When sardines nearly vanished from the Monterey waters of California, traders began bidding against each other, driving up the price per can. One buyer decided to open a can to treat himself, but soon felt stomach discomfort and told the seller the sardines were bad. The seller replied, "Hey, you don't get it—these sardines aren't for eating; they're for speculation." — From Seth Klarman, 'Margin of Safety' On October 1st, while the nation focused on the National Day military parade, some were glued to Tmall. At 10 a.m., Tmall officially began selling 53-degree Feitian Moutai at 1,499 yuan per bottle, and it sold out in seconds. Wumart in Beijing released 80,000 bottles over four days, drawing thousands to queue from early morning. Similar scenes unfolded at Costco and Suning. Before the Mid-Autumn Festival, the opening of Shanghai's Costco drew massive crowds, even causing traffic jams. The 10,000 bottles of Feitian Moutai were snapped up almost instantly. Behind the instant sell-outs lies a huge gap between the market guidance price and actual retail prices. The guidance price for 53-degree Feitian Moutai is 1,499 yuan, but retail prices exceeded 2,000 yuan early this year, and by autumn many had risen to 2,300-2,500 yuan, with some areas nearing 3,000 yuan. Under appreciation expectations, many distributors hoarded stock, and scalpers joined in the speculation. There are two types of baijiu in China: one is Guizhou Moutai, and the other is all other baijiu. No other liquor triggers such massive hoarding and frenzied speculation in the secondary market as Moutai does. In May this year, Yuan Renguo, who had led Moutai for over 20 years, fell from power. Li Baofang, who had been transferred from Guizhou's Economy and Information Technology Commission less than two years earlier, became the new leader. Before the Mid-Autumn Festival, after an unannounced visit to a Moutai store, Li wisely stated: "Moutai is for drinking, not for speculation." To implement this principle and curb soaring retail prices, Moutai Group has increased supply to direct channels like e-commerce and supermarkets, offering Feitian Moutai at the 1,499 yuan guidance price. Tens of thousands of bottles typically sell out instantly. As retail prices climbed, the company's stock also hit new highs this year. On the last trading day of September 2019, Guizhou Moutai closed at 1,150 yuan, with a total market value of 1.44 trillion yuan, ranking fourth on the Shanghai and Shenzhen exchanges, behind only ICBC, China Construction Bank, and Ping An Insurance. By free-float market value, Guizhou Moutai's 1.44 trillion yuan is nearly equal to ICBC's 1.49 trillion yuan. In late September, Moutai briefly surpassed ICBC to become the highest free-float market value company on A-shares. A liquor company reaching such heights is unprecedented globally. Guizhou Moutai's 1.44 trillion yuan total market value dwarfs other baijiu companies. Excluding Moutai, the other 16 listed baijiu firms have a combined market value of only 1.13 trillion yuan. These include Wuliangye, Yanghe, Luzhou Laojiao, Shanxi Fenjiu, and Gujing Gongjiu. In April 2018, Yuan Renguo attended the Boao Forum for Asia and, when asked by the host, said that as Moutai's chairman, he dared not call Moutai a great company, only that it was getting closer to being one. Over the past four years, while the Shanghai Composite Index fell over 40% from its peak, Guizhou Moutai's stock rose over fourfold. This baijiu company from the mountains of Guizhou has become the global leader in sales revenue, profit, and market value, indeed "closer to a great company." However, greatness is no longer relevant to Yuan Renguo. In May this year, Yuan was investigated and fell. Official statements said he used Moutai's distribution rights as a tool for building connections and exchanging interests, engaging in political climbing, and indulging in power-money and power-sex transactions. A liquor company boss entangled with power, money, and sex is a uniquely Chinese phenomenon. Among China's famous liquors, Moutai's history is relatively short. Although some claim that during Emperor Wu of Han's reign, the Nanyue Kingdom (around today's Renhuai County, where Moutai Town is located) already produced wine, Moutai Town truly began producing liquor during the Jiajing period of the Ming Dynasty. The Moutai distillery site, called Yangliuwan, has a furnace built in the 8th year of Jiajing (1529). The