Kweichow Moutai is China’s, and the world’s, most valuable alcohol company by market capitalisation, and is expected to surpass the value of any mainland-traded company ever. Its success is tied to China’s economy and culture, and a growing pride in the nation. It has also featured extensively in China’s political life.

Kweichow Moutai is a maker of baijiu, which translates literally as “white liquor”, a sorghum-based spirit long-favoured at business meetings and official banquets. The brand in question has been in operation since 1951, the merger of three distilleries based in the town of Moutai, Guizhou province in southwest China. Its proof is a punchy 53%.

Part state-owned and part publicly-traded, it has a close relationship with China’s history. According to the South China Morning Post, Moutai (pre-merger) was served at the founding of the People’s Republic of China in 1949. In 1972, premier Zhou Enlai served it to visiting US president Richard Nixon. Henry Kissinger told Deng Xiaoping that “I think if we drink enough Maotai we can solve anything,” the New York Times reported in 2008, in an article detailing the product’s decline. Things are different now.

Oddly, for a brand operating in the super-premium segment of the market, the story of Kweichow Moutai’s recent success is based on graft, or President Xi Jingping’s much-publicised efforts to battle it. Xi ordered the crackdown soon after coming to power in 2012.

“Fanfu”, as it’s known in Mandarin, hit the elite hard. Communist Party officials had to reduce their travel and cut down on delicacies like shark’s fin, expensive club membership, and ultra-premium booze. Outrageous displays of wealth were suddenly extremely risky.

One key brand at the centre of this was Kweichow Moutai, which, according to the Singapore Straits Times, at its peak in 2012, half of its sales came from government-related consumers. Across the baijiu market, an estimated 70% of ultra-premium baijiu was going to either the government or the military. Fanfu had a significant effect on the product’s price, which tumbled to less than half its peak price.

Earlier that year, Baijiu had seen a major moment. Diageo, the British multinational drinks company became the controlling stakeholder in the Shuijingfang brand. A rare example of a western company taking control over a Chinese brand. By 2013, sales had dropped by 78%, forcing Diageo to write down the brand’s value by US$446 million. It had focussed too heavily on the collapsing super-premium segment. In 2017, Moutai grew larger than Diageo by market capitalisation.

Five years later, analysis from drinks analyst Bernstein shows how the Baijiu market has completely changed. Where government and army officials once accounted for 70% of sales, that proportion plunged to 10%, while individuals began to take 70%, with the remaining 20% being business based. This new affordability has been crucial to burgeoning interest.

However, it’s the provenance that has gone a long way in limiting supply and sending demand skywards. According to reporting from the South China Morning Post, the town’s particular microclimate, the locality of the ingredients, and the five-year manufacturing process keeps its core product’s prices high. It is also attracting international interest, with auctioneer Christies publishing a guide to Moutai on its website.

One anonymous senior member of the company explained that “people’s income has skyrocketed and we will never be able to match the rapidly increasing demand because Maotai is an affordable luxury and a very important piece of the social and business cultures of China.”

Styled as the country’s national drink, the company has also started to invest in marketing communications and sponsorship in order to reach new consumers as it further diversifies its consumer base. Witness, for instance, its tie-up with the Italian top-flight football club, Inter Milan.

Analysts now expect the company to soon break the 1,000 yuan share price barrier. “I can’t see any growth cap on the company in the long run, unless the Chinese don’t drink one day”, says Dai Ming, a fund manager at Hengshen Asset in Shanghai. “The liquor culture is deep-rooted in China and when you do business here, you drink. It’s a product with demand outstripping supply, so growth is quite visible.”

Its first quarter profits for 2019 rose by 30% year-on-year. It is both a luxury collectors’ item and a growing tipple of the middle classes. It is a unique phenomenon. Looking ahead, its fate requires the company to start selling abroad as well as in China, and it aims to export 10% of its product in future, despite shortages. As long as the supply remains low, demand shows no signs of slowing.

South China Morning Post, New York Times, Straits Times, Just-Drinks, YT Sports, WARC