3 Chinese Baijiu stocks to watch
If a shot of Chinese Baijiu isn’t enough to get you excited then you should take a look at the returns Chinese Baijiu stocks have delivered in recent years.
Baijiu (which literally translates to ‘white liquor’) is a potent liquor with an alcohol content usually between 40-65%. Despite it being relatively unknown outside China, Baijiu’s popularity amongst China’s burgeoning middle and upper-class populations (where it accounts for 99% of all alcohol consumed), makes it the most consumed liquor in the world.
Consider this. In 2019 more Baijiu was consumed in China than the total amount of Vodka consumed world-wide. Globally, more Baijiu was sold in 2019 than the combined total of Tequila, Rum, Vodka, Gin and Whisky, according to The Drinks Business.
Over the past few years, investors have finally taken notice and Chinese Baijiu stocks have soared.
But could the rise continue? Here’s 3 Chinese Baijiu stocks to watch.
Kweichow Moutai (SHA: 600519)
This is a company that has been likened to Bitcoin on social media after its meteoric share price rise in 2020. During a year plagued by lockdowns, Kweichow Moutai’s sales still increased by 10% in 2020. But this was the smallest yearly sales increase reported by the distiller in five years.
The performance of Kweichow Moutai has seen its market cap surpass the likes of Coca Cola, Pepsi Co and Diageo to become the largest beverage company in the world. And in China, Kweichow Moutai surpassed Industrial & Commercial Bank of China to become China’s biggest stock based on market cap.
Kweichow Moutai is China’s dominant Baijiu brand with a market share of around 60%. It is a favourite amongst the Chinese premium consumer with the price for a bottle starting at around 900RMB (US$137), however, based on alcohol content and age, some Kweichow Moutai bottles can be priced as high as 26,800RMB (US$4000). Then there are vintage Moutai bottles, which are viewed as a status symbol for the super-wealthy and have even been touted as store of value.
A bottle of 1980 Maotai was sold at auction for US$1.3 million in 2012!
Kweichow Moutai rose to prominence in the 1970’s when it became known as the favourite drink of Chairman Mao, founder of the People’s Republic of China.
Wuliangye Yibin (000858.SZ)
Wuliangye Yibin shares have also seen explosive gains in the past few years, more than doubling in 2020. It is number two in China’s domestic Baijiu market, behind Kweichow Moutai. The distiller’s flagship product is the classic Wuliangye Baijiu, which has an alcohol volume of 52% and sells for around 1400RMB (US$230). It’s most premium product sells for around 26,800RMB (US$4000).
The company’s Baijiu production today still follows processes developed during the Ming Dynasty (1368-1644 A.D.) and the company still utilises centuries-old cellars in Yibin (located in China’s southwestern Sichuan province).
“The aged cellars and environment completely maintained their original forms. Without these cellars, no good liquor can be made,” a workshop Director told China Daily.
While Wuliangye specialises in Beijiu it also produces a large range of other popular Chinese spirits.
Wuliangy Yibin is amongst the top 10 biggest stocks by market cap in China and amongst the top five most valuable beverage companies in the world.
It is listed on the Shenzhen Stock Exchange.
Luzhou Laojiao (000568.SZ)
Luzhou Laojiao is a lesser-know distiller, but certainly one to keep on your investment radar as it embarks on global expansion.
Luzhou Laojiao’s flagship Chinese Baijiu product is the Guojiao 1573, with a price tag starting from around 650RMB ($US100). However, certain Guojiao 1573 bottles can sell for thousands of dollars. Luzhou Laojiao’s top luxury high-end product is the Guojiao 1573 Triple 60. Bottles have sold for up to 336,000RMB (US$51,000).
Luzhou Laojiao is another historically significant distiller with history and processes dating back to the Ming and Qing dynasties, it still utilises centuries-old cellars and distilleries for production.
Guojiao 1573’s share of the Chinese market is currently just under 10%, but it has also been aggressively pursing markets outside China in recent years.
In 2018 the company launched Ming River Baijiu in partnership with investors in the US and Europe. Ming River is targeting alcohol markets in the US and Europe. Luzhou Laojiao also has ambitious goals for the sale of its Guojiao 1573 product outside China. The brand has been promoted as part of high-profile sponsorships, including the 2018 FIFA World Cup and the 2020 Australian Open tennis tournament.
Luzhou Laojiao is listed on the Shenzhen Stock Exchange.