Meet Kweichow Moutai, The World's Most Valuable Liquor Company

Chinese liquor company's $420 billion market cap makes it larger than Coca-Cola, Toyota, Nike, and Disney -- as well as China's four largest banks

What’s the story behind Kweichow Moutai? Its stock has been on a tear of late, rising nearly 70% in 2020, further distancing the Chinese alcohol behemoth from its peers. Today, Shanghai-listed Kweichow Moutai is the world’s most valuable liquor company, considerably ahead of UK-based Diageo (DGE), maker of Johnnie Walker whisky and other iconic brands, as well as Belgium-based Anheuser Busch InBev (BUD).

Ever since it went public in 2001, the company has been delivering steady and sometimes sizzling returns for shareholders. All told, the stock is up more than 28,000 percentage points since inception according to this Yahoo Finance chart. So, in theory, a $1,000 investment in 2001 would be worth $280,000 today. These are the kind of returns only achieved by global brands like Nike, Starbucks, and Costco, to name a few.

CNN Business just did a great round-up of the Kweichow Moutai story.

Some excerpts below:

The company, which is part state-owned and part publicly-traded, is China's most valuable firm outside of technology — worth more than the country's four biggest banks. Globally, its market cap has not only surpassed all other alcohol distillers like Diageo and Constellation Brands, but also Coca-Cola, which had long held the crown as the world's largest beverage maker by market cap.

Moutai has one unmistakable advantage: the drink is China's national spirit.

Moutai baijiu — the type of liquor the company makes — is a clear, potent spirit that's been dubbed "firewater," thanks to the fact that it's 53% alcohol. The red-and-white bottles of its flagship product, "Feitian," or "Flying Fairy," are a staple at Chinese state banquets and business events.

Known as the favorite tipple of Mao Zedong, founder of Communist China, and as the "drink of diplomacy," it was famously used to welcome former US President Richard Nixon on his historic trip to China in 1972, and again in 2013 when Chinese President Xi Jinping met with his US counterpart, Barack Obama, in California.

Once, at a state dinner in 1974, US Secretary of State Henry Kissinger told Deng Xiaoping, the future Chinese leader: "I think if we drink enough Moutai, we can solve anything."

And here’s a video below from Anthony Strom, Portfolio Manager for the Fidelity Asia Fund, making the case for an investment in Kweichow Moutai back in September 2019

And last week, the Hong Kong-based South China Morning Post reported that Kweichow Moutai’s “meteoric rise sparks bubble concerns in China’s stock market.”

Some excerpts below

The bullish sentiment on Kweichow Moutai may put its valuation under scrutiny. The stock trades at 49 times its estimated earnings, the most expensive level in at least a decade. Analysts forecast a 19 per cent rise in the group profits this year, almost twice the rate flagged by the company in an exchange filing earlier this month.

Kweichow Moutai’s capitalisation is 60 per cent higher than the GDP of its home province. Guizhou’s economy expanded 8.3 per cent from a year earlier to 1.68 trillion yuan in 2020, according to local government statistics, while the GDP of Zunyi, the city where Kweichow Moutai is located, was only 348.3 billion yuan.

The company’s market cap is also on track to surpass the GDP of the entire economy of Shenzhen, one of China’s most thriving cities.

Remarkably, it has little global footprint outside of China or the Chinese diaspora.