---
title: "The Brutal Truth Behind Moutai's Surge: Widest Wealth Gap in Eight Years"
description: "Moutai's market value surpassed 500 billion yuan on April 13, making it the world's most valuable liquor company. While Moutai's stock has tripled since end-2013, Tsingtao Beer and Master Kong have halved, reflecting a widening wealth gap and shifting consumption patterns."
author: "New Distribution"
publisher: "New Distribution"
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published: "2017-04-15"
language: "en"
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# The Brutal Truth Behind Moutai's Surge: Widest Wealth Gap in Eight Years

> Moutai's market value surpassed 500 billion yuan on April 13, making it the world's most valuable liquor company. While Moutai's stock has tripled since end-2013, Tsingtao Beer and Master Kong have halved, reflecting a widening wealth gap and shifting consumption patterns.

Moutai is defying gravity again! On April 13, its total market value exceeded 500 billion yuan, solidifying its position as the world's most valuable liquor company.
Moutai's adjusted share price has more than tripled since the end of 2013, while Tsingtao Beer and Master Kong, once also seen as consumer giants that could weather bull and bear markets, have seen their stock prices fall sharply, even halving from their peaks.
Currently, Moutai's total market value is approximately equal to 11 Tsingtao Beers or 10 Master Kongs. At the end of 2013, Moutai's market value was only 1.36 times that of Master Kong and just over 2 times that of Tsingtao Beer. The following shows the market value changes of the three companies from December 31, 2013, to April 13, 2017.
Note that Moutai's current price-to-earnings ratio is still slightly lower than Tsingtao Beer and Master Kong, meaning if valued at the same level, the gap would be even larger.
Not only has the stock price soared, but Moutai's retail prices are also rising. And it's hard to get hold of a bottle...
Meanwhile, sales of Tsingtao Beer and Master Kong instant noodles are declining. Why is Moutai suddenly selling like hotcakes while beer and instant noodles are sliding?
This is not just about the operational performance of these three companies; there is a larger backdrop. The "wealth gap" is widening, not just in the market values of these three companies.
**Demographic Shifts: Declining Share of Young People**
The main consumer groups for beer and instant noodles are young people, while Moutai's core consumers are older on average.
According to National Bureau of Statistics data, the proportion of males aged 20-39 in China's total population fell from 16.74% in 2011 to 15.87% in 2015.
At the same time, the growth in the number of migrant workers, a key consumer group for beer and instant noodles, has plummeted, directly dragging down consumption of instant noodles and beer. The chart below, based on NBS data, shows the trend in migrant worker numbers over the years.
Meanwhile, the proportion of males aged 40-60 rose from 15.22% to 15.64%. Research indicates that this age group, often in business, is the main consumer of Moutai.
**Infrastructure Recovery and Business Activities Boost Moutai Sales**
The recovery in infrastructure and increased business banquets are also reasons for Moutai's sales growth. For a long time, business banquets and corporate gifts have supported Moutai sales.
After 2012, as anti-corruption efforts deepened, restrictions on "three public consumptions" (official banquets, official vehicles, and overseas trips), coupled with economic downturn and slowing infrastructure investment, led to weak demand for Moutai and a sustained decline in terminal prices. However, since the second half of 2016, infrastructure investment has heated up, especially towards the end of the year and early 2017, with a significant rebound in infrastructure investment and increased business activities, boosting demand for business banquets. The chart below, based on NBS data, shows the cumulative year-on-year growth of infrastructure investment (excluding power).
According to NBS data: In the first two months of this year, China's infrastructure investment (excluding power) reached 831.5 billion yuan, up 27.3%, hitting a four-year high.
In 2016, Kweichow Moutai produced about 60,000 tons of base liquor for Moutai and series products, a year-on-year increase of 18.22%. Many studies suggest that Moutai's current production can only meet about half of consumption. A previous research report by Goldman Sachs Gao Hua Securities estimated that, assuming no price increases, Moutai's sales volume would grow at a compound annual rate of 13.5% from 2016 to 2021.
**Rising Housing Prices and Rents Squeeze Consumption Capacity**
Rising housing prices and housing expenditures are squeezing the consumption capacity of low- and middle-income groups.
