Moutai's Billion-Dollar Fund Doubles Down on Biotech: Strategic Investments in XingSai Bio and Beyond

“Dental Maotai,” “Ophthalmic Maotai,” “Medical Aesthetics Maotai”… In the past, the industry likened several highly profitable leading enterprises to Kweichow Moutai in their respective niche sectors.

And now, the real Moutai has arrived.

Recently, eCyte, Inc. (hereinafter referred to as “eCyte”) completed a strategic financing round, with investment from the Moutai Science and Technology Innovation Fund managed by the Moutai Fund Company. In 2023, the Jinshi Fund, in which Moutai participated as an investor, also invested in Chengdu Tachem Co., Ltd. (hereinafter referred to as “Tachem”), a core raw material supplier for peptide drugs. In 2022, Guizhou Moutai Hospital opened its doors; it is a hospital built to Grade A tertiary general hospital standards with an investment of RMB 1.9 billion. Overall, Moutai is making significant investments in the biopharmaceutical sector.

Similar to Kweichow Moutai, many baijiu companies have identified biopharmaceuticals as a key investment direction; even with ample cash reserves, they seek new growth drivers through diversified investments.

In recent years, Moutai has frequently engaged in cross-industry collaborations within the consumer sector. Co-branded products such as Moutai ice cream with Mengniu, Jiangxiang Latte with Luckin Coffee, and liquor-filled chocolates with Dove have achieved robust sales and rapidly gained widespread popularity.

In the field of industrial investment, Moutai has also accelerated its cross-sector expansion. Since 2023, it has invested in three funds, all of which include biotechnology in their investment portfolios.

Overview of Three New Funds Established by Moutai Within One Year; Source: Company Announcements, Qichacha

In August 2023, the Zhaohua Fund and Jinshi Fund, in which Moutai participated as an investor, completed their regulatory filings. Established in cooperation with China Merchants Capital and Jinshi Investment, each fund has a total size of RMB 5.51 billion, with Moutai committing RMB 5 billion to each.The investment scope of the two funds includes, but is not limited to, investment opportunities in next-generation information technology, biotechnology, new energy, new materials, high-end equipment, and consumer goods.

In October 2023, the Moutai Science and Technology Innovation Fund completed its filing. Public records indicate that the fund, with a total size of RMB 200 million, was jointly capitalized by Kweichow Moutai Group and Moutai Fund Management Company.

Several funds were quick to make investments shortly after their establishment.

In November 2023, Chengdu Tachem Co., Ltd. completed a Series A+ financing round of nearly RMB 300 million, led by Moutai Jinshi Fund, with participation from Qiming Venture Partners, Honghui Fund, and Jiayuan Capital. Existing shareholders Hillhouse Investment, CICC Qichen Fund, and GF Xinde continued to participate in the round.

Chengdu Tachem Co., Ltd., established in 2013, is a leading enterprise in the supply of core raw materials for peptide drugs. The company’s portfolio includes thousands of products—such as protected amino acids, non-natural protected amino acids, peptide fragments, amino acid (linker) resins, and GLP-1 side chains along with their precursors—all of which are at the forefront of the industry. This has enabled the company to rapidly secure contracts with over one hundred pharmaceutical companies and CDMO clients worldwide.

In April 2024, eCyte completed a strategic financing round, introducing the Moutai Science and Technology Innovation Fund as a strategic investor.

eCyte focuses on the field of single-cell analysis and sorting, innovatively proposing the concept of the "Ramanome." Leveraging Ramanome technology, eCyte has independently developed a series of instruments for single-cell Raman analysis and sorting. These instruments break through the limitations of the traditional "culture-then-screen" research paradigm, providing novel instrumental tools for major industrial needs such as mining microbial resources from environmental samples without cultivation based on "in situ" metabolic functions, industrial strain breeding, and screening large-scale mutant libraries in synthetic biology. Furthermore, the "Ramanome" is poised to become a new form of big data for the biomanufacturing and synthetic biology industries.

Furthermore, the Moutai Sci-Tech Innovation Fund invested in a new energy enterprise in Guizhou Province in January 2024. In other words, within six months of their establishment, the three funds successively invested in several hard-tech companies.

In fact, as early as 2014, Moutai established the Moutai Fund Company as its primary investment arm. Over the past decade, the Moutai Fund Company has invested in enterprises such as Baijia Food, Li Ziyuan, Jiamei Packaging, and China National Salt Industry Corporation, focusing predominantly on companies in the broader consumer sector, particularly food and beverages, which align closely with its core business.

This landscape shifted in 2023 with the establishment of three new funds: these funds are substantial in size, with total committed capital reaching RMB 10 billion. Two of them partner with professional investment institutions, further enabling market-oriented operation of the capital. Meanwhile, investments are directed toward biopharmaceuticals and new energy, reflecting a broader diversification across industries; andFollowing its establishment, the new fund kicked off its investment activities with biotechnology companies; within six months, two of the three portfolio companies were in the biotech sector, underscoring the significant role of the life sciences field in cross-industry investments.

