What does Moutai’s price plunge mean for luxury?

What happened In recent months, the market price of Kweichou Moutai – China's most prestigious baijiu, or white spirit brand – has plummeted, causing concern in the country’s luxury sector. This downturn, which also saw Moutai’s stock value nosedive by 250 billion RMB ($34.3 billion), has prompted a reevaluation of the resilience of other perceived stable assets, notably real estate in central Shanghai. Once a symbol of unwavering value, the price of Moutai, which once hovered around 3,000 RMB ($413) but has since fallen to approximately 2,100 RMB ($289) per bottle, a 30% decline, caught many off guard. Moutai has long been a lucrative venture for primary distributors, which capitalized on the significant markup between wholesale and retail prices, and created a thriving network of secondary and tertiary dealers who buy in bulk and resell at higher prices. The entry of e-commerce giants like Taobao and Pinduoduo into the Moutai market, selling the spirit at a discount, disrupted this system. Initially, scalpers welcomed the opportunity to purchase Moutai at lower prices online, but as the market became flooded with cheaper bottles, the resale value plummeted. Within months, Moutai’s market price declined steeply, leading many dealers to sell at a loss, or exit the market entirely. The decline in Moutai’s price has significantly impacted the company’s stock performance. Often referred to as the “first stock of China,” Moutai's shares were priced at 1,410 RMB ($197.57) each as of August 5, a more than 45% decline from a high of 2,601 RMB ($364) on February 8, 2021, and a 17% decline since the beginning of 2024. Moutai’s falling fortunes resulted in the company losing its position as the most valuable onshore stock in China to the Industrial and Commercial Bank of China (ICBC) on June 28, with Moutai’s market capitalization declining to its current level of 1.78 trillion RMB ($246 billion), lagging behind ICBC’s market cap of 2.12 trillion RMB ($271 billion). Moutai’s price decline has led some to speculate about the stability of other high-value assets, particularly luxury real estate in Shanghai’s central districts. Shanghai's property market has long been considered a bastion of stability, with high-end apartments regularly fetching prices in the tens of millions of RMB, even as the market remains jittery elsewhere. However, the fear is that if a revered brand like Moutai can decline so quickly, so too might Shanghai’s luxury real estate market. Critics argue that the market’s reliance on wealthy buyers, much like Moutai’s dependence on affluent consumers, makes it vulnerable to economic fluctuations and changes in consumer sentiment. The Jing Take While Moutai’s situation is concerning, experts say that Shanghai’s real estate market operates under different principles and is subject to different factors. Moutai’s decline can be attributed to oversupply and aggressive discounting by e-commerce platforms, a scenario less likely to be replicated in the housing market due to the unique value proposition of prime urban properties. Still, Moutai’s price plunge has broader economic and social implications. For years, the spirit has been not just a drink, but a cultural icon, often gifted in business dealings and served at state banquets. Its price stability was seen as a reflection of broader economic confidence. Yet, this has gradually changed over the past decade owing to Chinese President Xi Jinping’s signature crackdown on ostentatious official functions. This shift was hinted at by commenter @hs_asty00, who writes on Baidu, “[Baijiu] is gradually changing from a must-have at gatherings to an optional item. This trend will inevitably bring the price of [Moutai] back to its real value.” Echoing this, @Magnanimous and calm red panda (坦荡且泰然丶小熊猫) writes on Baidu, “Everything that isn't a necessity will fall in price in the long run.” Considering Moutai’s unique position as a domestically produced, largely domestically purchased and consumed item – unlike imported spirits or luxury goods – the jury is still out on whether the company’s recent decline will have a broader impact on China’s luxury market. However, it has certainly put investors on high alert. “If Moutai has collapsed, couldn’t Shanghai's real estate collapse, too? Quickly, drink the liquor to calm your nerves!” @My only funny world (唯我滑稽之天下), posted on Baidu. The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

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What does Moutai’s price plunge mean for luxury?