A controversy arose a few weeks ago in the Chinese media over "China's National Liquor", the Maotai (a white alcohol obtained by the distillation of sorghum). Produced since the Han dynasty, gaining great popularity in the course of the 18th and 19th centuries, this alcohol is now produced by several companies; two of which were featured in a recent Hurun Report:
- Kweichow Moutai and Wuliangye are ranked No. 4 and No. 7 respectively in terms of value among luxury global brands (World's Most Valuable Luxury Brands 2012)
- Kweichow Moutai holds 5th place in a list of gifts most offered by wealthy Chinese (among which are Chanel and Apple) Top Ten Gifts for the Chinese Luxury Consumer 2012.
The price of a bottle of Flying Moutai (their best seller) is now around € 200 – as compared to € 4 ten years ago - and some bottles even fetch a price of several thousand Euros. We are therefore looking at an undeniable shift towards the up-market bracket – of a product where quantities remain limited (see graph), allowing the brands in question to realize a net margin of 28% to 45%.
The controversy was very well recapitulated during the TV show, below - raising the question that was echoed by all the media: "Is Moutai a vector of corruption?"
The Hurun report clearly illustrates the role that Moutai (like all luxury brands) plays in the Chinese tradition of gifting presents but the reaction to the classification was strong: an official from Shanghai (China Daily, 14 January) even went so far as to propose a ban on serving Moutai at official banquets. Jing Daily quoted the official response of the brand:
"While most brands would be thrilled to be included in such a list, yesterday Maotai spokesman Ye Yuanhong (叶远鸿) categorically disavowed his brand’s inclusion, telling Chinese media, “In regards to being included in Hurun’s luxury brand list, Maotai has never claimed itself eligible to be considered a luxury brand. We don’t know anything about Hurun’s list, and wish to distance ourselves from it ".
Here we find two of the debates that are stirring up opinions in Chinese society, especially amongst its ruling class - whose main objective is to maintain a sort of social harmony and therefore to prevent inequalities from growing too much:
- One can indulge in luxury, but not in a manner that is (too) conspicuous
- One should fight actively against corruption
Yet, the fact remains that Moutai and Wuliangye possess all the ingredients that could make them true luxury brands (like our Cognac or Champagne) – however they lack, like all Chinese luxury brands, a key element: the skills in luxury brand management (creating a brand DNA / recruiting proper talent / distribution strategies, etc.).
