It's 53% alcohol, tastes like fire water,

and a bottle can cost tens of thousands of dollars.

- Moutai is the national liquor of China,

so it's many people's go-to drink.

- [Narrator] As Moutai's popularity grows,

so has its share price.

In June 2020, its surpassed China's biggest bank,

climbing to reach a valuation of over $500 billion in 2021.

Today, Moutai is the world's largest beverage company

by market value.

The company is now worth $295 billion.

That's more than double the market cap of the company

that owns Budweiser

and more than 10 times the parent company of Jack Daniel's.

But there are challenges ahead,

particularly among Chinese youths unwilling to splurge

and international consumers who know little about Moutai.

So, what's next for China's premier liquor brand?

This is the economics of Moutai.

(lighthearted music)

Before we get into the details, how do people drink Moutai?

- It'll be consumed in these tiny little

five or six mil baijiu glasses.

And the reason why it's so small

is because it is much stronger than your usual spirits,

and also because it's in such a small glass,

you can kind of sip your way

over the course of a long banquet

with many different dishes.

(group speaking in foreign language)

- [Narrator] Moutai is rooted deep in Chinese history,

earning a reputation as the drink of diplomacy.

During the Chinese Civil War in the 1930s,

communist soldiers on the run

made a stop at a village in Guizhou province,

where Moutai is made,

and reportedly used the liquor to wash their blistered feet

after trekking thousands of miles.

The story helps cement Moutai's status

as the drink of choice among the Communist Party leadership,

including Premier Zhou Enlai,

who toasted President Nixon with Moutai

during his historic visit to China in 1972.

Two years later, Secretary of State Henry Kissinger

met Zhou and said, "If we drink enough Moutai,

we can solve anything."

- Because of the fact

that it's been in so many historical moments,

so the brand awareness of Moutai is like topnotch,

which also explains why it's a status symbol.

My friends would bring Moutai to weddings.

If there's a political banquet,

then there will be Moutai served.

- Last chance 22,000.

45,000.

48,000.

(gavel tapping) Sold.

- [Narrator] Moutai is popular

among the rich and elite in China.

- Thank you. - [Narrator] This year,

Sotheby's hosted its first Moutai-themed auction.

- It has become a more prominent category

that demands its own category,

which is not an easy feat, I think.

- [Narrator] Paul Wong has been an auctioneer at Sotheby's

for more than a decade.

- So, 80% of our consumers they buy and drink

and 20% maybe they buy it,

you know, for, you know, saving up.

It's a safe buy even if you don't drink it now

because prominent brands like Moutai

will be ahead of the curve.

- [Narrator] Moutai is not only a safe choice

for collectors, but also for investors.

The liquor firm has long been considered

as one of China's bellwether stocks.

- Moutai is basically the anchor of value investing,

meaning that any fluctuations in Moutai share price

could affect the entire Chinese equity market.

It's sort of not in the official's interest

or in the investor's interest, to be honest,

to let Moutai share price fluctuate that much.

- [Narrator] Moutai shares have declined since early 2021,

amid Chinese President Xi Jinping's anti-corruption drive

and COVID restrictions.

But the stock has proved more resilient

than the broader Chinese stock market,

shown here by the country's benchmark index.

- What makes Moutai shares in general stable

despite these fluctuations

is that the demand remains pretty stable

even during COVID years.

Moutai's revenue increased,

so that kind of speaks to how stable the company is.

- [Narrator] Consistent high demand

and constrained supply is how Moutai keeps its prices high.

The cheapest bottle on the market costs about $350,

but vintage ones like this 80-year-old bottle

can go for almost $40,000.

And this lot from the 1970s smashed records

and was sold for 1.4 million.

Scarcity is what keeps Moutai expensive.

Much like champagne has to come from France

and bourbon from the US,

the liquor can only be made in this village in Guizhou.

- So the supply isn't that high usually.

A typical bottle of Moutai

takes at least five years to make.

It needs to use a specific type of grain,

which is a red color sorghum,

and then it needs to be distilled nine times

and aged three years.

So for any drop of Moutai

to go from production to the market, it takes quite a while.

- [Narrator] This seven-story statue

resembling a Moutai bottle

symbolizes the company's importance to Guizhou,

which owns Moutai.

- The GDP per capita of Moutai village

is about 310,000 US dollars,

and that's more than four times of the GDP per capita

of the entire US.

- [Narrator] Making sure the brand continues to thrive

is one of Moutai's biggest challenges.

- A brand, it's like a living entity

that always needs to be replenished.

(commercial spoken in foreign language)

- [Narrator] Moutai's consumer base has long been dominated

by older and wealthier Chinese

who appreciate the brand's historical significance

and could afford to serve bottles during formal dinners.

(commercial spoken in foreign language)

So the company launched new marketing campaigns

(commercial spoken in foreign language)

to target younger Chinese.

Over the past two years,

Moutai collaborated with newer brands,

including different flavors of prepackaged ice cream

and Moutai-infused lattes,

which went viral on Chinese social media

when it launched last September.

That same month,

the company unveiled a new partnership with Dove

to release liquor-filled chocolate.

Priced between $5 to $10,

all of them sold out quickly,

though they only accounted for less than 0.3%

of Moutai's overall revenue,

and not everyone who bought these products enjoyed them.

- (speaking in foreign language)

- [Narrator] And if they don't like it,

they probably won't be willing

to splurge $350 on a bottle.

- Because the economy is not doing very well,

so people tend to downgrade their consumption.

Previously, they might, you know,

buy luxury bottle of Moutai.

Now they're fine with just beer.

- [Narrator] Another problem facing Moutai,

it's not well known outside of China.

That's why the company

is trying to promote the brand overseas

and expand its consumer base globally.

Moutai says it's now available in more than 70 countries.

- [Presenter] We shared Moutai's smooth taste

with the world.

- [Narrator] But the brand remains obscure

in global markets.

- I think most people who tend to really enjoy Moutai

are still Chinese.

I remember in one of the stories,

one of the interviewees said like, "I really don't get it.

You know, it tastes like ethanol."

- [Narrator] If Moutai wants to continue to grow,

it needs to be less reliant on the Chinese market.

- Looking ahead, if Moutai wants to be as stable as now,

that's fine, but if it wants to expand more aggressively,

it needs to look to the younger generation

and the global audience.

- [Narrator] Moutai may have a long way to go

before it becomes a global household name,

but its dominance in the liquor industry remains.

Its annual net profit in 2023 beat market expectations,

rising 19% to $10.3 billion.

- Moutai is a very big brand.

It's almost immune to many things

that are happening in the Chinese economy right now.

It is the most valuable alcohol producer in China

and the biggest in the world

and will probably continue to be.

(gentle music)