If a business wants to make a splash in the global market, it needs to gain a stranglehold over the stock exchange. Kweichow Moutai Co. Ltd, the distillery behind China’s national spirit, knows that better than most. Having already ousted Diageo from the top of the tree as the world’s most valuable liquor manufacturer in 2017, Kweichow Moutai is now the biggest public company in China.
The popularity of Moutai appears not to have been impacted by Coronavirus, with the share sales increasing by 23% in 2020. This means that Kweichow Moutai Co. Ltd boasts a share value of some £205 billion. For comparison, the biggest bank in the nation – the Industrial and Commercial Bank of China – boasts a share value of ‘only’ £200 billion.
Coronavirus has had a significant impact on countless industries, but hospitality has arguably been hit hardest. Social distancing regulations have led to worldwide shutdowns of bars and hotels, which has naturally had a knock-on effect on the alcohol trade. Baijiu sales overseas were already struggling, and now it appears that India may stop consuming the spirit due to political differences with China.
India does not have a liquor to call their own. While baijiu is as synonymous with China as vodka is with Russia, the Indian market settles for replicating traditional European recipes. These spirits are referred to as Indian-made foreign liquor, aka IMFL. The distributor VBev India, however, brought Jiangxiaobai baijiu into the nation some seven months ago.
Whiskey is by far the most popular spirit in India, accounting for around 75% of liquor sales. Indian nationals were starting to develop a taste for baijiu, however. That’s according to Sumedh Singh Mandla, CEO of VBev India, who described the Chinese spirit as having a tropical taste comparable to pineapple.
It’s no secret that baijiu is big business in China. A successful distillery of this spirit can turn an enormous profit, and if floated on the stock exchange, the prospects are even better. This has not escaped the attention of Dr. Wang Junlin, a master investor that has reversed the fortunes of countless baijiu brands in the Sichuan province.
Dr. Junlin is the majority shareholder of the Sichuan Langjiu Group Co. Ltd, manufacturers of the Langjiu baijiu. Dr. Junlin has a hand in 76.7% of Langjiu’s shares, whether directly or otherwise. Despite parting with some 70 million shares, he remains in possession of 68% of the company.
As a result of the sale of these shares, however, Langjiu is set to be listed on the stock exchange. Other baijiu brands already hold this distinction, including Wuliangye, Shede Wine, Luzhou Laojiao and Shui Jing Fang. The presence of Dr. Junlin in this deal is interesting though, as he is believed to be the wealthiest man in the liquor industry. Dr. Junlin’s personal net worth is believed to top £1.5 billion.
Dr. Junlin enjoys a stellar reputation in the realm of Sichuan wine. Born in Renshou in 1967, Dr. Junlin studied at the Southwestern Medical University (then known as Luzhou Medical College) to earn his medical degree. In the early 1990s, Dr. Junlin also held the position of director of Chengdu Enwei Group Research Institute.
In 1992, Dr. Junlin took on a new career path. He began work at the Pharmaceutical Factory, an enterprise owned by the Luzhou state, as a Director. The factory was struggling financially at the time, with an annual income of just £220,000. Dr. Junlin oversaw privatisation that ensured this income rose to a staggering £50 million.
Baijiu is a source of cultural fascination in China, and distilleries are hoping to replicate this overseas. Cheng International, one of the biggest distributors and importers of baijiu, are taking this ball and running with it. As of July 2020, a four-part online masterclass aimed at the British alcohol trade will unfold over Zoom.
The course will be led by Qiqi Chen, the Managing Director of Cheng International, and the aim is simple. Chen is looking to educate western audiences about baijiu. This includes the baijiu production process, the history of baijiu, and its importance to Chinese culture – both contemporary and ancient.
Naturally, there is also a sales element at play. The masterclass is designed to show that baijiu can be a big seller within the European spirit trade. Lessons on concocting the perfect baijiu cocktail will also be provided, as will insights into pairing baijiu with the perfect meal. Samples will also be provided at a cost, of which £5 of every sale will be donated to The Drinks Trust.
If you are a part of the alcohol industry in the UK and would like to attend this masterclass, the first session is free for the initial 100 sign-ups. Point your browser to www.bomci.chengintl.co.uk to reserve your place. If you’re unavailable, don’t worry too much. You’ll find everything you could ever wish to know right here on www.baijiublog.com too.
Issues with lorries and heavy goods vehicles on the motorway are no fun at all, often leading to lengthy traffic jams and delays. Spare a thought for the driver that spilt hundreds of boxes of Moutai from his delivery in Shanghai. Not only is this city famously busy, but his cargo was truly precious.
It appears that the driver was attempting a U-turn in the Changning District, one of the most populous parts of Shanghai. In doing so, the side of the truck opened. Over a thousand crates of Moutai proceeded to tumble into the road.
So far, so unfortunate. Accidents happen. Sadly, the driver’s production line is unlikely to be quite so understanding. When we consider that the average bottle of Moutai retails for around £100, that potentially is six figures of lost revenue spilt on the streets of Shanghai. Throw in the prestige of this spirit and you have a recipe for a storm.
Chinese liquor giant Kweichow Moutai Co plans to expand into the health tonic liquor market by partnering with Xiuzheng Pharmaceutical Group. The two companies have signed a strategic partnership agreement to start cooperation production and sale of the liquor. The two companies also plan to set up a joint venture.
