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Business

Move over Johnnie Walker -- Moutai rules the liquor world

Market value overtakes Diageo thanks to strong 'baijiu' sales

TOKYO -- Driven by soaring share prices, Chinese premium alcohol company Kweichow Moutai has dethroned Johnnie Walker producer Diageo as the most valuable liquor company in the world.

The state-owned distiller's market capitalization, based on trading at the Shanghai Stock Exchange, is now 500.5 billion yuan ($72.7 billion). That surpasses Diageo's market value of $71.5 billion, on the New York Stock Exchange. Brands under Britain's Diageo include Smirnoff vodka, Baileys Irish liqueur and Guinness, the world's best-selling stout.

On Friday, Moutai shares closed at 395 yuan, four times higher than in January 2014. Moutai is now one of the top 10 companies on the SSE by market capitalization, alongside state-owned giants such as Bank of China, Sinopec and China Life Insurance.

For comparison, Moutai is now worth more than Japan's KDDI, South Korea's Hyundai Motor and India's Tata Consultancy Services, and is twice as big as Thailand's leading company, PTT.

It has been a remarkable comeback for a company that saw both sales and share price plunge after Chinese President Xi Jinping imposed a strict anti-corruption campaign in 2012.

Pledging to "strike both tigers and flies," Xi cracked down on government officials' banquets and gift-giving, which were Moutai's two main revenue sources. The relentless campaign frightened officials across China, making them reluctant to dine or even have coffee at a five-star hotel.

While the anti-corruption campaign is still running, the paranoia about being seen anywhere near a "baijiu" bottle seems to have calmed down. Baijiu, China's most popular liquor, is made by distilling fermented sorghum. Alcohol content exceeds 50%, and fans crave its mellow taste.

The Guizhou Province town of Moutai is the home of China's top baijiu distilleries.

Baijiu received the global spotlight in the 1915, when it won a gold medal at the 1915 Panama-Pacific Exposition in San Francisco. It is known as one of the world's top three distilled beverages, along with whiskey and brandy. It became China's national drink after the Communists carried baijiu on the Long March, both as a beverage and as a disinfectant.

It has served an important role in diplomacy. Most famous was when then Premier Zhou Enlai raised a glass of baijiu with then U.S. President Richard Nixon during his 1972 visit, and also with then Japanese Prime Minister Kakuei Tanaka later that year. Both visits led to the normalization of diplomatic relations between the countries.

More recently, Xi took a bottle with him to the U.S. and drank Moutai baijiu with then President Barack Obama in 2013.

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