Today I would like to introduce you to a company that ensures decent percentages in the minds of consumers and in the accounts of investors.
We are talking about – Kweichow Moutai.
With a market capitalization of approximately $ 200 billion, the company is the most valuable spirits manufacturer in the world.
As I wrote in my article on Chinese culture and society, making báijiǔ / schnapps in China is a millennium-old tradition. Liquor was distilled under the name Jujiang more than 2100 years ago.
The world-famous Moutai developed from this long tradition. The distillery is located in the town of the same name in the southwest Chinese province of Guizhou.
Kweichow Moutai was founded in 1999 and has been listed on the Shanghai Stock Exchange since 2001. The price has risen by almost 16,000% since the IPO – a real success story.
With the Guizhou government holding 65% of the company, the province can enjoy huge tax and dividend income.
The classic among Maotai’s is the Feitian Moutai with an alcohol content of 53%. The liquor is sold on the Chinese online platform Tmall for 1499 yuan ($ 212). In Germany it is available for just under € 300.
For a long time, the Moutai was considered a “liquor for officials” and was not for sale to ordinary people. If a Chinese person received a bottle, it was usually on the shelf for decades as a trophy.
The Moutai has received numerous national and international awards and is one of the top 3 distillates alongside French cognac and Scottish whiskey. It is considered a Chinese national drink and is served at most Chinese state banquets and is often given as a diplomatic gift.
The high sales prices with low production costs are of course also reflected in the business figures.
The company has more than doubled sales in the past five years from $ 4.2 billion to $ 9.4 billion. Profits increased from $ 3.2 billion to $ 7.4 billion over the same period. The operating profit margin is an incredible 78%!
Kweichow Moutai started exporting its products in 1993. At that time the export volume was 45,000 liters. In the meantime, this has grown to 2.2 million liters, which contributes to foreign sales of at least $ 469 million (5% of total sales).
Foreign sales in Asia (ex. China) are 45%, followed by Europe 22% and North America 11%. A further 22% are spread across the rest of the world.
In the 2018 financial year, the Moutai brand products were responsible for approx. 90% of sales. Other company products include other alcoholic beverages and tobacco products.
Kweichow Moutai is managed by 61-year-old Li Baofang. He is well networked and holds several political posts.
The company works in a crisis-proof industry. The high-priced schnapps is a luxury food with a long tradition in China.
Moutai is also a strong brand, which means that customers are more willing to pay. Consumers are willing to spend several hundred dollars on a bottle of the premium drink.
Demand is expected to increase over the next few years as the Chinese income continues to grow. Since Moutai enjoys cult status, more and more people from the rising middle class will want to afford this drink.
Since Kweichow Moutai’s profits have so far been generated almost exclusively in China, there is still enormous potential for further growth in the foreign markets in the future.
With the increasing influence of China through the Belt and Road Initiative in particular, Chinese products such as Moutai will also be promoted and requested more.
In addition to the already agreed high profit margins, the company pays a dividend. The yield is currently around 2.5%.
Have you ever enjoyed a moutai?
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