Statistics show that the share of housing consumption in urban residents' spending increased by 12 percentage points from 2005 to 2016, reaching 22%, more than doubling over the decade.
Huarong Securities once stated in "Rent Burden under Housing Price Pressure": The surge in housing prices and rents has significantly changed residents' consumption expenditure structure. The increase in housing consumption has squeezed out spending on food, clothing, education, and other items. People have to tighten their belts to buy and pay for homes, worsening the consumption structure.
**Consumption Upgrades, Changing Habits, and Health Awareness**
The overall decline in beer and instant noodle sales in recent years is closely linked to changing consumption habits. A Haitong Securities report shows that in 2015, over half of the food and beverage sub-industries saw production decline compared to 2014.
With increased health awareness, consumers prefer healthier foods. Statistics show that cigarette consumption has also declined in the past two years, similar to the trend in beer and instant noodles.
As income levels rise, the proportion of food in total consumption gradually decreases, affecting FMCG sales. NBS data shows that the Engel coefficient for urban households fell from 36.7% in 2005 to about 29.3% in 2016.
On the other hand, the rise of food delivery platforms in recent years has led to a surge in meal orders, also hitting instant noodle consumption among white-collar workers.
Consumers are shifting towards personalized and quality products. Even in the overall declining beer market, financial reports from Tsingtao, China Resources, and Yanjing show a significant increase in demand for mid-to-high-end products.
**Luxury Goods Rebound: Is a New Consumption Cycle Coming?**
After years of overall weak consumption, sales of luxury and mid-to-high-end products have been recovering since the second half of last year.
Research data shows that luxury clothing and footwear brands Hugo Boss and Salvatore Ferragamo saw China market (including Hong Kong and Macau) growth of 20% and 13% respectively in the fourth quarter of fiscal 2016.
Even sales of luxury cars in third- and fourth-tier cities surged in the second half of last year. China MeiDong Auto Holdings, a Hong Kong-listed company mainly selling luxury cars in third- and fourth-tier cities, reported in its annual results that Lexus, Porsche, and BMW sales grew by 79.0%, 46.3%, and 30.3% respectively, far exceeding overall sales growth, mainly due to the surge in the second half.
Even jewelry, which had been declining, has shown signs of recovery recently. Chow Tai Fook's mainland revenue increased 16% in the first quarter of 2017. After a sustained decline, same-store sales have recently risen significantly, as shown in the chart.
Moutai's rising terminal prices and record-high stock prices are indeed a barometer.
A major change is quietly taking place. Will Moutai's stock price reach 500? Will its market value exceed 600 billion? Which other mid-to-high-end consumer products will benefit in the new context? It's time to seriously consider these questions.
**Moutai's Price Increase Far Below Money Printing Speed; Widest Wealth Gap in Eight Years**
From 2013 to 2017, housing prices in first-tier cities generally doubled, while Moutai's current terminal price, though up from last year, is still far below its previous peak. The actual purchasing power of money has depreciated, and with this shift, Moutai's terminal price has effectively fallen significantly.
Relative to the ever-increasing money supply, Moutai, as a high-end consumer product, has actually become cheaper. According to central bank data, from the end of 2011 to the end of February this year, M2 money supply grew from 85.16 trillion yuan to 158.29 trillion yuan, an increase of over 85%.
In recent years, the wealthy class has risen, with their wealth growing rapidly. According to the "2015 China Private Wealth Report" and Huachuang Securities research, China's high-net-worth individuals (with investable assets of over 10 million yuan) jumped from about 300,000 in 2008 to 1.26 million in 2015, with their investable assets surging from 9 trillion to 37 trillion yuan. The wealth growth rate of the high-net-worth group far exceeds the average growth rate of national income.
Even without considering the impact of the three public consumptions, the affluent class's consumption capacity for Moutai has greatly increased, and Moutai's consumer base is expanding.
There is more and more money in society, but why do we always feel that our own money is not enough?
On one hand, it's currency depreciation.
We know that the most reliable way to measure the shrinking of our wallets, i.e., the inflation level, is not to look at the official CPI, but to calculate the M2-GDP gap.
