KWEICHOW MOUTAI: How do you make $300 billion
by selling liquor? Well, the answer is by getting the CCP or the Chinese Communist Party addicted
to it and charging them a fortune. This probably sounds quite daunting and borderline impossible,
but that’s precisely what a company called Kweichow Moutai has managed to do.
That name probably doesn’t ring a bell but Kweichow Moutai is actually the 25th largest
company in the world with a market cap of $307 billion. For perspective, that’s more than Coca
Cola and Pepsi which means that Kweichow Moutai is the largest beverage company in the world.
In fact, they’re almost the largest food company in the world as well, only beaten out by Nestle.
They’re also the 2nd largest Chinese company only beaten out by Tencent. This is no doubt
quite impressive, but when you take a look at how much Moutai costs, it all makes sense. A single
bottle of Moutai costs anywhere between $300 to $44,000 depending on the age. For a 500 ml bottle,
this translates to 60 cents to 88 dollars per ml. For perspective, even human blood only costs 39
cents per ml. And that’s just normal moutai. It’s not uncommon to hear about vintage Moutai selling
for more than a million dollars. This has allowed Kweichow to grow to $20 billion in revenue and $13
billion in net profit every single year with a net margin of over 53% but it wasn’t always
like this. In fact, just 20 years ago, the entire company was barely pulling in $200 million worth
of revenue and $75 million worth of profit. This means that within a matter of 20 years, Kweichow
has managed to grow 100 to 200X which is very much reflected in the stock price which has run up as
much as 290X. Even if you bought Google at IPO, you would’ve only gotten a 50X return. So, how
Kweichow Moutai went from a boutique distillery to being the world’s largest beverage company with
a drink that tastes like rotten cabbage? Well, the answer is a bit of deception, some powerful
connections, and a lot of brilliant marketing. So, here is the insane story of Kweichow Moutai.
THE FALSE ORIGIN:
Taking a look back, Kweichow is by no means a heritage company. In fact, the current version
wasn’t even created till the end of 1999 but the same cannot be said about Moutai which according
to some sources dates back over 2000 years to 135 BC. This was during the rise of the Han Dynasty
not to be confused with the Huns from Mulan. The Han Dynasty is one of the strongest dynasties in
China’s history having ruled over much of modern day China for over 4 centuries. Many of the
traditions and cultures that we now associate with China today can be traced back to the Hans. So,
it wouldn’t be surprising if Moutai was also popularized by the Hans. The story goes that
a diplomat from the Western Han dynasty named Tang Meng would travel to an independent kingdom named
Nanyue back in 135 BC. During this trip, Tang would apparently enjoy a drink which he brought
back to the Han Dynasty. According to legends and Kweichow’s own history page, this is the origin of
Moutai. But, what if I told you that all of that was a facade, a legend popularized by Kweichow
for marketing purposes. You see, according to historical scholars and records, there was indeed
a man named Tang Meng who traveled to Nanyue back in 135 BC. There’s even evidence that he did enjoy
a drink there but this drink was not Moutai, it was Jujiang. So, the reality is that Moutai is no
where near that ancient but it’s in Kweichow’s best interest to convince people that it is. A
lot of the appeal of Moutai is that its what the greatest Chinese people of history drank and its
the drink of China. This ideology and Chinese pride is what really sells the drink because
the drink itself is vile and putrid and I can’t understate that. In fact, here are some reviews.
“Imagine rotten cabbage, ethyl alcohol, and paint thinner, blended and strained.”
“The first time I tried Moutai it tasted like engine oil.” “I’ve never met anybody, even at
the heights of alcoholic derangement, prepared to admit that they actually liked the taste.” None
of these reviews are that surprising though when you consider that Moutai is 53% alcohol. So yeah,
Moutai is a terrible tasting drink that has nothing to do with the Han dynasty. The real
roots of Moutai actually go back to the much more modern Qing dynasty who were in power
between 1644 and 1911. Sometime during this period, some northern Chinese distillers would
apparently introduce some advanced techniques to create a distinctive type of Baiju known as
Moutai. But again, this is mostly just fluff. The reality is that the invention of Moutai
was unceremonies and largely unknown because it wasn’t really an invention to begin with. These
northern Chinese distillers were simply making classic liquor using the climate and ingredients
that they had access to. It just so happened that this climate and these ingredients gave the liquor
a unique taste which has since become the iconic taste of Moutai. So, while Kweichow likes to claim
that Moutai is some sort of magic juice with a 2000 year history, Moutai is actually just some
random local drink with a terrible taste. But, none of this would hold back Moutai in the 1900s.
CHINESE PRIDE:
Like with many popular products, the popularity of Moutai has more to do with
optics than intrinsic value. And the optics of Moutai can be traced back to 1915 to the
Panama Pacific International Exposition. The exposition was held in San Francisco and is one
of the most monumental events in American history. 9 years before the exposition,
San Franciso experienced the worst earthquake in history estimated to be a magnitude of 7.9. This
exposition was designed to show that not just San Francisco but all of America was willing
to fight through and recover from anything. As such, this exposition would be marketed like
never before and attracted a whopping 18 million people. The exposition showcased some of the most
advanced tech of the time like America’s first transcontinental telephone call. In one corner
of this grand exposition, there an exhibit for Chinese Moutai. While no where near as impressive
as a transcontinental telephone call, Moutai was no doubt a heavy weight when it came to liquor.
