“I had a great night out today. The dinner was awesome – we drank Moutai!” My dad declared on our weekly video call, his reddish face beaming from the other side of the screen. “Moutai makes the day.” I chuckled.
And I am not exaggerating. Kweichow Moutai (贵州茅台), a fiery hard liquor with faint soy sauce aroma, has found the key to the nation’s heart. So much so that today the company behind it stands undoubtedly as the world’s most valuable spirit maker. A colossal market value exceeding USD 420 billion dwarfs famed peer Diageo by more than four folds, despite the drink’s obscurity outside the country.
A “state liquor” worthy of red carpet
So what is Moutai?
Moutai is a premium brand of baijiu (白酒), or “white spirit” if translated literally. This clear and strong liquor type is distilled from fermented sorghum with typically high alcohol proof (from 38 to 65).
I will never forget my very first sip of it, at a Chinese new year family dinner – yes, Dan Rather was bang on the money – “drinking liquid razor blades” was exactly how I felt. And that at once became my last dabble with baijiu. Clearly millions of my fellow countrymen think otherwise. Like my dad, many consider drinking premium baijiu in shots a real treat.
Interestingly, the elevation of baijiu to national spirit over other types of alcoholic beverages can be traced back to China’s red past. Amid class struggle rhetorics in the country’s early days, wine was labelled as an example of “decadent bourgeoisie lifestyle”. In contrast, baijiu’s popularity was greatly boosted by its association with the working class.
Yet Moutai is by no means an everyday baijiu.
Its fame stretched back to the Long March and the Chinese civil war. During the critical Battle of Chishui River, which tipped over the balance of war to the communist side, the Red Army reportedly used Moutai to lift their spirits and disinfect their wounds.
Unsurprisingly, in the ensuing decades, Moutai became the hand-picked choice for state banquets and functions, thanks to the endorsement from senior party leaders, many of whom came from regions with a strong baijiu drinking culture.
As a result, generations of Chinese have grown up witnessing their leaders toasting foreign heads of states with Moutai and presenting Moutai as a diplomatic gift. Well-publicised anecdotes associating Moutai with historic events such as the formalising of US-China relations in 1972 further cement its position as the “state liquor” in the eyes of the public (Moutai did attempt to register “state liquor” as a trademark at one point though without much success).
When Deng Xiaoping met Henry Kissinger, Kissinger famously told Deng, “I think if we drink enough Moutai we can solve anything.
Nixon reportedly ignored the advice from his aides and drank the fiery liquor with Premier Zhou Enlai at the Great Hall of the People. He said, “let me make a toast with this panacea.”, after hearing Zhou recounting story of using Moutai to treat wounds during the Long March. Apparently Zhou later showed Nixon how to set Moutai ablaze at the table, an experience you can relive today at some hotpot restaurants.
Moutai 2.0
For all its remarkable history, it would be unfair to pin down Moutai’s success merely on its heritage. Lasting success is a mirage for any product. Even more so with China’s fast evolving market and fickle consumers. To stand out from the crowd as the country’s No.1 baijiu brand for decades, Moutai’s secret weapon lies in its superior storytelling.
And this ability was soon put to test in 2012, as the premium baijiu market bore the brunt of the government’s anti-corruption campaign. About 40% of Moutai’s sales, hinged on government and military spending, evaporated almost overnight after an introduction of bans and severe restrictions.
Meanwhile, a food safety scandal emerged from another premium baijiu maker, Jiu Gui Liquor Co. (酒鬼酒) in November 2012. With an excessive level of potentially toxic plasticiser found in its drinks, it further shook the market’s confidence. The timing could not have been worse – for the upcoming Chinese New Year, a traditionally peak period for purchase and consumption, the once highly sought-after Moutai saw its retail price plummet from 2000 RMB to 800 RMB per bottle. Still at this rock-bottom price, there were few willing buyers.
Yet who would have thought that the blip in 2012 proved to be a blessing in disguise. It forced Moutai to make painful adjustments to become a consumer-facing business. And as it turned out, it was pretty good at it.
Ask any baijiu drinker in China. I would bet my money on it – you would hear the same thing over and over again as if they were all reciting from a Moutai pitch book: Moutai can only be produced in Moutai town (茅台镇). Local climate and sorghum gives rise to Moutai’s distinctive flavour. Crucially, the water used in distillery comes from nearby Chishui River (赤水河), where a high concentration of micronutrients is critical in creating an unique soy sauce-like aftertaste.
So in short, it is impossible to replicate Moutai anywhere else in the world outside this small town in China’s far-flung Guizhou province (贵州省). Full stop. And the market buys it. “Give me a blind test of ten different baijiu, I can tell which one is Moutai within seconds.” That’s what my dad used to say. Sure enough, like many believers, he paid a pilgrimage to the sacred Moutai town to witness the alchemy close-up.