Our GDP has been around 7% in recent years, falling below 7% last year, and will remain at a medium-to-low growth level for a long time.
On the other hand, this extra money hasn't flowed into your pocket.
In 2015, the stock market soared; in 2016, the property market surged; there were also various gray scams—P2P, private lending, equity investments in startups—and another round of property market surges this year, all driven by massive capital inflows.
The wealth gap is never a new topic in China, but this year it's worse. The Gini coefficient, used to measure wealth inequality, reached its highest level in eight years this year!
In January this year, the National Bureau of Statistics released the latest income Gini coefficient of 0.465, the first increase since 2008.
In this era, we feel unprecedented financial pressure and experience unprecedented wealth anxiety. Everyone worries: how can I prevent my wealth from shrinking further? Everyone struggles to find a capital channel to achieve upward mobility. Everyone runs to at least keep up with inflation.
Life is so difficult, but have you ever thought that this might be a good thing?
Although the wealth gap is widening, the overall increase in social wealth is also growing!
Let's look at Moutai's stock price changes over the years.
We know an "unspoken rule": Moutai is not for everyday drinking, but for gifting and entertaining.
Especially when investing or developing projects, Moutai is particularly suitable.
Therefore, Moutai's stock price has always had a certain relationship with China's infrastructure investment.
In 2013, the central government restricted "three public consumptions," and infrastructure investment declined, causing Moutai's stock price to fall that year (indicated by the green arrow).
In 2016, national infrastructure investment began to heat up, and Moutai's stock price also rose significantly (indicated by the red arrow).
According to the National Bureau of Statistics, in 2016, infrastructure investment reached 11,887.8 billion yuan, up 17.4% year-on-year, 9.3 percentage points higher than total investment.
This year, infrastructure has shown an explosive trend.
In the first two months of 2017, infrastructure investment exceeded 830 billion yuan, with investment growth hitting a four-year high. Profits in related industries such as construction machinery, cement, and coal, which had been declining for years, also rebounded strongly.
A country's infrastructure largely determines its development level and has a huge driving effect on economic growth.
Market data also confirms this: in the first quarter of 2017, many related listed companies forecast significant growth in sales or profits.
Furthermore, the successive establishment of the Xiongan New Area, the "Zhejiang-Shanghai" new area, and the "Pearl River Delta" Guangdong-Hong Kong-Macao Greater Bay Area adds infinite possibilities for China's economic future!
Domestic demand data is so impressive, and our external demand is also recovering, far exceeding expectations.
In RMB terms, March exports grew 22.3% year-on-year (expected 8%, previous 4.2%); imports grew 26.3% (expected 15%, previous 44.7%); trade surplus was 164.3 billion yuan (expected 75.8 billion, previous -60.4 billion).
Our economy is standing at the starting point of a new cycle.
And new situations mean new opportunities.
We are in an era of widening wealth gap and wealth reshuffling because we are in a new era of growth and change!
Eternal stability means eternal rigidity. Only when rules are not yet established and everything is in disorder can heroes emerge from the grassroots; once social order is established and rules are set, all capital will be distributed according to social hierarchy, with the big players taking the lion's share.
We feel unprecedented pressure and heavy burdens, but fortunately, we still have opportunities!
Looking back at China's 30 years of reform and opening up, which change hasn't elevated ordinary people?
In the 1980s, the market economy began, and the Shenzhen Special Economic Zone attracted countless young people to go south, making some ordinary people into well-known entrepreneurs of the time;
In the 1990s, manufacturing rose, and most well-known brands today were born, with a group of outstanding private entrepreneurs emerging;
In 2000, the internet emerged, and countless internet companies sprang up like mushrooms, with BAT also starting then;
In 2001, China joined the WTO, and young people who dared to venture abroad established foreign trade companies and became wealthy;
In 2010, real estate prices rose, and those who saw the trend used financial leverage to achieve financial freedom...
Every change is a wealth reshuffle, creating wealth polarization. In this process, winners and losers depend entirely on personal opportunity.
Now, China is standing at a new wind vane. Will you be the winner this time?
**<New Distribution> compiled from: Bread Finance, Mi Wealth**
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