Moutai Chairman Yuan Renguo said health tonic liquor was a major new business of the company during the 13th Five-Year Plan (2016-20), in response to surging demand for health-related products.
Lockdown has taken its toll on a number of relationships throughout the world, as couples are forced into closer proximity than ever before. China is no exception, with divorce rates spiking dramatically when the country came out of quarantine.
With this in mind, spare a thought for a now-infamous aircraft passenger known only as, “Ms. Li.” Li was a passenger on Loong Airlines Flight 8528, transporting travellers from Xining Caojiabao in Qinghai to Hangzhou Xiaoshan International in Zhejiang. Ms Li was visibly upset, weeping openly in her seat.
It was believed that she was intoxicated … and so it proved to be. Ms. Li had drunk around half a litre of baijiu before boarding the plane, in the form of two 250 ml bottles.
No matter how ironclad your constitution and tolerance may be, that’s a powerful amount of alcohol. The explanation offered was that her partner had ended their relationship, seemingly immediately prior to the plane departing, and Ms. Li was determined to drown her sorrows.
Unfortunately, things took something of a turn. Upset by the news, and powered by baijiu, Ms. Li began a display of strength comparable to a comic book superhero. As her distress grew, she managed to physically smash an airplane window in mid-flight. Thankfully just the first layer was impacted, so nobody was hurt – including Ms. Li.
As the Coronavirus pandemic continues to rage throughout the world, individual nations are taking steps towards life after COVID-19. Unsurprisingly, China is currently furthest into this process. Acting as Ground Zero for the virus, dealing with its consequences longer than any other country, China has managed to get infection rates under control according to news coming out of China.
As we all know, however, we still need to Be Alert. China is looking at how to reduce the risk of a new, even more decimating wave of the infection. One suggestion, in particular, has caught the eye – and, if enacted, it will have significant ramifications on the baijiu industry.
The city of Hangzhou, located in the Zhejiang province, introduced health codes at the peak of the Coronavirus crisis in February. These codes were installed on citizen’s cell phones via a QR code. In order to enter Hangzhou, individuals were asked to reveal their recent travel history and any potential health conditions they lived with.
The worldwide economy has taken a drastic hit in 2020 following the impact of Coronavirus. It’s arguable that that China has suffered as has the rest of the world, acting as Ground Zero for the events that dominate our headlines. China now seems to be emerging from the COVID-19 nightmare – with baijiu manufacturers leading the charge toward economic recovery.
Wuliangye Yibin Co Ltd owns a major distillery based in the Sichuan province of China’s southwest. The business, best known for its eponymous Wuliangye strong aroma baijiu, has made significant investment into the foundations of the distillery. In excess of £1billion has been sunk into improving infrastructure, ensuring that the strong demand for baijiu from Chinese nationals will be matched by increased production capacity.
Why Moutai commands such a premium price?
There are a number of factors that affect the price of Moutai, below we will highlight the main events in history that are primarily responsible for lending to the aura, mystique and romance created around the Moutai baijiu brand.
Maotai or Moutai which it is also known, is more than just a spirit in China. Maotai is part publicly traded and part state-owned producer and is the world’s most valuable liquor brand by market valuation.
The perception of Moutai is everything
In reality, Moutai’s flavour is not drastically different from any other sauce aroma baijiu brand. It’s not necessarily the tastebud-tantalising properties of Moutai that create such a stir. It’s more the perspective of quality and prestige. To gift a bottle of Moutai, whether as a token of esteem of an act of gentle conviction (some might say soft bribe!) is to show a demeanour of wealth and taste.
In many respects, this is a triumph of marketing and reputation management. There is an aura of wonder and mystery that sounds Moutai. In addition, there is the favouritism for this baijiu brand displayed by the powers that be. This is the spirit served at all state banquets, ensuring that it retains the official seal of approval of China’s ruling classes.
How Moutai Rose to Prominence
Moutai is marketed as the national spirit of China (albeit not officially trademarked as such.) This really became the case in 1949, when Chairman Mao rose to prominence. Mao and his comrades toasted the founding of the People’s Republic of China with Moutai. Perhaps that was because it was the tipple of choice of Zhou Enlai, the Chinese premier and Mao’s second-in-command.
Either way, Moutai has been served and shared at all state banquets since the 1950s. Countless political leaders of all stripes from around the world – including Richard Nixon and Kim Il Sung – have enjoyed this famously potent spirit. US Secretary of State Henry Kissinger was a particular fan, announcing at a peace summit in 1972 that, “I think if we drink enough Maotai, we can solve anything.”
The production process of Moutai was modernised in the 1950s. Chairman Mao dispatched emissaries to the USA to learn how traditional spirits were made in the west. Bringing these learnings home to China, three distilleries – producing a trio of different baijiu brands, Ronghe, Hengxing and Moutai – were merged. An iconic brand was forged from the ashes, and the ascent of Moutai began in earnest.
This distillery is state-owned and operated, too. This means that every yuan earned through Moutai sales puts money back into the central coffers of the nation. When we also consider that Moutai is publicly traded on the stock exchange – and is the most valuable liquor brand in the world – sales at high prices can leave China in a healthy financial position. This does not leave the authorities with any real motivation to drop the price of Moutai. After all, the popularity of the product ensures that it will sell anyway. Why not charge a premium and reap the rewards foir the state?