A drinks maker has become China’s most valuable publicly-listed company, overtaking the country’s biggest bank.
Kweichow Moutai is a luxury spirit favoured by Chinese politicians and businesspeople looking to impress.
The company’s share price has risen dramatically this year, pushing its value to new highs.
Despite producing one of China’s most prestigious brands, few people will have heard of it outside of the country until now.
As its value has risen, Kweichow Moutai has leapfrogged Industrial & Commercial Bank of China (ICBC), the world’s largest commercial bank by assets, to become the country’s most valuable public company.
Its share price has rocketed more than 20% so far this year according to data from Refinitiv and it is one of the few Chinese listed companies whose share price has exceeded 100 yuan (£11, $14).
Chinese tech giant Alibaba is more valuable, but isn’t listed in China. Huawei, another well-known Chinese company, is privately owned.
Based on Monday’s closing share prices, Kweichow Moutai is currently valued at more than 1.8tn yuan. ICBC is currently worth just under 1.8tn yuan.
What is Kweichow Moutai?
Kweichow Moutai has an unusual corporate structure. It is partially state-owned and partially publicly-listed on the Shanghai Stock Exchange.
Formed in 1999, Kweichow Moutai is the world’s most valuable liquor company, having surpassed UK-based Diageo three years ago.
It manufactures and distributes a unique brand of baijiu, a clear and colourless liquor which is considered China’s national spirit.
Baijiu typically has an alcohol content of between 35% and 60% by volume.
John Watkins, an alcohol industry expert who has worked extensively in China, said: «Doing shots with Moutai is part of the business culture and accelerates building trust and friendships.»
Talking about the manufacturer, he added: «It appears from the outside to be a well-run company that will be able to generate sustainable and growing profits as China’s consumer market grows and has more and more purchasing power.»
Why is it so prestigious?
Kweichow Moutai was a favourite drink of People’s Republic of China’s (PRC) founding father Mao Zedong who famously served it at state dinners during US President Richard Nixon’s visit to China in 1972.
In 1974, the US Secretary of State Henry Kissinger told Deng Xiaoping, China’s future paramount leader: «I think if we drink enough Moutai we can solve anything.»
Such glowing endorsements made Moutai the brand of choice for the elite, a must-have at business banquets and a display of wealth and power.
«It is considered as a status symbol because of the high price and limited supply, which I believe it is part of Moutai’s marketing and sales strategy,» said David Liu, an analyst and regular baijiu drinker based in Shanghai.
Why has its share price suddenly shot up?
Shares in Kweichow Moutai have risen since the coronavirus pandemic broke out in China, while other alcohol brands have seen their values fall.
Kweichow Moutai is often drunk at home so sales have not been dented like rival brands who rely heavily on bars and clubs that have been closed during virus lockdowns.
The luxury brand is also benefitting from the US-China trade war.
«Right now, with rising patriotism from pride in how China has so far contained Covid-19 and anger at the US from Trump’s trade war, Chinese are increasingly buying domestic brands and products out of patriotism.
«This is true from sports apparel to cosmetics to alcohol,» said Shaun Rein, founder of the China Market Research Group.
He added that because Chinese can’t travel overseas on costly shopping trips to Europe, they are spending on domestic luxury consumption instead.
How much does it cost?
Buyers regularly spend about up to 900 yuan (£91, $127) for a bottle of Kweichow Moutai baijiu but the price can rise dramatically for rare and good vintages. Some bottles sell for up to $20,000.
Although distribution and price setting is heavily controlled by the Chinese government, many people buy bottles as speculative investments to hold onto and sell at a higher price.
And how does it taste? «The first time I tried Moutai it tasted like engine oil – fiery and burnt my throat on the way down. Now I find it smooth and enjoyable,» said Mr Rein.
Kweichow Moutai still has some way to go to become the world’s most valuable listed company. That title currently belongs to Saudi Aramco (Saudi Arabia Oil Company) which is valued at almost $1.9tn, according to Refinitiv.