Kweichow Moutai, China’s favorite booze, passed on Friday with US$71.5 billion Johnny Walker owner Diageo as the world’s most valuable drink despite its dependency on the China market. They have made all the right moves, tells business analyst Shaun Rein to CNN, despite president Xi Jinping‘s anti-corruption drive.
To this day, Moutai is considered the gift to give and the drink of choice to toast with on special occasions, especially big business deals. That’s made it a staple at lavish banquets, the very ones discouraged by Chinese President Xi Jinping’s anti-corruption campaign.
As the campaign got under way in 2012, Moutai sales took an initial hit, but that didn’t last long.
“They got smart,” said Shaun Rein, the founder of China Market Research in Shanghai. Moutai cut prices to make its baijiu more affordable and broadened distribution to make it more accessible, according to Rein.
The drinks maker turned its attention to a wider, younger consumer base rather than the government officials to whom it had traditionally appealed.
For the moment, that approach seems to be working. But Moutai has a huge dependency on the Chinese market, which accounts for 95% of its sales.
It has made some efforts to expand outside of the country, but without much success.
Rein says there’s still potential at home, with more young people now able to afford the punchy price tag — a 500 ml bottle (about one pint) can set you back as much as $580 — and a slow but steady increase in luxury purchases.
Perhaps most important, Moutai’s brand is so strong in China, Rein says, that “they just don’t have any real competitors.”
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