distribution and worth setting is closely managed by the Chinese authorities, many individuals purchase bottles as speculative investments to carry onto and promote at a better worth.

And how does it style? “The first time I tried Moutai it tasted like engine oil – fiery and burnt my throat on the way down. Now I find it smooth and enjoyable,” mentioned Mr Rein.

Kweichow Moutai nonetheless has some technique to go to turn out to be the world’s most respected firm. That title at the moment belongs to Saudi Aramco (Saudi Arabia Oil Company) which is valued at almost $1.9tn, in keeping with Refinitiv.