Kweichow Moutai: the most profitable company you never heard of?

Donald Verschuure
Published on
October 19, 2022

A-INSIGHTS is specialized in analyzing company figures, which captures detailed information on the activities of companies and explains the drivers behind their performance. This blog contains a combination of financials and news sources.

  • Net sales development (2021): Above Average
  • Operational profit (2021): Above Average

Two weeks ago, the (partially) state-owned company Kweichow Moutai surpassed Tencent as the most valuable (partially) publicly traded Chinese company. At the time of writing the company is worth an incredible amount of 337 billion Euros. To illustrate: that is more than the total value of Nike & Coca-Cola combined. But why has nobody outside of China heard of this enormous company and why is it one of the best performing companies in the global liquor industry?

A toast to presidential endorsements

To understand all this, we first need to understand the role of an alcoholic drink called Baijiu in China. The national spirit of China has a clear color and contains an alcohol content between 35% and 60%. It is common to “toast” with Baijiu after closing an important business deal or special occasion. And for the national party, there is only one brand of Baijiu: ‘Moutai’. It is even rumored that this was the favorite drink of Mao Zedong. He, and after him many other Chinese leaders, typically served it during state events.

In China, it is almost impossible to wish for a better advertisement and consequently, Moutai started gaining a special status. It became associated with the national party and the Chinese elite, becoming a status symbol and collector’s item next to a drink.

Incredibly high margins for Kweichow Moutai

This is the exact reason behind one of the strongest business qualities of Kweichow Moutai, their incredibly high margins within the liquor industry. The company realizes an average EBIT margin of more than 66%, which is more than 5 times higher than the global liquor industry average. Moutai is so profitable because it is able to sell their product at a large premium price. Baijiu generally comes in bottles of 500ml, and prices commonly exceed two hundred euros per bottle.

EBIT Moutai

Figure 1: Kweichow Moutai %EBIT vs. the global liquor market


Next to this, they also release limited edition bottles which are easily over a thousand euros. Last year, a crate of 24 bottles was auctioned for an incredible 1.4 million U.S. Dollars. Moutai is seeking to further improve its margins through iMoutai, its direct sales platform, which offers consumers 20% better prices than in-store. By cutting out the distributor, Moutai can realize a 54% higher price for an average bottle.

A flowing beverage demand that boosts sales

Coupled with their high margins there has been a strong increase in sales of 79.3% (CAGR: 15.7%). Driven by an increase in demand from the Chinese market (responsible for >95% of total sales). And the company is not even able to meet demand as the product can only be produced in a specific Chinese region called Guizhou Province. The specific environment in that area and the water from the Chishui river which runs there are a necessity to produce Moutai. Due to the heavy usage of the Chishui river’s water, it currently faces low upstream storage as well as pollution problems which questions if the company will be able to increase production to meet the demand.

Net Sales Moutai

Figure 2: Kweichow Moutai net sales development vs. the global liquor market

Is Moutai's future international? 

So with the success of the company also comes limitations. If the company can increase production, it will be interesting to watch if the brand can increase its foothold outside of China. The global liquor market is large and there is a demand for premium liquors: but is the Western consumer willing to pay a large premium price for a relatively unknown brand?

Find out how the rest of the beverage industry performs

Curious to see what other major players in the entire beverage industry are doing and what strategies they follow to guarantee long-term growth? Via the button below, you can download our free beverage industry report.

*For the global liquor landscape, A-INSIGHTS has analyzed the 140 largest liquor companies, with a net sales of €50 million and more.

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