donor list includes "Dahe Shaofang." "Shaofang" was an old term for a distillery, suggesting Moutai Town began producing liquor about 500 years ago. Later, Renhuai suffered repeated military disasters and destruction. Moutai Town revived and began batch production during the Jiaqing period of the Qing Dynasty. According to the old "Zunyi Prefecture Annals," during the Daoguang era, "there were no fewer than twenty distilleries in Moutai, consuming no less than 20,000 dan of mountain grain." A poem described the scenery: "Moutai's fragrance is richer than oil; friends call for a boat. Drunk by the green waves, unnoticed; an old fisherman wakes them as the moon hooks." This shows the leisure class was already boating and drinking on the Chishui River. During the Xianfeng and Tongzhi periods, due to the suppression of the Taiping Rebellion and Miao uprisings, Qing troops devastated Moutai Town, severely impacting liquor production and market prosperity. Before liberation, three major distilleries existed: Chengyi, founded in 1863 by Hua Lianhui; Ronghe, founded in 1873 by Wang Lifu; and Hengxing, established in 1929 and later bought by Guizhou financier Lai Yongchu. These three produced what were later abbreviated as Hua Mao, Wang Mao, and Lai Mao. If Moutai relies only on this brewing history to talk about lineage and heritage, Fenjiu, Gujing Gongjiu, Luzhou Laojiao, and Wuliangye would all laugh. Fenjiu: One of China's oldest famous liquors. During the Northern Qi (550-577 AD), Fenjiu was already treasured. According to the "Book of Northern Qi," Emperor Gao Zhan recommended it: "I drink two cups of Fenqing here; I urge you to drink two cups in Ye." Fenjiu is produced in Xinghuacun, Fenyang. By the Tang Dynasty, poems like "May I ask where the tavern is? The shepherd boy points to Xinghuacun" show Fenjiu's fame spread nearly a thousand years before Moutai. Wuliangye: Produced in Yibin, Sichuan, with over 1,200 years of documented history. From Tang to Song, it produced wines like Zhongbi, Lizhi Lu, Chunbi, and later Yaozi Xuequ. The company has ancient cellars used continuously for over 400 years, something Moutai cannot match. Gujing Gongjiu: The distillery in Bo County, Anhui, has a long history; its ancient well is over 1,400 years old. Since the Wanli period of the Ming Dynasty, it was offered as tribute to the imperial court in both Ming and Qing, hence the name "Gujing Gongjiu" (Ancient Well Tribute Wine). Luzhou Laojiao: Luzhou in Sichuan has a history of quality baijiu, most famous for Luzhou Laojiao. The oldest cellars date to the Ming Dynasty, with the 1573 cellar being the longest continuously used in China. There are also many Qing-era cellars, far surpassing Moutai. Other liquors like Xifeng, Jiannanchun, Yanghe Daqu, and Quanxing Daqu also have longer histories than Moutai. In modern liquor history, Moutai has no significant advantage either. One notable event: In 1915, Moutai won a gold medal at the Panama-Pacific International Exposition. This medal is frequently cited in Moutai's marketing. When Guizhou Moutai listed in 2001, its prospectus mentioned this: "In 1915, at the Panama-Pacific International Exposition in San Francisco, the Ministry of Agriculture and Commerce of the Beiyang government sent liquors from Chengyi and Ronghe distilleries under the name 'Moutai Brewing Company,' collectively called Moutai wine. At this exposition, Moutai was rated a world-famous liquor and won a gold medal and certificate." Moutai did win a gold medal, but its significance is far less than imagined. The exposition celebrated the opening of the Panama Canal, ran from February 1915 for nine and a half months, with over 18 million visitors. The Chinese delegation was led by Chen Qi. The exposition had six award levels: Grand Prize, Medal of Honor, Gold, Silver, Bronze, and Honorable Mention. The gold medal was actually third-class; the true first prize was the Grand Prize. In the liquor category, Moutai and Xifeng won gold medals. Four Chinese entries won Grand Prizes: Zhili Gaoliang Wine, Henan Gaoliang Wine, Guangdong Fruit Wine, and Shanxi Gaoliang Fenjiu. Yes, you read that right: among currently produced famous Chinese liquors, Fenjiu won the real Grand Prize, while Moutai got a third-class equivalent. Moutai and Fenjiu have even argued over this. Later, some companies claimed lineage. For example, Hengshui Laobaigan said the Zhili Gaoliang Wine was theirs, and Baofeng Wine claimed