CAT 2024 Question Paper | VARC Slot 3

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The passage below is accompanied by four questions. Based on the passage, choose the best answer for each question.

Moutai has been the global booze sensation of the decade. A bottle of its Flying Fairy which sold in the 1980s for the equivalent of a dollar now retails for $400. Moutai's listed shares have soared by almost 600% in the past five years, outpacing the likes of Amazon. . . .

It does this while disregarding every Western marketing mantra. It is not global, has meagre digital sales and does not appeal to millennials. It scores pitifully on environmental, social and governance measures. In the Boy Scout world of Western business it would leave a bad taste, in more ways than one.

Moutai owes its intoxicating success to three factors—not all of them easy to emulate. First, it profits from Chinese nationalism. Moutai is known as the "national liquor". It was used to raise spirits and disinfect wounds in Mao's Long March. It was Premier Zhou Enlai's favourite tipple, shared with Richard Nixon in 1972. Its centuries-old craftsmanship—it is distilled eight times and stored for years in earthenware jars—is a source of national pride. It also claims to be hangover-proof, which would make it an invention to rival gunpowder....

Second, it chose to serve China's super-rich rather than its middle class. Markets are littered with the corpses of firms that could not compete in the cut-throat battle for Chinese middle-class wallets. And the country's premium market is massive—at 73m-strong, bigger than the population of France, notes Euan McLeish of Bernstein, an investment firm, and still less crowded with prestige brands than advanced economies. Moutai is to these well-heeled drinkers what vintage champagne is to the rest of the world.....

Third, Moutai looks beyond affluent millennials and digital natives. The elderly and the middle-aged, it found, can be just as lucrative. Its biggest market now is (male) drinkers in their mid-30s. Many have no siblings, thanks to four decades of China's one-child policy—which also means their elderly parents can splash out on weddings and banquets. Moutai is often a guest of honour.

Moutai has succeeded thanks to nationalism, elitism and ageism, in other words—not in spite of this unholy trinity. But it faces risks. The government is its largest shareholder—and a meddlesome one. It appears to want prices to remain stable. Exorbitantly priced booze is at odds with its professed socialist ideals. Yet minority investors—including many foreign funds—lament that Moutai's wholesale price is a third of what it sells for in shops. Raising it could boost the company's profits further. Instead, in what some see as a travesty of corporate governance, its majority owner has plans to set up its own sales channel.....

In the long run, its biggest risk may be millennials. As they grow older, health concerns, work-life balance and the desire for more wholesome pursuits than binge-drinking may curb the "Ganbei!" toasting culture [heavy drinking] on which so much of the demand for Moutai rests. For the time being, though, the party goes on.

Question 14 : Which one of the following is both a reason for Moutai's success as well as a possible threat to that success?

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Explanatory Answer

According to the passage, Moutai has succeeded thanks to nationalism, elitism and ageism. It faces risks due to government meddling, lack of corporate governance and aging millennials being prompted to put an end to the heavy drinking culture due to various factors.
The passage identifies ageism as both a reason for Moutai's success ("The elderly and the middle-aged, it found, can be just as lucrative") as well as a threat ("In the long run, its biggest risk may be millennials. As they grow older, health concerns, work-life balance and the desire for more wholesome pursuits than binge-drinking may curb the “Ganbei!” toasting culture [heavy drinking] on which so much of the demand for Moutai rests"). So, option 3 is the correct choice.
Note that Moutai's appeal to the rich is not identified as a threat to its success.
Government involvement in the business is only identified as a threat, not reason for success.
Chinese love of liquor-filled celebration is a reason for and not a threat to Moutai's success. As millennials grow older, they may put an end to the heavy drinking culture and it is that which poses a threat to Moutai.

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The question is " Which one of the following is both a reason for Moutai's success as well as a possible threat to that success?"

Hence, the answer is 'Its appeal to the older age group.'

Choice C is the correct answer.

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