As a matter of fact, so powerful is this perception of rarity that it soon transformed Moutai from a consumable drink to a token of social status, wealth and power. And then finally to a tradable asset with enduring investment value. In a way, rather ironically, a product meant to represent the working class at the start eventually surpassed its supposedly “bourgeoise” wine peer in splendour and luxury.
Thriving on this unparalleled branding, Moutai, in its second life, has successfully shifted its clientele to the private sector and retail consumers. Nowadays according to the company, the percentage of its direct government exposure is estimated to have dropped to a single digit.
Don’t think it is that a big deal? Well, let me put it into perspective for you:
- Moutai’s share price went up 60 times since the listing two decades ago, churning out a large crop of “Moutai-naires”. Today it ranks as the largest domestically listed company by market value. Many view it as the “beacon stock among blue chip names and the barometer of China’s domestic A-share market”.
- As a state-owned enterprise majority owned by Guizhou provincial government, it has risen not only to be the face of its home province but also its No. 1 fiscal income contributor (18% in 2019 to be more precise). Corruption scandals aside, it helped fund local development in one of China’s poorest and most debt-laden provinces. Though some of the financial engineerings adopted, such as gifting of stocks, have raised eyebrows in the past.
Why is Moutai so expensive?
As time moves on to the more recent years, things are getting even more surreal for Moutai.
Runaway price is one. The official retail price set for its core product Feitian Moutai 飞天茅台 (53 proof) is RMB 1,499 per bottle. But in reality, it changes hands for as high as RMB 3,000 RMB (equivalent to about USD 460).
Maniac demand is another. Ever since Moutai launched a direct sale channel, millions have been eagerly queuing on various e-commerce platforms, in hope of laying their hands on a few bottles at the official price of RMB 1,499. Most were bitterly disappointed, as TMall’s (天猫) stock went literally within seconds – in some live-streaming sessions, the host barely managed to mention Moutai’s name before the bottles all ran out. In the case of Gome (国美), more than 260,000 buyers swarmed in during the Moutai launch event, crashing the app instantly.
With the Moutai craze, comes an equally bizarre Moutai trading ecosystem. Some make a living by standing in line (virtually) for others to buy Moutai. Others give up their jobs to become full-time Moutai touts. Friends shared stories with me of being approached to sell their boarding pass for RMB 500 each, as soon as they landed at Guizhou, as entitlement to purchase Moutai comes with the flight.
In response to the market frenzy, Moutai announced in November 2020 to sell close to 9 million bottles directly to the market at the official price. This speaks for a direct sale volume of more than prior three quarters combined together. Yet no amount of Moutai supply seems to be enough to quench the thirst of the market and there is no end in sight to the fights over a prized bottle.
Clearly, smart marketing can no longer explain such madness.
“People who buy Moutai never drink. Those who drink Moutai do not need to buy it. (买的人不喝，喝的人不买)”
I am sure you have figured out by now that people who fight over Moutai are not necessary like my dad. Their thirst is not for the drink, but the lucrative mark-up that can be immediately pocketed. On that account, much of the sold Moutai are not consumed at all. On the contrary, they change hands multiple times in various channels or are put in storage in wait for another price hike (the myth is that the fragrance thus the value gets better with time).
What is the portion of Moutai sold but not consumed? What will be the impact should these phantom bottles be brought to the market? No one has answer to these questions. But what I do know is that like me, many of the younger generations prefer not to drink “liquid razor blades”. Gin & tonic, cocktail, wine and healthier non-alcoholic drinks are much more in fashion. For the minority hardcore baijiu drinkers, there are plenty of other more appealing hippy brands, such as Jiang Xiao Bai (江小白).
Both Moutai and the government are not unaware of the risks of out of control speculation. In July 2020, China Daily, the government’s mouthpiece, published an article stressing that “liquor is for drinking, not for speculation or corruption”.
For the time being, both have resorted to more stringent price checks to cool down the market. The outcome has been underwhelming to say the least. With transaction value doubling the official retail price, any attempts to enforce price controls simply results in a temporary halt of trading while sending people to the black market (don’t be be alarmed if someone tries to sell you “milk” with 53 proof online!).
An increase in the official retail price to reflect market demand appear to be a reasonable solution, but as a state-owned company which needs to be mindful of political implications, Moutai’s hands are tied.
To date, the legend of Moutai has resulted in a win-win for almost everyone involved – let it be Moutai employees, Moutai town, Guizhou province, shareholders, distributors and retailers – except for people like my dad, who from time to time, do enjoy a drink or two, if he can find and afford one.
Like all China’s past fads, at the height of the craze as it is now, Moutai is revered as a liquid gold. But let’s not forget that once the hype is over, it will be back to what it is again, an alcoholic drink made of sorghum – I think my dad would be a happy bunny then.
