How Chinese liquor brand Moutai is using Costco to thwart speculators

China’s premium white liquor brand Kweichow Moutai has been facing a long-standing problem – speculators pushing up the price of its highly sought product to irrational highs with little benefit to the brand.  The problem has become so acute that average Chinese consumers can rarely access the liquor. But with the opening of Costco in Shanghai, Kweichow Moutai saw a new solution for cuting out the speculators, hatching a plan in just seven days.

Two days before Chinese Mid-Autumn Festival, which falls on Friday this year, Kweichow Moutai sold 5 tons, or 10,000 bottles, of the liquor via Costco Shanghai. Notably, the price of the product sold at Costco is RMB1,499 (US$211), while the same product sold by some liquor retailers can be up to RMB2,600 (US$365).

Consumers buy Moutai at Costco Shanghai. Source: MoutaiSpace

On Weibo, China’s microblog equivalent to Twitter, some internet users openly shared their excitement in buying the liquor.  One user exclaimed  “I’m the Costco winner today!” along with a picture of three bottles of Moutai.

“On the first day [of the two-day sales], about 5,000 consumers came to buy Moutai… We didn’t publicise the two-day event,” Chinese new media platform MoutaiSpace reported.

With a brand reputation as China’s most famous liquor, Moutai is not only a consumer product but has also become a good investment for those who can get their hands on it.  Such buying by speculators has driven Moutai prices up year after year.  A special bottle of Moutai even sold atRMB8.9 million (US$1.25 million).

Against this backdrop, Moutai has been trying for years to adopt a simple sales model that eliminates intermediate trading companies and directly sells to consumers.

Consumers line up at Costco Shanghai. Source: MoutaiSpace

“Directed sales help true lovers of Moutai get access our liquor, while also curb speculation and similar activities that have disturbed market rules,” Chinese business news outlet nbd.com.cn reported, citing a Moutai sales manager.

According to the manager, the sight of Costco members fighting for Moutai liquor at the supermarket caught the attention of Moutai’s management, who quickly cooperated with Costco to finalise an agreement within seven days.

As one Costco Shanghai manager described the 'Moutai Effect': “We heard of Moutai liquor before, but the opening of Costco in Shanghai made us feel how influential Moutai is in China,” the manager told MoutaiSpace. The manager said most members of Costco are middle class with great consumption power who are buying Moutai to give to others as gifts or to drink by themselves.

“We made the right decision [to cooperate with Moutai],” the manager said.

The return of lineups to Costco was a welcome sight for US-based bulk retailer.  Last week, Campaign Asia Pacific reported that consumers start to return their membership cards after the supermarket hiked prices.