---
title: "Why Kweichow Moutai Became the World's Most Valuable Luxury Company?"
description: "Kweichow Moutai recently surpassed a market value of one trillion yuan for the first time, and with adjusted prices, its A-share price has surged about 80 times from its IPO price of 31.39 yuan in 2001 to a record high of 2535.06 yuan. Beyond its market value, Moutai has also achieved international prominence, surpassing LV to become the world's most valuable luxury company. This article explores the reasons behind Moutai's continuous growth and development since its establishment."
author: "麦克"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-01-21"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/gCZL4OpLAbKKqkgLaRm6UQ"
translation: "https://xinjignxiao.com/zh/articles/%E8%B4%B5%E5%B7%9E%E8%8C%85%E5%8F%B0%E4%B8%BA%E4%BD%95-%E7%81%AB-%E6%88%90%E5%85%A8%E7%90%83%E6%9C%80%E5%A4%A7%E5%B8%82%E5%80%BC%E5%A5%A2%E4%BE%88%E5%93%81%E5%85%AC%E5%8F%B8-8421f92e.md"
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# Why Kweichow Moutai Became the World's Most Valuable Luxury Company?

> Kweichow Moutai recently surpassed a market value of one trillion yuan for the first time, and with adjusted prices, its A-share price has surged about 80 times from its IPO price of 31.39 yuan in 2001 to a record high of 2535.06 yuan. Beyond its market value, Moutai has also achieved international prominence, surpassing LV to become the world's most valuable luxury company. This article explores the reasons behind Moutai's continuous growth and development since its establishment.

Recently, Kweichow Moutai surpassed a market value of one trillion yuan for the first time. Calculated on a 'post-adjusted' basis, Moutai's A-share price has surged about 80 times from its IPO price of 31.39 yuan in 2001 to a record high of 2535.06 yuan. Moutai's 'heat' is not just about market value; it also includes international status. Now, Kweichow Moutai has surpassed LV to become the world's largest luxury company by market value.

In a highly competitive market environment, any success is hard-won. So, why has Kweichow Moutai been able to achieve continuous development and growth since its establishment? How did Moutai Group successfully build the 'Kweichow Moutai' as a giant baijiu brand? How did Moutai make the Chinese market return to a 'planned economy' era, where even with money it's hard to buy liquor? Who 'ignited' Moutai's stock market, making it 'hot' to the 'top of the world'? Standing at the 'highest peak', how should Moutai develop in the future?

Development and Growth
As a provincial-level state-owned enterprise, Kweichow Moutai receives policy support from local and central governments, and has had stable orders from enterprises and government (before the 2012 'Eight Regulations'), laying a solid foundation for its survival and development. Since the reform and opening-up in 1978, China has implemented extensive economic system reforms, encouraging the development of mixed-ownership economy. Under this macro-economic background, Kweichow Moutai also underwent institutional reforms, with cross-holding of public and non-public capital enhancing its market competitiveness. In August 2001, Kweichow Moutai was listed on the Shanghai Stock Exchange, and the market began to play an important guiding role in its development direction. 'One important support' and 'two major reforms' are the fundamental reasons for Moutai's continuous growth.

Quality and Brand
As is well known, 'making good quality is easy, but building a brand is hard.' Fortunately, Kweichow Moutai has a good reputation both domestically and internationally.

To build a brand, quality comes first. Moutai uses water from the Chishui River, which is slightly sweet and free of dissolved impurities. Due to its unique water quality, Premier Zhou Enlai even ordered that the upper reaches of the Chishui River be closed to development and factory construction. If water quality alone determined Moutai's special taste, then Moutai Group could store and transport large amounts of Chishui River water and build branch factories to expand production. However, since its establishment in 1953, Moutai has only had one production base in Maotai Town, Renhuai County, Guizhou Province. The brewing of Moutai also requires the special natural environment and climatic conditions of Maotai Town. The special basin topography and climate conditions dominate the fermentation and maturation process of the liquor, and also play a decisive role in the production, enrichment, and reduction of microorganisms that contribute to the aroma components. The special natural production conditions ensure the quality of Moutai while also laying the groundwork for the market phenomenon of 'supply far less than demand'.

In terms of brand promotion and publicity, Moutai has done better than any other baijiu brand in the world. Moutai was designated as the 'national liquor' the day after the founding of New China, and since then it has been the official liquor for state receptions. The year after the establishment of the Moutai factory (1954), Premier Zhou Enlai brought Moutai to Geneva, Switzerland, and showcased it at the Geneva Conference. At the dinner celebrating the 10th anniversary of Hong Kong's return in 2008, President Hu Jintao toasted with Moutai. In addition to national 'assistance' in promotion, Moutai itself has invested heavily in brand building and promotion. Unlike other commercial brands, Moutai uses 'giving back to society' as a way to build and promote its brand. According to incomplete statistics, Moutai donated 36.1 million yuan for the Wenchuan earthquake, 20 million yuan for the Ya'an earthquake, 5 million yuan for the Yushu earthquake, and donated a total of 200 million yuan to the Hope Project twice to support 40,000 poor students' college dreams.

With the soaring price of Moutai, various 'counterfeit Moutai' products have emerged in the market. During the 3·15 period in 2017, Moutai Group issued a public announcement: only Moutai produced by 'Kweichow Moutai Co., Ltd.' can be called Moutai. In addition, common products like 'Moutai internal supply liquor', 'State Council special liquor', and 'military special supply liquor' are counterfeit and infringing products. To prevent counterfeit products from devaluing the Moutai brand, Moutai Group has implemented numerous anti-counterfeiting measures, which is also one of the reasons for strictly controlling product sales channels.

