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BUSINESS Bloomberg Businessweek January 29, 2018

customized products that capitalize on the brand. baijiu”—the older the baijiu, the more expensive
“Two thousand years ago, the Chinese calling (and profitable) it is. “Since sales volume will stay
card was lions, 1,000 years ago it was Chinese por- constant next year, we think we can maintain rev-
celain, 500 years ago it was tea leaves, and now enue growth through this strategy,” Yuan says,
it’s local brands with their own intellectual prop- referring to the more premium products. Moutai
erty,” Yuan says. “I believe Moutai is one of these.” expects its as-yet-unreported revenue to exceed
Baijiu, which means white liquor, can be made 60 billion yuan for 2017 and to rise more than
from sorghum, rice, wheat, or corn, and may con- 10 percent in 2018.
tain as much as 53 percent alcohol by volume. Yuan, who has worked at the company for
While few outside China buy the liquor, Moutai four decades, is also attempting to increase pro-
baijiu is baked into national myth as the drink duction. But he says that, based on the land
of choice for Communist Party leaders. It’s what Moutai controls, it won’t be able to produce
Mao Zedong and his comrades used to toast the more than 60,000 metric tons of its baijiu annu-
founding of the People’s Republic in 1949. Just ally. While that is about 41 percent more than the
four years ago, the distiller was battling a slow- 42,700 metric tons the company estimates it pro-
down as an austerity drive in Beijing slashed duced in 2017, the numbers suggest a likely cap
demand from government officials, who had been on expansion.
buying up bottles for banquets and as gifts for one Analysts at Sanford C. Bernstein & Co. esti-
another. But purchases by ordinary Chinese have mate Moutai will have to limit its annual sup-
more than compensated since then. ply growth to 4 percent for the next three to five
Yuan wants to sell more customized bottles, years to be able to sell the Flying Fairy brand sus-
such as the HK$6,000 ($767) ones with the com- tainably, without using up too much of its stores
pany’s label that were created exclusively for a of aging liquor. They estimate Moutai boosted
Macau operator of gambling junkets for high roll- supply of Flying Fairy by 38 percent in 2017,
ers. He’s added more limited-edition bottles, such implying it borrowed from the future to deliver a
as the ones created for the 70th anniversary of short-term result. “Continuing this pace of deple-
18 China’s World War II victory over Japan. Those tion is not sustainable,” says Bernstein analyst
are listed for 1,999 yuan on the company’s web- Euan McLeish.
site, though they’re also sold out. Then there’s To keep the company growing, Yuan is Steamed sorghum
is spread before
the opportunity to sell higher-priced “mature expanding Moutai’s finance business deeper fermentation