In-Depth Analysis of the Sustainability of Kweichow Moutai's 90% Gross Margin

Based on the data and analysis I have collected, I now present to you an in-depth investment research report on the sustainability of Moutai’s 90% gross margin.

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According to the latest financial data, Kweichow Moutai (600519.SH) maintains impressive profitability [0]:

Core Indicators	H1 2025	YoY Change	Industry Average
Consolidated Gross Margin	91.30%	-0.46pct	81.5%
Gross Margin of Moutai Liquor	93.85%	-0.28pct	-
Gross Margin of Series Liquors	77.59%	-2.51pct	-
Net Profit Margin	52.56%	-0.13pct	~25%
ROE	36.48%	-	~15%

Moutai’s gross margin is nearly

higher than the industry average, and this gap has remained basically stable over the past decade [0][1].

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Moutai’s high gross margin primarily stems from its

:

contributes 84.6% of revenue, with a gross margin of 93.85%, almost a perfect business model of ‘low cost, high price’ [1]. Moutai Liquor can be subdivided into:

• Standard Moutai Liquor (Feitian Moutai, Wuxing Moutai)
  - accounts for approximately 80%-90%
• Non-standard Moutai Liquor (Vintage Liquor, Chinese Zodiac Liquor, Premium Moutai)
  - positioned as ultra-high-end

have a gross margin of 77.59%, which, while lower than that of Moutai Liquor, is still significantly higher than the mid-range product level in the industry [1].

Key Insight

: A 93.85% gross margin for Moutai Liquor means its cost accounts for only 6.15% of the selling price. This extremely low cost structure stems from the unique brewing process of sauce-flavor liquor and the irreproducible microbial environment in Maotai Town.

The production cycle of Moutai Liquor lasts up to

: Starter making on Dragon Boat Festival → Grain loading on Double Ninth Festival → 9 times of steaming → 8 times of spreading and air-drying → 7 times of wine extraction → 3 years of storage → Blending and flavoring [3]. This process characteristic determines the following:

Characteristics	Impact on Gross Margin
Time Cost	Long capital occupation cycle, but finished liquor has scarcity premium capability
Wine Yield	Approximately 1 catty of liquor produced from 5 catties of grain, but the yield of high-quality liquor can reach over 90% [3]
Cellar Dependency	Unlike strong-flavor liquor which is restricted by cellar age, sauce-flavor liquor relies more on production techniques and geographical environment
Aging Value	Appreciates over time, forming collectible attributes

Moutai is widely recognized as ‘There are two types of Chinese liquor: one is Kweichow Moutai, the other is all others’ [3]. Its brand moat is reflected in:

• Historical Heritage
  : 800 years of brewing history, designated liquor for the founding ceremony, diplomatic state gift
• Pricing Power
  : Average annual price increase of over 8% since 2003; the wholesale price of bulk Moutai in 2025 is approximately RMB 1,860 per bottle, with a huge spread between ex-factory price and wholesale price [2]
• Consumer Stickiness
  : Consumers who drink Moutai rarely downgrade to Wuliangye or Luzhou Laojiao

In H1 2025, revenue from direct sales channels increased by 18.62% YoY, while that from wholesale channels only grew by 2.83% [1]. The ‘iMoutai’ digital marketing platform achieved tax-exempt revenue of RMB 10.76 billion, with a gross margin of 94.50% [2]. The increase in the proportion of direct sales further strengthens the gross margin advantage.

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Factors	Analysis
Supply-Demand Shortage Pattern	Annual production capacity of Moutai Liquor is approximately 50,000-60,000 tons, while market demand far exceeds supply, and wholesale price has been higher than ex-factory price for a long time
Extremely Low and Stable Costs	Main costs are sorghum and wheat (low-cost raw materials), not affected by sharp fluctuations in commodity prices
Solid Brand Barriers	Moutai’s high-end image has taken root in consumers’ minds, and other liquor enterprises cannot replicate it in the short term
Direct Sales Channel Expansion	Digital channels such as ‘iMoutai’ increase the proportion of direct sales and reduce channel sharing
Internationalization Potential	Overseas revenue in H1 2025 reached RMB 2.893 billion, up 31.29% YoY, opening up new growth space [1]

Risks	Assessment
Minor Downward Trend of Gross Margin	Gross margin in H1 2025 was 91.30%, a decrease of 0.63 percentage points compared to 91.93% in 2024; the gross margin of series liquors decreased by 2.51 percentage points [1]
Pressured Consumption Environment	The wholesale price of bulk Moutai dropped from RMB 2,220 per bottle at the beginning of 2025 to RMB 1,860 per bottle, and terminal catering consumption is sluggish [1]
Increase in Sales Expense Ratio	Sales expense ratio in H1 2025 was 3.58%, up 0.44 percentage points, indicating that the company needs to invest more in marketing expenses to maintain market share [1]
Intensified Industry Competition	The liquor market has shifted from incremental to stock competition, with numerous mid-range liquor brands [1]
Financial Aggressiveness	Financial analysis shows an ‘aggressive’ classification; low depreciation/CAPEX ratio may affect the maintenance of long-term competitiveness [0]

:

• Moutai’s gross margin has long been stable in the range of 91%-92% with minimal volatility
• Maintains a stable gap of approximately 10 percentage points from the industry average (81.5%)
• Net profit margin remains above 50%, ROE exceeds 30%, showing excellent profitability

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:

1. Rigid Supply
   - The unique geographical environment and microbial community in Maotai Town cannot be replicated, and limited production capacity expansion forms a natural barrier
2. Brand Moat
   - The ‘national liquor’ mental position is solid, and consumer recognition is the largest moat
3. Stable Cost Structure
   - Raw material costs account for an extremely low proportion (<10%), with limited erosion to profits
4. Strong Pricing Power
   - The spread between ex-factory price and wholesale price provides sufficient room for price increases for the company

:

1. Signs of Structural Decline
   - Gross margin has decreased slightly for two consecutive reporting periods, with a particularly obvious decline in the gross margin of series liquors
2. Changes in Consumption Scenarios
   - Demand for business banquets and gift-giving is affected by the economic environment, and demand for high-end liquor is volatile
3. Evolution of Competitive Landscape
   - Under the upsurge of sauce-flavor liquor, the rise of sauce-flavor brands such as Langjiu and Xijiu may divert some market share

Dimensions	Assessment
Gross Margin Outlook	Expected to remain in the range of 89%-92%, may drop to 88% in extreme cases
Valuation Rationality	Current P/E ratio is 19.23x, considering its profit stability and brand premium, the valuation is still attractive [0]
Risk Warning	Macroeconomic downturn, shrinking consumer demand, channel inventory backlog

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[0] Jinling AI Brokerage API Data - Kweichow Moutai Company Profile and Financial Analysis (January 17, 2026)

[1] Chengtong Securities - ‘Moutai’s High-End Position is Solid, Mid-Range Liquor Competition is Fierce’ Kweichow Moutai H1 2025 Earnings Report Commentary (August 13, 2025)

[2] Huaxin Securities - ‘Successful Conclusion of 2024, Steady Growth in 2025’ Kweichow Moutai Company Event Commentary Report (April 5, 2025)

[3] Suning Institute of Finance - ‘Moutai with a Market Value of RMB 2.35 Trillion and a Gross Margin of 91%: What’s the Reason?’

[4] Huafu Securities - In-Depth Research Report on Kweichow Moutai (600519.SH): ‘Deserved “National Liquor” Status, Stable Performance with Surprises’