How high? Moutai and price gouging

Are Kweichow Moutai’s flying fairies in for a hard landing?

“If you absolutely must drink Moutai, make sure you’re drinking the right product.” I gave that piece of advice just months ago, but that before the baijiu giant announced yet another price hike. According to a statement, they plan to raise the price certain baijiu labels between 20-30%. You have to be kidding me.

Let’s chart the price trajectory of Kweichow Moutai’s flagship Feitian (“Flying Fairy”) label:*

  • Early 1980s: RMB8/US$1.25
  • Early 2000s: RMB200/US$32
  • Mid-2000s: RMB600-800/US$95-125
  • 2010: RMB1,200/US$190
  • 2011: RMB1,500/US$235
  • 2012: RMB2,000/US$315
  • 2013 (est.): RMB2,500/US$395

The reason for the price increase is sound if you look at it from a strictly short-term economic standpoint. After all, I’ve heard speculation that the government buys the vast majority of Moutai’s Feitian stock before anything hits the shelves. The rising wealth of Chinese consumers means that there’s a constant demand for whatever the government leaves the market. I don’t know at what point, if any, the consumers will say “Enough!” and the demand will ebb, just that we haven’t hit it yet and maybe never will. Other premium baijius are starting to feel the crunch of China’s slowing economy, but Moutai seems immune. For now, at least.

Unfortunately, there’s a political component to be considered. Time and time again the government has been widely criticized for spending so much of public funds on high-end baijiu, criticism that is unlikely to soften with China’s increasingly bleak economic outlook. It’s going to be very difficult for government officials to start making cuts in spending while drinking $400 bottles at public functions. (But don’t think they won’t try.)

Having already at least paid lip-service to the idea of cutting back the official binge-drinking budget, you have to figure that at some point someone in the government is going to have to ask Moutai, a state-run distillery, to knock off all the price hikes. They’re starting to make the government look bad, especially when Moutai representatives are making with the cringe-worthy comments like this one made to Xinhua reporters: “If you don’t drink Moutai (at government functions), what would you drink?”**

But enough about politics and back to the matter at hand: Is Moutai still worth it if the price keeps going up? No. Not even a little bit. In fact, it wasn’t really worth it when it cost US$300, but now it’s just getting laughable. If someone offers you a glass of Moutai, drink it and don’t think twice. It’s great baijiu. But you can do a whole lot better for the money. Fifteen bottles of solid mid-grade baijiu or one bottle of Moutai? It’s not a difficult calculation.

*NOTE: These figures do not account for inflation and the three oldest prices are based on anecdotal information.

**This quote was pulled from the WSJ China Real Time blog, because the original has already disappeared from Xinhua’s website. Apparently somebody got the message. 

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3 Responses to How high? Moutai and price gouging

  1. Pingback: Withdrawal symptoms: China’s rice wine market | Buy Buy China

  2. I buy a bottle at USD500

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