to be the Henan Gaoliang Wine. Everyone wants to claim ancestral glory. The exposition story isn't over. At the time, Moutai Town sent liquors from two distilleries with rustic labels: "Moutai Village Ronghe Distillery" and "Moutai Village Chengyi Distillery." The Renhuai county official cleverly combined them into one product, repackaged as "Moutai Brewing Company." After the rebranding, they won the gold medal. Then came the question: who owns the medal? The two distilleries sued over it. In 1918, Governor Liu Xianshi ruled that the gold medal was shared. What truly established Moutai's national status was not that medal; otherwise, Fenjiu, with its Grand Prize, would be the top choice for banquets today. Moutai's current position owes much to its so-called "red gene." The story goes: In January 1935, the Central Red Army arrived in Moutai Town. With fewer than 30,000 troops, they were preparing to cross the Chishui River for the third time to evade hundreds of thousands of enemy troops. In Moutai Town, they encountered Moutai liquor. With ample stock, the soldiers drank freely; some even used it to wash their feet to relieve fatigue. The Red Army stayed only two days, but those days changed Moutai's fate. In the 2005 book "Zhou Enlai and National Liquor Moutai," Mao Zedong is quoted: "Moutai is a place famous for its wine; it's a pity to use it for washing feet." Zhou Enlai said, "Comrades, this is the Moutai that won the gold medal at the Panama-Pacific Exposition." At the founding of New China, many who had drunk in Moutai Town stood on Tiananmen Gate to celebrate. Because of the Long March connection, Premier Zhou had a special fondness for Moutai. He was also a connoisseur. It is said that Moutai was chosen for the founding ceremony's state banquet. (Note: photo of Moutai exhibition hall) Fenjiu later claimed that the founding banquet used Fenjiu, not Moutai, because Moutai was remote and limited in supply. However, soon after, Moutai became the state banquet liquor, an indisputable fact. Zhou later used Guizhou Moutai at formal diplomatic events for Ho Chi Minh, Nixon, and Kissinger. When superiors favor something, subordinates follow. Moutai's status as a high-end liquor was thus established. If a different premier who didn't appreciate liquor had been in charge, or if the Red Army had passed through Xinghuacun and used Fenjiu, or Sichuan and used Quanxing Daqu, Moutai's fate might have been entirely different. Sometimes you think it's about strength and history, but it's also about luck. After liberation, when Moutai appeared at state banquets, the three distilleries' fates changed dramatically, like many private enterprises. In February 1951, Ronghe owner Wang Bingquan was executed on charges of banditry for refusing public-private partnership, and the distillery was confiscated. In November, the Renhuai government bought Chengyi for 130 million old yuan (13,000 new yuan). Hengxing owner Lai Yongchu was sentenced to 10 years in July 1952 for allegedly stealing national gold. In December, Hengxing was confiscated. "The innocent man suffers for his treasure." Thus, the three private distilleries became state-owned, renamed Guizhou Province Moutai Distillery in 1953, the predecessor of today's Moutai Group. After 1949, five national liquor evaluations were held. Moutai was always named a famous liquor, but it didn't dominate others like Fenjiu or Luzhou Laojiao. The first evaluation in 1952, organized by the Ministry of Light Industry, named only four famous liquors: Moutai, Fenjiu, Luzhou Daqu, and Xifeng. The most influential was the second in 1963, which named eight: Wuliangye, Gujing Gongjiu, Luzhou Laojiao Tequ, Quanxing Daqu, Moutai, Xifeng, Fenjiu, and Dongjiu—the "Old Eight." The second evaluation was stricter, with all samples sealed and blind-tasted. Wuliangye ranked first; Moutai only fifth. Hong Kong's "Ta Kung Pao" reported the results. An incident occurred: Premier Zhou was abroad and used Moutai to entertain foreign journalists, calling it China's best liquor. A journalist, aware of the report, said the best was now Wuliangye. According to Zhou Henggang, who presided over the evaluation, the Premier asked the Light Industry Minister to explain upon his return. The ministry re-evaluated the samples blind, with the same result: Moutai's quality had indeed declined. Under Zhou's instructions, Zhou Henggang went to Moutai to improve quality. The ministry held further