Moutai closes in on Diageo's crown

Kweichow Moutai is poised to steal Diageo's crown as the world's most valuable alcoholic drinks firm.

The state-owned luxury brand of baijiu (which literally means "white liquor"), set a new intra-day price record at the end of last week, hitting 359.78 yuan during trading on the Shanghai Stock Exchange.

Its share value climbed more than 53% in 2016 to a market capitalisation of US$60.5billion, while Diageo is valued at US$65billion.

Not quite sure what it is? Here's what Dan Murphy's has to say about the spirit: "Kweichow Moutai is the most revered of Chinese liquors. Primarily consumed as a celebratory drink, its aroma and taste are reminiscent of soy sauce, pear, walnut and almond."

Kweichow Moutai, 
Industry analysts believe its value will continue to surge in 2017.

“The new year price rally may be triggered by anticipated demand growth in the upcoming Chinese Lunar New Year holidays,” Wang Ying, an analyst for Hua Chuang Securities, told South China Morning Post. “It’s a traditional peak season for liquor consumption in China, in particular high-end liquor.”
China's luxury liquor sector has seen an industry-wide surge in share prices, with suppliers already raising prices in anticipation of sales growth during Chinese New Year.

China’s baijiu industry experienced a resurgence in 2015/16, following a slump in 2012/13 as a result of the government’s anti-extravagance drive in the country.

Kweichow's flagship product, the 500ml 53% alcohol Feitian Moutai, has seen its retail price jump 30% to around 1,200 yuan per bottle, compared with the first half of 2016.

Rising inflation in 2017 is expected to increase the brand's appeal even further.

“One of Moutai’s attributes is its investment value,” Chen Songkun, an analyst for Industrial Securities, said. “Individual consumers and franchisers usually stock up on the brand when expectation for inflation increases.”

Citic Securities analysts Dai jiaxian and Chen Mengyao agreed: “It should be noted that Chinese premium liquor products are alcoholic beverages with high alcohol content. This makes it possible to keep them in storage for long periods of time and they are believed to taste even better with age.”

They noted that the investment return on vintage Moutai products is “quite impressive” and trading is very active.