![]() Visitors are only permitted to enter the plants that are guarded by the People’s Liberation Army after going through a lengthy approval process. Its production technique is recognised as China’s ‘national intangible cultural heritage’ and remains a commercial secret. In 2020, the company still managed to inch its revenue and net profit upward by another 6.7% and 13.5% year-on-year respectively despite the COVID-19 pandemic. Revenue and net profit have grown at a compounded annual growth rate of 23.9% and 29.8% respectively over the past 20 years because of increasing sales volume and price increments. Some of them come in different volumes so that consumers can afford them at different price points. Overall, the company carries fewer than 50 products. Its gross and net profit margins are in fact increasing, and averaged 88.5% and 39.6% over the past two decades. The economic moat is hardly eroding despite stiff competition over the years. In 2020, it owned the biggest pie of the domestic baijiu market share in China at 39.5%. Even though the company has increased its product pricing almost every two years in the past, consumers are still willing to purchase its products. Can Kweichow Moutai grow even more valuable? The quality control process is noticeably manual, and the company still relies on master blenders’ personal tastes and techniques passed down from generation to generation to produce the liquor (this could be part of the branding too). As a result, the average inventory and cash conversion cycle days for the company stand at 1,490 and 1,466 days respectively over the past 20 years. It takes typically five years to produce a fine blend of Kweichou Moutai. While this may be partly true, I believe this is partly a marketing gimmick and a way to brand Kweichou Moutai as a premium product.Īdding to Moutai’s limited supply is the long production period and laborious manufacturing processes. The product was of inferior quality according to them. The management tried to expand and replicate the production processes elsewhere in both other parts of Maotai town and China but to no avail because of the differences in climate and concentrations of micronutrients in river water. The company claims to be only able to produce the liquor in Maotai town using the water extracted from the upper reaches of the Chishui River. While the company has gradually expanded its production capacity, the supply of the liquor remains limited because of elevated consumer demand. Kweichow Moutai distillery on the banks of the Chishui River. It was served at the founding of the People’s Republic of China in 1949, and Zhou famously toasted American president Richard Nixon with the drink during the 1972 summit between the two countries. ![]() The liquor has traditionally been served at Chinese state banquets and business events, or presented as a diplomatic gift. It is often associated with the former leaders of the Chinese Communist Party Kweichow Moutai was the favourite liquor of Mao Zedong and Zhou Enlai alike. It is historically and culturally significant to the Chinese. ![]() Kweichow Moutai is commonly known as the national liquor in China despite the company’s multiple failed attempts to trademark it as such. A bottle of rare 1935 Lay Mau edition (a different type of Kweichow Moutai) was sold at a whopping US$1.55 million in 2011. Moutai tops the list of the most expensive bottle of liquor sold in China. The retail price of a half-litre bottle of Kweichow Moutai Feitian stands at about US$350. A bottle of aged Moutai that is properly stored will cost even more. ![]() Apparently, the Moutai aroma is so strong that you will notice its faint smell in the air when you arrive at the town. The company’s flagship Moutai, Kweichow Moutai Feitian (or Flying Fairy), carries a savoury aroma that is similar to fermented beans and soy sauces. Moutai is named after the town it originated from (i.e., Maotai town in Guizhou province, China). Baijiu usually contains high alcohol per volume and is well-known in China. In some other baijiu varieties, rice and wheat are used instead to give the baijiu different aromas. It is a type of distilled colourless baijiu (white liquor) that is primarily made by fermenting sorghum in brick pits. Kweichow Moutai produces and sells Moutai (or Maotai). It is currently the world’s most valuable liquor company by market capitalisation. Kweichow Moutai is publicly traded on the Shanghai Stock Exchange and is indirectly majority-owned by the Guizhou provincial government. If an investor bought shares of Kweichow Moutai at RMB6.25 at its IPO in 2001, their overall return on investment - based on a share price of RMB1,634.08 (as at 9 September 2021) and inclusive of dividends received over the years - would be 27,584%!
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