- [Narrator] This is Moutai.
It's 53% alcohol, tastes like fire water,
and a bottle can cost tens of thousands of dollars.
- Moutai is the national liquor of China,
so it's many people's go-to drink.
- [Narrator] As Moutai's popularity grows,
so has its share price.
In June 2020, its surpassed China's biggest bank,
climbing to reach a valuation of over $500 billion in 2021.
Today, Moutai is the world's largest beverage company
by market value.
The company is now worth $295 billion.
That's more than double the market cap of the company
that owns Budweiser
and more than 10 times the parent company of Jack Daniel's.
But there are challenges ahead,
particularly among Chinese youths unwilling to splurge
and international consumers who know little about Moutai.
So, what's next for China's premier liquor brand?
This is the economics of Moutai.
(lighthearted music)
Before we get into the details, how do people drink Moutai?
- It'll be consumed in these tiny little
five or six mil baijiu glasses.
And the reason why it's so small
is because it is much stronger than your usual spirits,
and also because it's in such a small glass,
you can kind of sip your way
over the course of a long banquet
with many different dishes.
(group speaking in foreign language)
- [Narrator] Moutai is rooted deep in Chinese history,
earning a reputation as the drink of diplomacy.
During the Chinese Civil War in the 1930s,
communist soldiers on the run
made a stop at a village in Guizhou province,
where Moutai is made,
and reportedly used the liquor to wash their blistered feet
after trekking thousands of miles.
The story helps cement Moutai's status
as the drink of choice among the Communist Party leadership,
including Premier Zhou Enlai,
who toasted President Nixon with Moutai
during his historic visit to China in 1972.
Two years later, Secretary of State Henry Kissinger
met Zhou and said, "If we drink enough Moutai,
we can solve anything."
- Because of the fact
that it's been in so many historical moments,
so the brand awareness of Moutai is like topnotch,
which also explains why it's a status symbol.
My friends would bring Moutai to weddings.
If there's a political banquet,
then there will be Moutai served.
- Last chance 22,000.
45,000.
48,000.
(gavel tapping) Sold.
- [Narrator] Moutai is popular
among the rich and elite in China.
- Thank you. - [Narrator] This year,
Sotheby's hosted its first Moutai-themed auction.
- It has become a more prominent category
that demands its own category,
which is not an easy feat, I think.
- [Narrator] Paul Wong has been an auctioneer at Sotheby's
for more than a decade.
- So, 80% of our consumers they buy and drink
and 20% maybe they buy it,
you know, for, you know, saving up.
It's a safe buy even if you don't drink it now
because prominent brands like Moutai
will be ahead of the curve.
- [Narrator] Moutai is not only a safe choice
for collectors, but also for investors.
The liquor firm has long been considered
as one of China's bellwether stocks.
- Moutai is basically the anchor of value investing,
meaning that any fluctuations in Moutai share price
could affect the entire Chinese equity market.
It's sort of not in the official's interest
or in the investor's interest, to be honest,
to let Moutai share price fluctuate that much.
- [Narrator] Moutai shares have declined since early 2021,
amid Chinese President Xi Jinping's anti-corruption drive
and COVID restrictions.
But the stock has proved more resilient
than the broader Chinese stock market,
shown here by the country's benchmark index.
- What makes Moutai shares in general stable
despite these fluctuations
is that the demand remains pretty stable
even during COVID years.
Moutai's revenue increased,
so that kind of speaks to how stable the company is.
- [Narrator] Consistent high demand
and constrained supply is how Moutai keeps its prices high.
The cheapest bottle on the market costs about $350,
but vintage ones like this 80-year-old bottle
can go for almost $40,000.
And this lot from the 1970s smashed records
and was sold for 1.4 million.
Scarcity is what keeps Moutai expensive.
Much like champagne has to come from France
and bourbon from the US,
the liquor can only be made in this village in Guizhou.
- So the supply isn't that high usually.
A typical bottle of Moutai
takes at least five years to make.
It needs to use a specific type of grain,
which is a red color sorghum,
and then it needs to be distilled nine times
and aged three years.
So for any drop of Moutai
to go from production to the market, it takes quite a while.
- [Narrator] This seven-story statue
resembling a Moutai bottle
symbolizes the company's importance to Guizhou,
which owns Moutai.
- The GDP per capita of Moutai village
is about 310,000 US dollars,
and that's more than four times of the GDP per capita
of the entire US.
- [Narrator] Making sure the brand continues to thrive
is one of Moutai's biggest challenges.
- A brand, it's like a living entity
that always needs to be replenished.
(commercial spoken in foreign language)
- [Narrator] Moutai's consumer base has long been dominated
by older and wealthier Chinese
who appreciate the brand's historical significance
and could afford to serve bottles during formal dinners.
(commercial spoken in foreign language)
So the company launched new marketing campaigns
(commercial spoken in foreign language)
to target younger Chinese.
Over the past two years,
Moutai collaborated with newer brands,
including different flavors of prepackaged ice cream
and Moutai-infused lattes,
which went viral on Chinese social media
when it launched last September.
That same month,
the company unveiled a new partnership with Dove
to release liquor-filled chocolate.
Priced between $5 to $10,
all of them sold out quickly,
though they only accounted for less than 0.3%
of Moutai's overall revenue,
and not everyone who bought these products enjoyed them.
- (speaking in foreign language)
- [Narrator] And if they don't like it,
they probably won't be willing
to splurge $350 on a bottle.
- Because the economy is not doing very well,
so people tend to downgrade their consumption.
Previously, they might, you know,
buy luxury bottle of Moutai.
Now they're fine with just beer.
- [Narrator] Another problem facing Moutai,
it's not well known outside of China.
That's why the company
is trying to promote the brand overseas
and expand its consumer base globally.
Moutai says it's now available in more than 70 countries.
- [Presenter] We shared Moutai's smooth taste
with the world.
- [Narrator] But the brand remains obscure
in global markets.
- I think most people who tend to really enjoy Moutai
are still Chinese.
I remember in one of the stories,
one of the interviewees said like, "I really don't get it.
You know, it tastes like ethanol."
- [Narrator] If Moutai wants to continue to grow,
it needs to be less reliant on the Chinese market.
- Looking ahead, if Moutai wants to be as stable as now,
that's fine, but if it wants to expand more aggressively,
it needs to look to the younger generation
and the global audience.
- [Narrator] Moutai may have a long way to go
before it becomes a global household name,
but its dominance in the liquor industry remains.
Its annual net profit in 2023 beat market expectations,
rising 19% to $10.3 billion.
- Moutai is a very big brand.
It's almost immune to many things
that are happening in the Chinese economy right now.
It is the most valuable alcohol producer in China
and the biggest in the world
and will probably continue to be.
(gentle music)