How China’s ‘Firewater’ Became the World’s Most Valuable Liquor Brand | WSJ The Economics Of

Summary

Moutai, China's national liquor, is a symbol of luxury and tradition with a market value surpassing $500 billion. Known for its high alcohol content and steep price, it has gained popularity among the wealthy, while also becoming an investment asset. Despite its success, Moutai faces challenges in appealing to younger consumers and expanding internationally. While still largely consumed in China, the brand is working to broaden its reach through collaborations and global marketing. With a production process rooted in scarcity and history, Moutai remains resilient, making it one of the most valuable liquor brands worldwide.

Takeaways

• 😀 Moutai is China's national liquor, known for its high alcohol content (53%) and its status as a luxury drink.
• 😀 Moutai is deeply rooted in Chinese history, with its reputation solidified during the Chinese Civil War and its role in diplomatic events, such as toasts between Chinese leaders and international figures.
• 😀 The brand has become a symbol of status, especially among China's wealthy elite, who serve it at weddings, political banquets, and other high-profile events.
• 😀 Moutai's market value skyrocketed, surpassing the largest Chinese bank in 2020 and becoming the world's largest beverage company by market cap in 2021.
• 😀 Despite its success, Moutai faces challenges, including decreasing demand among younger Chinese consumers and limited international recognition.
• 😀 Moutai's stock is considered a bellwether for the Chinese economy, with fluctuations in its share price having potential ripple effects across the market.
• 😀 The brand's stability is bolstered by consistent demand and limited supply, with each bottle requiring years of production and aging, contributing to its high cost.
• 😀 The company has expanded its product offerings with collaborations, such as Moutai-infused ice cream and liquor-filled chocolates, to attract younger consumers and generate buzz on social media.
• 😀 Moutai is available in over 70 countries, but it remains relatively unknown outside of China, presenting a challenge for its global expansion.
• 😀 The brand's long-term success will depend on how well it engages younger generations and penetrates international markets without losing its traditional appeal.
• 😀 Despite challenges, Moutai's financial performance remains strong, with its 2023 net profit surpassing expectations and showing resilience against broader economic pressures.

Q & A

What is Moutai, and why is it significant in China?

Moutai is a high-alcohol liquor (53%) that is widely regarded as the national drink of China. It is known for its historical significance, being associated with Chinese leadership and major political events, making it a status symbol among the Chinese elite.

How did Moutai's popularity impact its market value?

Moutai's popularity contributed to its significant market value growth. In 2021, the company's valuation surpassed China's biggest bank, reaching over $500 billion, making it the world's largest beverage company by market value.

What challenges does Moutai face in terms of consumer demographics?

Moutai faces challenges with younger Chinese consumers who are unwilling to splurge on expensive liquor, as well as international markets where the brand remains relatively unknown.

What are some unique ways people drink Moutai?

Moutai is typically consumed in small 5-6 milliliter glasses, as it is much stronger than regular spirits. The small glass allows people to sip it slowly during long banquets with multiple dishes.

How is Moutai tied to Chinese history and politics?

Moutai has deep historical roots, especially during the Chinese Civil War, where it was used by Communist soldiers. The brand became a symbol of the Communist Party, with figures like Premier Zhou Enlai and President Nixon famously sharing it during diplomatic visits.

What role does Moutai play in the Chinese luxury market?

Moutai is considered a luxury item and a status symbol in China, frequently served at political banquets and elite weddings. It is also a popular collectible, with auction prices for vintage bottles reaching astronomical sums.

How has Moutai become a popular investment asset?

Moutai is seen as a stable investment, with its shares considered a bellwether for China's stock market. The brand's stable demand and constrained supply contribute to its resilience, even during economic downturns like the COVID-19 pandemic.

Why are Moutai's prices so high, and how is scarcity a factor?

Moutai's high prices are due to its limited supply. Each bottle takes at least five years to produce and requires specific grains and a lengthy distillation process. The liquor's scarcity and unique production method keep demand high and prices elevated.

How does Moutai contribute to the economy of Guizhou province?

Moutai significantly contributes to the economy of Guizhou, where it is produced. The GDP per capita in Moutai's village is more than four times that of the US, highlighting the company's immense local economic impact.

What is Moutai doing to appeal to younger consumers?

Moutai has launched marketing campaigns targeting younger consumers, collaborating with brands to create new Moutai products like ice cream and lattes, as well as liquor-filled chocolate. These products have been popular on Chinese social media, although they represent a small portion of the company's overall revenue.

What are Moutai's international expansion efforts, and why are they important?

Moutai is attempting to grow its presence outside of China, aiming to be available in more than 70 countries. Expanding its global market is essential for future growth, as the brand cannot remain reliant solely on Chinese consumers.