China’s Kweichow Moutai Co. produces a version of baijiu — a traditional Chinese liquor made from grains fermented in pits — that retails for nearly $400 a bottle.
The company, whose stock has risen 97% this year, is now valued at $210B. But the strangest part? Most consumers say they don’t even like the taste of the fiery spirit.
A market researcher from Shanghai told The Wall Street Journal that famous Moutai hooch tastes “very much like ethanol.”
So, why do people suffer through the fiery taste?
It is purely based on reputation.
Moutai has long been seen as a luxury product favored by China’s wealthiest and most powerful Communist party leaders. So, as China’s wealth has increased, more and more people have begun drinking Moutai.
In some cases, Chinese businesspeople will treat their clients to Moutai — only to wash their mouths out with water afterwards to rid themselves of the nasty aftertaste (of course, not everyone dislikes the booze).
And Kweichow Moutai has leaned in to its new luxury reputation
Kweichow Moutai has kept supplies of its liquor limited to cement its air of exclusivity. The company tells retailers to sell the booze for $213 per half liter — but many sellers charge closer to $400.
And as the spirit’s value has soared, so has the prevalence of entrepreneurs — both legitimate and illegitimate — trying to profit from it…
Investors pour money into mutual funds focused on Kweichow Moutai. Speculators stockpile the liquor in the hopes of reselling it at a profit down the road. Scalpers line up to buy Moutai from Costco members and flip it. Counterfeiters brew up fake Moutai and try to sell it as the real thing.