Not only Kweichow Moutai, but also many other baijiu companies have made biopharmaceuticals a key investment area, with some even forming consortia to invest.

Luzhou Laojiao is one of the most active enterprises in this regard. The company has established investment-focused subsidiaries and contributed capital to the fund of funds initiated by these entities, thereby positioning itself in the equity investment market. After years of dedicated efforts, these subsidiaries have emerged as notable players in the equity investment arena, even securing spots on investment rankings published by certain media outlets.

In February 2024, the newly established Luzhou Phase I Industrial Guidance Fund issued a public announcement to recruit managers for its sub-funds. The Luzhou Phase I Industrial Guidance Fund is a fund of funds (FoF) jointly initiated by local state-owned asset platforms and investment entities under Luzhou Laojiao, namely Puxin Capital and Puquan Company. It has a planned total size of RMB 5 billion, with an initial subscribed capital of RMB 1 billion.

The announcement indicates that the fund primarily invests in key sectors including baijiu (food, light industry, and textiles), energy and chemicals, electronic information, equipment manufacturing, advanced materials, pharmaceuticals and healthcare, aerospace, and robotics, thereby supporting the cultivation of emerging industries and the optimization and upgrading of advantageous and characteristic industries.

It is understood that the Luzhou Phase I Industrial Guidance Fund is managed by Puquan Company. As a specialized fund management company under the Luzhou Laojiao Group, Puquan Company currently manages 10 private equity funds with assets under management of approximately RMB 2.3 billion. Its investment focus centers on sectors such as new energy, new materials, semiconductors, defense industry, and biopharmaceuticals.

Luzhou Laojiao also operates another major investment platform, “Jinduo Investment.” As of the end of 2023, Jinduo Investment had directly or indirectly participated in a total of 15 funds in the equity investment sector, with 181 underlying portfolio companies. Among these, 34 companies have gone public, and 5 are in the IPO application stage.

In Nanjing, Yanghe Distillery and Jinshiyuan have formed a consortium to invest in the biopharmaceutical sector.

In January 2023, Yanghe Distillery Co., Ltd. announced that the Huatai-Yanghe Fund of Funds (FoF), in which the company invested RMB 3 billion, had completed regulatory filing. To date, the Huatai-Yanghe FoF has invested in seven sub-funds, including two funds primarily focused on biopharmaceuticals: the Huatai GenScript Fund and the Hainan Qishen No. 1 Fund.

In October 2023, Yanghe Shares participated in the establishment of the Suqian Huatai Industrial Development Fund on October 18. The fund will focus on investing in innovative and technology-driven enterprises in fields such as new technologies, new economies, general health, and mass consumption.

Among the aforementioned funds, Jinshiyuan also contributed RMB 150 million to invest in the Huatai GenScript Fund. Furthermore, as early as 2019, Yanghe Shareholding and Jinshiyuan invested RMB 120 million and RMB 150 million, respectively, in the Zijin Hongyun Fund.

Investment Funds, Enterprises, and Investment Directions of Selected Baijiu Companies; Source: Company Announcements, Qichacha, and Other Public Information

In terms of results, liquor companies have reaped substantial rewards from their investments in the biopharmaceutical sector.

Taking the Zijin Hongyun Fund, which was invested in by two liquor companies as a consortium, as an example, the fund has invested in 27 biopharmaceutical enterprises, including Yikelai Biotechnology, Kuanyue Orthopedics, Hengyu Medical, and Genetron Health.

Jinshiyuan’s earlier investment in the Nanjing Huatai Grand Health Fund has backed 20 companies, including Simcere Diagnostics, Xinqing Medical, and Juyi Technology, among which Hua Ren Health, Shuyu Civilian Pharmacy, and RemeGen have successfully completed their initial public offerings (IPOs).

Looking at the alcoholic beverage industry,Among the more than 20 listed baijiu companies, establishing funds to invest in biopharmaceuticals is not yet a common practice. However, once these enterprises make such strategic moves, they commit substantial capital and engage in deep collaborations with professional investment institutions.

Why Are Baijiu Companies Making Biopharmaceuticals a Key Investment Focus?

A notable phenomenon is the repeated presence of synthetic biology and related technology companies among the enterprises invested in by these liquor manufacturers, such as Yikelai Bio, Bestzyme, and eCyte.

Synthetic biology has emerged as a prominent niche field in recent years, with applications spanning biopharmaceuticals, agriculture and food, energy and environmental protection, cosmetics, and other sectors.

In 2024, at its corporate science and technology innovation conference, Moutai stated that its future development should center on its innovation chains in material science, biological science, and life sciences to accelerate the growth of emerging industries and strategically plan for future industries. It identified the bioeconomy, with synthetic biology as its technological core, as a key direction for developing emerging industries. Furthermore, Moutai emphasized strengthening research into innovation chains such as life sciences to expedite its strategic layout in both emerging and future industries.

Baijiu undergoes multi-strain fermentation, and its production methods have been profoundly influenced by an unprecedented technological revolution. Synthetic biology, a frontier field internationally, represents a disruptive technology in the new wave of industrial revolution.In the long term, the development of synthetic biology will help deepen our understanding of microorganisms, enhance control over microbial communities, and resolve production instabilities caused by microbes in traditional fermentation processes.

