When Costco opened its first store in China in 2019, it wasn’t just the hot roast chickens and discounted Birkin bags that drew frenzied crowds.
A fiery, throat-tingling liquor called Kweichow Moutai also flew off the shelves.
At 1,498 yuan, or $ 299 for a half-liter bottle, it might not sound like the kind of bargain Costco shoppers tend to go for, but in this case, it absolutely was.
That price represented a huge discount over Moutai sold elsewhere – that is, if he could get his hands on it. The spirit of luxury is so beloved in China that it quickly sold out.
Even in the midst of a global pandemic, Kweichow Moutai, the company that makes the liquor of the same name, had a banner year: Its shares rose about 70 percent on the Shanghai Stock Exchange in 2020.
The partly state-owned and partly publicly traded company is China’s most valuable company outside of technology, worth more than the country’s four largest banks.
Globally, its market capitalization has not only surpassed all other alcohol distillers such as Diageo and Constellation Brands, but also Coca-Cola, which has long held the crown as the world’s largest beverage maker by capitalization of market.
Valued at 2.7 trillion yuan, or $ 540 billion, Kweichow Moutai is also worth more than Toyota, Nike and Disney.
“As long as they have stock [of the product] available, it will disappear almost instantly, “said Ben Cavender, managing director of the Shanghai-based China Market Research Group.
“You will see people crying out [for it]. “
Aside from the Chinese diaspora, however, Moutai remains virtually unknown abroad. Almost all, about 97 percent, of its sales come from China alone, according to its financial reports.
So how is it that a company that sells its products primarily in one country is now worth more than some long-standing global giants?
And can Kweichow Moutai, which is described by some Westerners as “liquid razor blades for drinking,” attract non-Chinese consumers?
From historical icon to status symbol
Moutai has an unmistakable advantage: the drink is the national spirit of China.
Moutai baijiu, the type of liquor the company makes, is a clear, potent liquor that has been called “fire water,” thanks to the fact that it is 53 percent alcohol.
The red and white bottles of its flagship product “Feitian” or “Flying Fairy” are a staple at Chinese state banquets and corporate events.
Known as the favorite drink of Mao Zedong, founder of Communist China, and as the “drink of diplomacy,” it was used to welcome former US President Richard Nixon on his historic trip to China in 1972, and again in 2013 when Chinese President Xi Jinping met with his US counterpart, Barack Obama, in California.
Once, at a state dinner in 1974, US Secretary of State Henry Kissinger told Deng Xiaoping, the future Chinese leader: “I think if we drink enough Moutai, we can solve anything.”
“So when I return to China, we must take steps to increase our production,” Deng replied, according to an archived transcript from the US government.
Being a part of so many major public events in China “really put the brand on the national consciousness,” said Cavender, who compared it to another giant beverage maker, Coca-Cola, in that regard.
“That’s the same reason that Coca-Cola has performed so well from a marketing perspective. If you look at the way they have advertised for the past 50 years, they are at almost every big event. You will see Coca-Cola when the Berlin Wall falls. You see Coca-Cola ads at Christmas. I think Moutai is that brand for China, and I think that part explains why it is so popular. “
Some say that the story goes even further back in the tradition of the Communist Party.
During the Red Army’s “Long March” in China in the 1930s, soldiers used to pour Moutai on the feet to help disinfect wounds, Chinese state media reported, citing a former army lieutenant general.
Legend has it that members of the Red Army even used to resort to drinking to knock themselves out before surgery, said Hao Hong, head of research at BOCOM International, the securities arm of the Bank of China Communications.
“It is a story [that goes around]”, said.” They had no anesthesia. So they had to use Moutai as a numbing drug [people] of surgery “.
Today, the brand is seen more as a luxury status symbol than for its “red” roots. Some customers do not buy it to drink, but to keep it as an investment.
The limited-edition boxes are collected and displayed by international auction houses, such as Christie’s, which says that some bottles can cost more than $ 40,000 each.
Moutai has found a way to be “accessible to many regular consumers, at least for special occasions,” while at the same time also offering collectibles that reach the ultra-rich, Cavender said.
“That’s something that makes Moutai, I think, different from a lot of the international beverage brands,” he said.
It has also been a huge advantage during an economically difficult year: Wealthy consumers who spend less on travel can splurge more on liquor, Cavender added.
A representative for Moutai declined requests to be interviewed for this story.