China’s Kweichow Moutai Co. has become the world’s most valuable liquor company thanks to a fiery spirit that can cost nearly $400 a bottle. The spirit is baijiu, a Chinese liquor made by fermenting sorghum or other grains in brick or mud pits. The company’s version, known simply as Moutai, has a long association with China’s Communist leaders, and has become a homegrown status symbol for affluent Chinese. One drawback: many people can’t stand it. The taste is “very much like ethanol,” said Jenny Miao, a 26- year-old market researcher in Shanghai. At dinners with clients, she said she sometimes has to toast with Moutai, but will then drink water to wash away the aftertaste. Moutai’s value continues to swell beyond what many people think it is worth. Its producer, Kweichow Moutai, keeps supplies limited and takes at least five years to make its most famous variety, called Moutai Flying Fairy. That has helped send prices for both new and vintage Moutai soaring—and made it an intoxicating investment for Chinese speculators. The company advises retailers charge 1,499 yuan, or $213, for a half-liter bottle of the clear spirit, which is 53% alcohol. But some stores in Shanghai demand 2,800 yuan, nearly $400, or more.

Qin Xiaoluo, who runs a liquor store in the central city of Changsha, has run out of Flying Fairy. He said as salaries rose, Chinese people “can afford better drinks—but drink less.” Mr. Qin said most of his Moutai buyers were wealthy entrepreneurs, and some reason that if they don’t drink it, it will go up in value anyway. Drinking the pricey spirit, for some, is related to the Chinese concept of “face,” which relates to reputation or dignity in a social context. Xue Yuhu, a Shanghai-based analyst with Founder Securities Co., said the drink is like a designer handbag: its value is enhanced by a hefty price tag. “Moutai is the best gift if you are planning to treat your higherups or visit your girlfriend’s home” and want to impress your future in-laws, he said. Moutai has become a status symbol. 

The buzz has helped shares in Shanghai-listed Kweichow Moutai gain 97% this year for a market value of about $210 billion— making it more valuable than British producer Diageo PLC, which has a market value of about $96 billion. Baijiu detractors say the taste reminds them of paint stripper or kerosene, especially the cheap varieties. It does have many genuine fans, who laud baijiu’s complexity and distinct flavor varieties—strong, light, soysauce, and rice aroma. One liquor website describes Moutai as having “a silky mouthfeel” and says it carries “an undertone of baking spice.” Other reviewers say the drink conjures tastes of nuts, sesame paste, mushrooms, cheese, and dark chocolate. Moutai is usually served in tiny glasses that contain about a third of an ounce of the spirit. Shots are frequently downed to show respect for someone making a toast. People in China say “gan bei” before drinking, which literally means “dry cup.” During Richard Nixon’s trip to China in 1972, he toasted Chinese Premier Zhou Enlai with Moutai.

The Liquor Everyone’s Buying—Even People Who Can’t Stand It