In the short term, portfolio companies can even establish strategic or business collaborations directly with investors.

Hong Xuanzhe, General Manager of eCyte, told VCBeat that as early as 2020, Kweichow Moutai Group had collaborated with the Single-Cell Center of the Qingdao Institute of Bioenergy and Bioprocess Technology, Chinese Academy of Sciences (the source of eCyte’s core technologies) on R&D projects for microbial indicator detection during the pile fermentation stage. Furthermore, as the lead unit for application development and demonstration topics, Moutai participated in the 2022 National Key R&D Program project titled “R&D of Basic Scientific Research Conditions and Major Scientific Instruments and Equipment,” hosted by eCyte. Together, they advanced the application of single-cell Raman spectroscopy in solid-state fermentation processes to explore technological innovations in Baijiu brewing craftsmanship.

“Based on our in-depth collaboration with the Moutai Group in recent years, the Moutai Fund Company took notice of us and made a strategic investment,” said Hong Xuanzhe.

Another phenomenon is that, in recent years, with the growing supply of alcoholic beverages and the diversification of consumer attitudes, liquor companies are also facing the reality of “involution.” As the leader among leaders,Some listed companies are accelerating their diversification efforts. In addition to entering the broader health sector through products such as health-oriented alcoholic beverages, they are also venturing into biopharmaceuticals and various other industries via equity investments. Through these equity investments, liquor enterprises aim to identify new growth drivers.

Moutai established Zhaohua Fund, Jinshi Fund, and the Sci-Tech Innovation Fund primarily to leverage the advantages of professional investment institutions and enhance capital returns. “Moutai’s funds invested in us not only because of our partnership with Moutai, but also due to the broad application prospects of our technology,” said Hong Xuanzhe. The company will focus on fields such as bio-intelligent manufacturing, synthetic biology, microbiome detection, biopharmaceuticals, and cell therapy, accelerating the industrial application of its technologies and products.

Looking at the companies invested in by Yanghe Shares and Jinshiyuan, in addition to the aforementioned field of synthetic biology, their portfolios also cover niche sectors such as antibody drugs, small nucleic acid therapeutics, high-value medical consumables, pharmaceutical retail, and consumer healthcare. This diversified investment strategy helps investors identify optimal growth opportunities.

Certainly, from the perspective of revenue and profit, the performance created by leading baijiu companies remains beyond the reach of many other enterprises.

According to the annual report, in 2023, Moutai recorded revenue of RMB 150.56 billion and net profit of RMB 74.734 billion; Luzhou Laojiao reported revenue of RMB 30.233 billion and net profit of RMB 13.246 billion; Yanghe Co., Ltd. also achieved revenue in the tens of billions and profit at the billion-yuan level.

Despite robust revenues and profits, liquor companies still adhere to certain criteria when selecting general partners (GPs) for equity investments.

Taking the “Luzhou Puxin Fund,” a fund of funds directly capitalized by Luzhou Laojiao Group, as an example, data from Qichacha shows that the fund has established subsidiary funds in collaboration with more than 30 investment institutions. Among these, it has partnered with Gaoxin Capital eight times, with Dingxing Quantum six times, and with Zhaoxi Capital and Suizhen Investment four times each.

Having laid out its equity investment strategy for many years, Luzhou Laojiao has also engaged in extensive cooperation with market-oriented investment institutions. The aforementioned institutions include professional investment firms specializing in hard-tech sectors such as semiconductors, advanced manufacturing, and new energy. Suizhen Investment, an alumni investment platform of Zhejiang University, leverages the resources and network of the Zhejiang University ecosystem to invest in fields such as artificial intelligence and healthcare/pharmaceuticals.

Moutai’s newly established fund has partnered with China Merchants Capital and Jinshi Investment, respectively, while Yanghe Shares and Jinshiyuan have repeatedly collaborated with Huatai Zijin. All these partners are renowned investment institutions backed by local state-owned enterprises or central state-owned enterprises.

Based on existing public data, liquor companies either prioritize “stability” by partnering with general partners (GPs) backed by state-owned capital, or emphasize “specialization” by collaborating with professional investment firms in niche sectors. In either case, this reflects the companies’ prudent approach to capital allocation.

However, given the inherently long investment cycles of the biopharmaceutical sector and the direct impact of policy factors on market dynamics during commercialization, overall industry investment has slowed in the past two years. On one hand, the industry requires greater financial support from well-capitalized industrial players such as liquor companies; on the other hand, liquor companies need to lay the groundwork by investing in numerous hard-tech sectors, including biopharmaceuticals, to secure a more sustainable and far-reaching future. What synergies will emerge from the convergence of these two sectors? It is certainly worth watching.

References:

Securities Daily: Synthetic Biology Accelerates the "Technological Revolution" in Baijiu

Guan Dian Wang: Moutai’s New Private Equity Fund Makes Debut, Expanding Liquor Industry Venture Capital Layout from New Energy to Pharmaceuticals