evaluations in 1979, 1984, and 1989, expanding the list. Only Moutai, Fenjiu, and Luzhou Laojiao (including Luzhou Daqu) were selected in all five. Xifeng, Wuliangye, Gujing Gongjiu, and Dongjiu were selected four times. Jiannanchun, Yanghe Daqu, and Quanxing Daqu were also selected multiple times. Moutai was far from dominant. After 1949, Fenjiu led the industry for a long time. In the early 1980s, Luzhou Laojiao was the top brand, with annual sales exceeding the combined sales of Sichuan's other "Five Golden Flowers" (Wuliangye, Langjiu, Tuopai Qujiu, Quanxing Daqu, Jiannanchun). Guizhou Moutai had small output and years of losses. In 1978, output was 1,068 tons, first exceeding 1,000 tons. In 1985, output reached 1,265 tons, with output value of 11.65 million yuan and profit of 5.76 million yuan—the first profit in over a decade. In July 1988, the State Council decided to liberalize prices for famous cigarettes and liquors, allowing companies to set prices based on market supply. Thirteen famous liquors were included: Moutai, Wuliangye, Langjiu, Luzhou Tequ, Gujing Gongjiu, Yanghe Daqu, Shuanggou Daqu, Quanxing Daqu, Jiannanchun, Dongjiu, Fenjiu, Xifeng, and Special Huanghelou. This decision profoundly changed the industry. Fenjiu seized the opportunity, expanding capacity to become the largest base for famous liquor by 1985. From 1988 to 1993, Shanxi Fenjiu led in sales and profits for six consecutive years, earning the title "Fen Old Master." After price liberalization, Fenjiu adopted a strategy of "famous liquor affordable to the people," raising prices then voluntarily lowering them. Luzhou Laojiao also misjudged, with director Wang Mingzao proposing a "from famous to popular" strategy, cutting prices to embrace consumers. Price wars usually expand market share, but not for high-end liquor. Years later, when Moutai and Wuliangye used "limited supply to maintain prices" and dominated the high-end segment, Fenjiu and Luzhou Laojiao realized their mistake. In China, drinking is serious business; lower prices mean lower status. After price liberalization, Wuliangye became the biggest beneficiary. In 1994, under veteran director Wang Guochun, Wuliangye raised prices three times, becoming the top baijiu. In 1998, after a fourth increase, it became the most expensive famous liquor. The next year, it was served at the 50th anniversary celebration of New China. For over a decade, Wuliangye was the king of baijiu, with Moutai as a follower. In 2003, Wuliangye's annual sales were 6.33 billion yuan; Moutai's were 2.4 billion. A bottle of 53-degree Feitian Moutai cost about 200 yuan, tens of yuan cheaper than Wuliangye. Wuliangye later made a series of mistakes. Under a large distributor system, it launched many sub-brands like Wuliangchun, Jinliufu, Wuliangchun, and Panda Wine. These mid-to-low-priced wines boosted revenue but damaged Wuliangye's high-end brand image. Moutai, in contrast, focused on a high-price route and a super single-product strategy. Since 2000, Feitian Moutai has raised prices 10 times, with ex-factory prices rising from 218 yuan to 969 yuan per bottle. During 2013-2014, restrictions on "three public consumptions" hit the high-end liquor industry. Wuliangye fluctuated prices, while Feitian Moutai maintained an ex-factory price of 819 yuan and strictly forbade distributors from discounting. Moutai also excels at storytelling: it can only be made in Moutai Town, the Chishui River's mysterious microbes, long production cycles, and limited base liquor capacity. In short, even industrial products gain market appeal with mystique or scarcity. Wuliangye and Luzhou Laojiao also talk about microbes, ancient cellars, and pit mud, like Coca-Cola's secret formula—all marketing tactics. In 2005, Wuliangye's revenue was 6.3 billion yuan; Moutai's was 3.01 billion. But Moutai's net profit reached 850 million yuan, surpassing Wuliangye for the first time. In 2006, Feitian Moutai's retail price exceeded classic Wuliangye; the next year, its ex-factory price also surpassed it. In 2008, Moutai's revenue hit 8.24 billion yuan, while Wuliangye's was 7.93 billion. This was the first time Moutai overtook Wuliangye in both revenue and net profit. The Wuliangye era ended; Moutai became the new king, widening the gap with others. In 2018, Moutai's revenue reached 77.2 billion yuan, with net profit of 37.8 billion. Wuliangye's revenue was 40.03 billion, net profit 14.04 billion. Since 2017, Moutai's net