Kweichow Moutai- Building and Sustaining a Top Luxury Brand
| Case Code: MKTG432 Case Length: 17 Pages Period: 2000-2020 Pub Date: 2021 Teaching Note: Available |
Price: Rs.400 Organization : Kweichow Moutai Co., Ltd. Industry :Food & Beverage Countries : India Themes: Brand Strategy, Brand Loyalty, Marketing Strategy,Brand Differentiation |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Emergence as The ‘National Wine’ of China
In the 20th century, Moutai began to be served at official occasions and feasts with visiting foreign heads of state and distinguished guests. Moutai won international fame after winning a gold medal in the alcohol category at the 1915 Panama-Pacific International Exposition in San Francisco...
The Rise of Kweichow Moutai (KM)
Over the following decades, there was a rise in the demand for Moutai. Before 1980, Moutai’s production had been below 1,000 tonnes a year. From 1980 to the late 1990s, the production volume was increased to sate market demand. By 1996, production had doubled to 4,000 tonnes. In 1996, the ‘Moutai Production Process’ was established as a state secret and protected. Over the years, special editions of Moutai were released for events of national importance...
The Marketingand Branding Strategy for Moutai
KM’s decisive strategies in the early 2000s were said to have played a major role in determining its profitability and creating the brand reputation for Moutai. During that period there was rapid economic growth in China, leading to a rise in the demand for high end liquor. Sichuan Province-based Wuliangye Yibin Company Limited (Wuliangye) , another baijiu producer and key competitor for KM in China that had double the latter’s market value, grabbed that opportunity. Wuliangye also had a wine-making history that went back centuries and had ancient production techniques. Wuliangye released multiple brands of baijiu with a wide range of alcohol content, flavors, and price ranges...
KM’s Challenges
As of 2018, KM produced about 50,000 tons of Moutai every year. However, in recent years, KM had noticed a trend toward supply shortages. The potential to appreciate in price drove Moutai’s buying frenzy, resulting in inventory shortages both inside China and in overseas markets...
A change in strategic direction?
In 2018, Renguo, who had been at the helm for 18 years, was replaced by Li Baofang (Baofang). Renguo had sought to grow KM’s customization business, introduce a raft of brands and sub-brands separate from the premium lines, and introduce a less expensive line of baijiu. He had also intended to use the Moutai Group’s massive cash reserves to diversify into new areas such as insurance and asset management, apart from undertaking public listing of three of its business units (e-commerce business, an agricultural arm, and a unit that sold its less-expensive baijiu known as Xijiu)..
The Road Ahead
For several years, KM had been topping the charts in Brand Finance’s annual rankings of most valuable spirits brands. (See Exhibit V). Brand Finance published the ‘World’s Top 500 Most Valuable Brands’ in January 2020, which ranked Moutai 32nd at US$ 39 billion, higher than Germany’s Porsche AG with US$ 33.9 billion at 41st and Italy’s Gucci with US$17.6 billion at 99th place...
Exhibits
Exhibit I: Timeline of Kweichow Moutai
Exhibit II: World’s most valuable Liquor companies by Market cap - 2017
Exhibit III: Global Fine Wine Market Share
Exhibit IV: KM Products and Brands
Exhibit V: Top 10 Most Valuable Spirits Brands, as of 2018-19
Exhibit VI: Key Financials of Kweichow Moutai Co., Ltd.
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