After Overtaking Diageo, China's Moutai Plans Three IPOs
(Bloomberg) -- China Kweichow Moutai Distillery Group is planning initial public offerings for three businesses by 2020 as the world’s most valuable spirits company expands beyond its core liquor operations.
The Chinese company is working to list its e-commerce business in Shenzhen next year, Chairman Yuan Renguo said Friday. Moutai also plans to float its agricultural arm and an operation making a less-expensive version of its signature baijiu liquor called Xijiu, he said. At the same time, the group is continuing to push ahead into financial services.
The new listings will boost Moutai’s brand image as it seeks to build “an international liquor investment group and become a respected world-class enterprise,” Yuan said in an interview from the company’s headquarters in Guizhou province. Moutai got about 5 percent of its revenue from outside China in 2016, according to data compiled by Bloomberg.
The group is seeking new drivers of growth and has seen the market capitalization for its listed Kweichow Moutai Co. triple to more than $125 billion, surpassing Diageo Plc’s valuation. The company’s stock has soared as its fiery grain liquor, traditionally the toast of choice among the country’s elite, has found widespread popularity among China’s middle class as they embrace a more affluent lifestyle.
Xijiu will be listed on the China Europe International Exchange, said Yuan. CEINEX is a Frankfurt exchange set up by the Deutsche Boerse, the Shanghai Stock Exchange and the China Financial Futures Exchange for China-related stocks.
The Xijiu, or “Xi liquor” business, was founded in 1952 and became a Moutai subsidiary in 1998. It had total asset of 3.5 billion yuan ($530 million) in 2016, and its baijiu production capacity is more than 30,000 tons. The Xi brand, which is written using the same character as President Xi Jinping’s surname, has gained in popularity with the leader’s rise.
IPOs plans are most advanced for the e-commerce business, which runs Moutai’s online store and other portals. The subsidiary, which was registered in 2014, is the only online seller of all of Moutai’s liquor products including baijiu and wine.
The agriculture company, which mainly produces blueberry-related products including juices, was registered in 2015. Revenue is expected to reach 200 million yuan in 2017, according to the company’s website.
Moutai has said it’s looking to put its profit to work by offering loans and insurance, and has invested 5 billion to 6 billion yuan in the sector so far. Yet Yuan said it is holding off on listing that business.
“The central government is emphasizing the development of the real economy,” Yuan said. “So we are now focusing on expanding businesses in the real economy, and don’t have IPO plans for the finance segment.”
The decision comes as China’s regulators have expressed concerns over non-financial companies crossing over into financial businesses, and have been clamping down on financial risk this year after debt ballooned in the wake of the global financial crisis.
Moutai has also recently found itself in the crosshairs of state-run media after Moutai shares surged as much as 115 percent this year. China’s Xinhua News Agency said last month they had been rising too fast, triggering a 9 percent slide since then. The stock retreated 1.6 percent on Friday. Still, Moutai has advanced 96 percent this year, compared with a 5.2 percent gain for the Shanghai Composite Index.
"The share price is the reflection of the value of the stock,” Yuan said. “Whether the price is high, you should ask investors. Investing in Moutai is to invest in the future. The stock market has risks, investors need to be cautious.”
©2017 Bloomberg L.P.