Relying solely on the domestic market is not enough to make Moutai a true international brand. To spread Moutai worldwide and enhance its international influence, Moutai needs to expand into international markets. Since the day after the founding of New China, Moutai has participated in many international beverage competitions and has become one of the world's three major distilled spirits, alongside 'Scotch whisky' and 'French Cognac'. Its products are exported to Asia, Europe, Africa, and the Americas.

Channels and Supply
In China, gold jewelry stores are numerous, making it easy to buy gold, but offline Moutai specialty stores are hard to find. Even if you find one, it's difficult to verify whether it has official authorization. It's really hard to buy authentic Moutai! Why is it so difficult to buy Moutai even with money? To ensure the quality and brand of Moutai, Moutai Group strictly controls sales channels (designated channels for product flow). However, everything has two sides. Although Moutai Group designates distribution channels, it cannot control how all agents sell Moutai to 'real consumers'. Because Moutai is a special beverage (high alcohol content, no expiration date), it gives many agents and distributors the opportunity to 'hoard and speculate'. Some agents and distributors firmly believe that the ex-factory price of Moutai will only increase, and aged Moutai will become more valuable over time. Not only agents and distributors hoard, but also many consumers who don't drink alcohol follow the trend and buy large quantities of Moutai for collection. They fill their shelves and then store boxes under the bed. So many people joke about Moutai Group: 'People who buy Moutai don't drink it, and people who drink it can't buy it.' The shortage in the Moutai market is not only due to human factors; large exports, production capacity lagging behind market demand, and insufficient channel supply are also important reasons.

Stock Market and Price
Why can Kweichow Moutai, which makes a 'single baijiu brand', have a market value of one trillion? Who contributed to Moutai's trillion-dollar market value? The decisive factor is the vast number of Chinese consumers. China is a populous country with a huge demographic dividend, and some domestic consumers have a characteristic: they only buy expensive goods (believing price equals status). For example, there is a popular ice cream brand in China - Häagen-Dazs (with the slogan: 'Love her, treat her to Häagen-Dazs'). Häagen-Dazs is a top-tier ice cream brand in China, with a 200ml cup typically priced over 100 yuan (about $15.7). In the US, Häagen-Dazs is a common brand with no connection to 'status', and a 450ml cup typically costs less than $4.5 (about 28 yuan). Seeing Häagen-Dazs's 'huge success' in China, many Americans in China complain: 'Do you have to treat her to Häagen-Dazs to show love?'

Many agents have also contributed to the soaring market price of Moutai. Although Moutai Group sets the ex-factory price and the selling price for first-tier agents (with price contracts between Moutai Group and first-tier agents), there are no price contracts between first-tier agents and second-tier agents. When second- and third-tier agents raise prices based on market supply and demand, Moutai Group cannot control the final selling price. The surge in Moutai's market value is closely related to the overly concentrated shareholding of Moutai Group's shareholders. The top ten shareholders hold a total of 74.98% of Kweichow Moutai's shares, with only 25% of shares circulating in the market. If fund holdings not in the top ten are excluded, the circulating shares would be even fewer. Over-concentration of shares leads to fewer dispersed shares, creating a 'scarcity effect' in the market and causing the stock price to soar. The rise in Moutai's stock price is also related to speculation by 'vested interests' (those with supply and inventory) who hype up Moutai prices. For example, those with connections at Moutai specialty stores buy up all available stock upon arrival, creating a false impression of extreme scarcity. In summary, the rise in Moutai's price and stock market is the result of the combined actions of consumers, shareholders, and merchants.

Attitude and Differences
Although Moutai Group has been trying to 'suppress' the market price of Moutai, it has not unified the ex-factory prices domestically and internationally. For example, a bottle of Moutai priced at 1990 yuan on the official website is priced at only $153 (about 979 yuan) in New York, nearly half the price.

Even though Moutai Group can enjoy export tax rebate subsidies (making the international ex-factory price relatively reasonable compared to domestic), Moutai entering the US market also has to pay tariffs (costs would be higher than domestic). The fact is that after tariffs, the price of Moutai in the US is still much lower than in China, which is contrary to the attitude of many American companies towards international markets (e.g., Häagen-Dazs is much cheaper in the US than in China).

Planning and Future
Deng Xiaoping once said: 'Science and technology are the primary productive forces.' Since it cannot expand branch factories, to solve the problem of supply shortage, Moutai Group must continuously increase investment in science and technology to improve productivity. Second, it should focus on channel reform. Although Moutai Group has opened online channels, guided 2800 agents to join the cloud business, and stipulated that agents must sell no less than 30% of their total goods through the cloud platform with guided prices, the cloud business still cannot change the Moutai distribution network. Even if agents do not comply with the 30% directive (even if you can make an appointment online, you may not be able to buy), Moutai Group has no practical solution. Moutai Group should strengthen online channel construction; only through channel reform can it prevent the 'bubble economy phenomenon caused by scarcity'. Third, it should continue to expand sales markets.

After the 2012 'Eight Regulations', Moutai's consumer market also shrank (government and enterprise orders decreased). Expanding the market is also a problem that Moutai Group needs to solve. Finally, strict control over production technology is necessary. Even if it cannot guarantee that the liquor will become more fragrant with age, it must prevent the aroma from deteriorating; otherwise, it would be a 'disaster' for Moutai Group.

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