The aroma and taste was something that the rest of the world had never experienced. This
not only made them popular at the exposition but they would straight up win a gold medal,
establishing China’s presence on the world stage. This was the first time that Moutai was linked to
Chinese pride but it was by no means the last. The event that would certify Moutai as a hood classic
was the Chinese Civil War between 1927 and 1949. This war was fought between the Republic of China
backed by the United States and the Chinese Communist Party backed by the Soviet Union.
The army of the CCP is referred to as the People’s Liberation Army and the story goes
that Moutai is what led this army to victory. Apparently, Red Army soldiers drank Moutai
to lift their spirits and disinfect their wounds during the battle of Chishui River.
This battle turned out to be the turning point of the bloody 22 year long war leading to the CCP’s
victory. And as this battle become legendary so did Moutai. Now, to be clear, we don’t even
know if these soldiers used Moutai but that’s the story that’s propagated by Kweichow Moutai
and the CCP alike. After the war, the CCP would double down on this image, advertising that Moutai
was the favorite drink of the Chinese leader Mao Zedong. But, it wasn’t just Mao who enjoyed this
drink. Pretty soon, Moutai became quite popular with foreign leaders as well. Likely the most
notable instance of this was with President Richard Nixon in 1972. Thanks to the Cold War,
China and the US were basically sworn enemies up until this point. So, this meeting between Richard
Nixon and Chinese leader Zhou Enlai was very much unprecedented. And to celebrate this monumental
event in Beijing, the CCP would of course serve Moutai. We don’t know what President Nixon thought
about the drink but his secretary of state, Henry Kissinger, was much more vocal. He said
​​“I think if we drink enough Moutai we can solve anything.” This event cemented Moutai as not just
the drink of the CCP but as the drink of the elite leading us to the modern day Kweichow Moutai.
AN EMPIRE:
Over the next few decades, Moutai transitioned from being a pride thing to being a status symbol.
It was the drink of millionaires and billionaires and if you were hosting someone important,
serving them Moutai was the standard but there was no standard brand. While all Moutai came from
the city of Moutai, there were several brands that you could choose from until 1999. In 1999,
the CCP would consolidate all of the most notable Moutai distilleries into one state
owned enterprise called Kweichow Moutai. While this created a monopoly, it wasn’t a very big
deal. It’s not like Apple and Google were merging. Rather, it was a bunch of local distilleries who
barely had a combined revenue of $200 million. But then, how did such a small operation become
the world’s largest beverage company? Well, the answer isn’t rocket science. One look at
China’s GDP graph will explain a lot. Back in 1999, China’s GDP stood at $1 trillion. Today,
China’s GDP stands at $17.7 trillion meaning that China’s GDP has grown 17X. For perspective,
America’s GDP has only grown about 2.5X during the same time period. So, Kweichow Moutai has
acted as a sort of index for Chinese wealth and the power of the CCP. In fact, the vast
majority of Moutai is consumed by the government officials. In 2012, it was estimated that half of
all sales came from government related customers. President Xi has tried to fight against on this.
One of the first things he did after coming to power in 2012 was crackdown on the spending of
CCP officials. This did momentarily reduce the price of Moutai but it has since recovered which
just goes to show powerful the brand really is but it’s not all good news. For one, Moutai is
only relevant within China. In fact, 97% of all of Kweichow’s revenue comes from China alone.
While westerners often try the drink when visiting China, they rarely pick it up as a
habit because it tastes like “drinking liquid razor blades”, not to mention the price. But,
it’s not just westerners who are shying away from Moutai. China’s youth isn’t so fond of
the drink either primarily because of the taste and association with older generations.
Currently, the core demographic for the liquor is 40 to 60 year old men. So, only time will tell if
Moutai will survive through generations but as for the imminent future it’s not going anywhere.
In fact, in late 2022, Kweichow briefly overtook Tencent to become China’s largest company period.
So, there’s really no question that Kweichow Moutai has basically become
the expensive alcoholic Coca Cola of China, and that won’t be changing anytime soon.
A BRAND:
In the end, it’s easy to dismiss Kweichow Moutai as some sort of bougie company that
sells ridiculously priced liquor to China's elite. But, when we peel back the layers,
it’s clear that Kweichow Moutai and more specifically Moutai itself is much more than that.
It’s really a testament to the power of branding. Objectively speaking, Moutai has virtually nothing
going for it. It’s a byproduct of random Chinese city’s climate and resources. But,
through the power of narrative, story telling, and branding, Kweichow Moutai has made Moutai into
a Chinese icon. They were able to tie together random events from over 2000 years ago to modern
events that hit close to home like the Chinese Civil War and Mao Zedong. And while there may
be a longer term trend away from Moutai just like there is with soda, Moutai is by no means going
anywhere but up anytime soon. And that is how you make $300 billion by getting the CCP drunk. Would
you pay $300 for a bottle of Moutai? Comment that down below. Also, drop a like if you would like to
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