profit alone exceeded the combined net profit of the other 16 listed baijiu companies (including Wuliangye, Yanghe, Shanxi Fenjiu, Luzhou Laojiao, Gujing Gongjiu). Other financial metrics also show Moutai's dominance. From 2009 to 2018, Moutai's average gross margin was 91.5%, and net margin 47.1%. The other 16 listed companies had gross margins of 61.7% and net margins of 16.5%. Over the decade, Feitian Moutai's ex-factory price rose from 439 yuan to 969 yuan, a bit more than double, but Moutai's revenue grew sevenfold. Growth came from price increases but mainly from volume. In 2009, output was 9,800 tons; in 2018, 32,500 tons—more than tripling. This is Moutai's true power: prices rise, yet sales increase. In recent years, other baijiu companies like Wuliangye, Shanxi Fenjiu, Luzhou Laojiao, and Yanghe have also seen volume and price rise together. Some say baijiu is the best track in A-shares, and Moutai is its king. A simple calculation: Feitian Moutai's ex-factory price is 969 yuan. With a 91.5% average gross margin, the cost is about 82 yuan. The official guidance price to distributors is 1,499 yuan. But outside monitored channels, actual retail prices range from 2,300 to 2,500 yuan, sometimes near 3,000 yuan. Terminal prices are 30 to 40 times the cost. Driving the retail surge is not just consumer demand but investment demand. Expectations of price increases, plus limited base liquor capacity this year and next, fuel hoarding and further price rises. In October 2010, Zhao Jun, an analyst at Xiangcai Securities, proposed: "Moutai is not only gold, but surpasses gold." He wrote, "Moutai is not just high-end liquor; from an investment perspective, it's sometimes gold, even surpassing gold. As long as Moutai's high-end status in China's baijiu industry remains, its investment value will be hard to change." This was perhaps the earliest discussion of Moutai's investment attribute. Since then, whenever terminal prices surge, Moutai's investment appeal is often cited by fans, like its moat. Price hike expectations also boost Moutai's stock. This year, the baijiu sector performed well; Moutai's stock doubled, though less than Wuliangye and Fenjiu. By end-September, Guizhou Moutai's market value of 1.48 trillion yuan ranked fourth among all A-share listed companies. Even including Tencent (Hong Kong) and Alibaba (US), Moutai ranks in the top ten among Chinese listed companies by market value. Wuliangye ranks eleventh, ahead of major blue chips like Bank of Communications, Yangtze Power, PICC, China Shenhua, Hengrui Medicine, Midea, and Gree. Among the top 20 A-share companies, two sell strong liquor. "Empty talk harms the country; drinking liquor prospers the nation." In contrast, the US top 20 includes 7 tech companies (Microsoft, Apple, Amazon, Facebook, Google), 4 financial firms, plus retail, chemicals, oil, and entertainment. Coca-Cola ranks 23rd with a market value of $231.6 billion. Moutai's market value is just one limit-up away from Coca-Cola's. Coca-Cola has billions of consumers globally; Moutai's regular consumers number at most a few million. Yet in valuation, the Eastern divine water has caught up with the Western divine water. China is indeed a magical country. Over a decade ago, when Yuan Renguo led Moutai, he set a goal to catch up with global spirits giant Diageo. Diageo has a long history and famous brands like Johnnie Walker and Crown Royal. Now, Moutai's market value exceeds the combined value of the world's top three spirits companies: Diageo, Pernod Ricard, and Brown-Forman. This is a high point for Moutai and China's baijiu industry. As long as optimism prevails, Moutai's lofty retail prices and stock seem to have no reason to fall. But when a bottle costing 82 yuan sells for nearly 3,000 yuan, the seeds of a bubble are already sown. A reversal has happened before. In 2012, 53-degree Feitian Moutai with an ex-factory price of 819 yuan was speculated to 2,300 yuan per bottle and hard to find. But after the "three public consumptions" restriction, prices fell below 1,000 yuan within a year, leaving hoarding distributors devastated. History may not repeat exactly, but human history shows bubbles eventually burst. The baijiu kingdom has no permanent master. Source: Pang Guan Zhe Qing (ID: pangguanzhe_qing) Tips will be paid 400-2000 yuan upon adoption. China FMCG + Internet Professional New Media Dedicated to FMCG manufacturer transformation and channel digital solutions