Kweichow Moutai, the Highest Capital Value Company in Chinese A share Stock Market

In China, drinking Baijiu (Chinese Liquor or Spirits) is a traditional culture for thousands years history. Along with this culture, lots of Baijiu brands were born to satisfy different people’s needs, for example, Kweichow Moutai for sauce fragrance, Wuliangye and Luzhou Laojiao for strong aromatic, etc. 

As the most famous Baijiu brand in China, Moutai stands out from its  peers as a high-end luxury brand, prized as a gift and as a treat for special occasions.So far, the stock price of Moutai has reached CNY 1668, and the total of the market capital value is CNY 2.1 trillion, Moutai has become the highest capital value company in Chinese A share Stock Market.

Why Kweichow Moutai has the previlege to win the crown in Chinese A share Stock Market? 

There are three reasons from my perspectives.

Firstly, Moutai has a very successful brand story. 

Since its gold prize in 1915 at the Panama-Pacific Exposition in San Francisco, Moutai shares the title of the world’s top 3 distilled liquors with Cognac brandy from France & Whisky from the Scottish Highlands. this multiple award winning and high-end spirit was named China’s superior liquor in 1951, two years after the founding of the People’s Republic of China. It has become the ultimate gift for special people & various celebrations. It is the only alcoholic beverage presented as an official gift by Chinese embassies in foreign countries and is used on many official occasions with foreign heads of state.

In every Chinese people’s mind, Moutai is the No. 1 National Liquor of China.

Secondly, scarcity supply made Moutai high-end luxury.

It is said Moutai spirit can only be made in Moutai Town,  which is located on the east bank of the Chishui river that rises between 420 and 550 meters above sea level. Because of its unique geological location, with a special micro-climate and the presence of the clear & pure Chishui water , the Moutai spirit gets its distinctive and multi-dimensional flavour. 

The Moutai spirit is made from a mix of locally produced red sorghum (a small grain rich in tannins), wheat and water. It is 100% organic without the addition of any artificial additives.

From the selection of ingredients to the delivery of the finished product, the production cycle takes 5 years, passing through no less than 30 processes and 165 different procedures.

The Moutai spirit is manually cultivated following the lunar calendar and the art of the production is passed on from generation to generation. Every production cycle takes 1 year.

Any attempts to replicate Moutai spirit elsewhere, have failed. The environment and ancient methods have created an irreplacable product !

Last, Massive demand made Moutai like cash printing machine.

As I have said, drinking Baijiu (Liquor and Spirits) is a traditional culture for thousands years history in China, Chinese has the unique Baijiu flavor. If people gathering or sending gift for special occasions, Moutai is the first option.

All the three reasons above promote Moutai achieve great financial performance. 

Since Moutai has massive demand and luxury brand, Moutai has the pricing power, the retail price grew at 20.17% CAGR from 2015 to 2019. 

Another one is the gross profitability, which represents the moat of company. The following graph shows the gross profitability of Moutai is more than 90%, and the revenue grew fast. 

So, it’s easy to see Moutai unique advantages: the high-end luxury brand, wide moat, pricing power, and that’s why Moutai has the highest market price and the highest capital value in Chinese A share Stock Market

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