Reminder: Click the blue text above “FMCG Distributor Professional Consulting” to learn more about marketing and distributor internal management.

For dairy distributors, the pressure is obvious. Sensitive quality issues, frequent returns and exchanges, and persistently high inventory levels seem to be the norm in the dairy distribution business. Faced with these problems, how should distributors solve them?

In response, Wu Lijun, a Mengniu distributor in Shangyu, Zhejiang, believes that whether dealing with low-temperature or ambient milk, controlling near-expiry stock is always the top priority. Only by doing so can product quality be guaranteed, distributors be profitable, and the entire market advance steadily.

Since entering the industry in 2003, Wu Lijun has been dealing with dairy products. Initially, he was Mengniu's city manager in Wuxi, Jiangsu. After a year of training and accumulation, he transitioned to become a distributor and successfully secured the agency for Yili low-temperature milk in Changshu and Kunshan. In 2009, he moved to Shangyu, Zhejiang, and established Maoxin Trading Co., Ltd., this time choosing Mengniu ambient milk.

From low-temperature to ambient, although the types of products distributed changed, Wu Lijun did not relax his control over near-expiry points, which became the key to Mengniu ambient milk gaining a foothold in the Shangyu market.

In Low-Temperature, Profits Come from Managing Near-Expiry

Like many dairy distributors, Wu Lijun encountered many difficulties in the early stages of operating Yili low-temperature milk, with logistics being the most prominent. Wu Lijun explained that at that time, the Jiangsu region was supplied by Yili's Beijing plant, with deliveries arriving every two days. However, due to the long distance, orders had to be placed six days in advance, meaning two batches were always in transit. Additionally, due to capital and market constraints, early order volumes were small and did not meet the manufacturer's delivery standards, so he had to pick up goods himself from the Wuxi distributor.

This not only increased the difficulty of inventory management but also wasted a lot of time in transportation. Coupled with unstable sales, it easily led to a large number of near-expiry products.

"As the saying goes, in low-temperature, distributors earn money from near-expiry. Because low-temperature milk has a short shelf life, generally less than half a month, transportation takes at least two days, and by the time it reaches the store, it's the third day. The shelf sales time is at most a week. If sales are slow, the distributor must also guarantee unconditional returns, and these returns often become near-expiry products that are destroyed, with all losses borne by the distributor. Conversely, if near-expiry is well controlled, the distributor can achieve considerable profits," Wu Lijun told reporters. The near-expiry rate for low-temperature milk needs to be controlled within 5 points, meaning that for 100,000 yuan of goods, the final near-expiry products should be less than 5,000 yuan to be considered normal; otherwise, the distributor may incur losses. Given this, Wu Lijun worked on order planning, warehouse management, and terminal promotions to compress the near-expiry rate to a minimum. At the same time, sales of Yili low-temperature milk in Changshu and Kunshan steadily increased, and the manufacturer began direct supply.

Two years later, Yili established a branch factory in Suzhou, further improving transportation conditions, which created favorable conditions for reducing the near-expiry rate. Wu Lijun stated that at that time, the near-expiry rate for Yili low-temperature milk was only about 2 points, which not only protected product profits but also helped the company smoothly pass its initial stage. Near-expiry control thus became the first priority in Wu Lijun's business operations.

Transition to Ambient, Starting Near-Expiry Control from the Basics

In 2009, seeking better development, Wu Lijun came to Shangyu, Zhejiang, a more economically developed area, and specifically registered a trading company. This time, he chose Mengniu ambient milk as his agency product. When discussing the reason for switching products, Wu Lijun frankly stated that on one hand, the pressure of operating low-temperature milk was indeed high, and on the other hand, it was also an opportunity. At that time, Mengniu ambient milk's monthly sales in Shangyu were only over 1 million yuan, but the monthly near-expiry products were nearly 10,000 boxes, equivalent to about 400,000 yuan. Such a high proportion of near-expiry was unbearable for ambient milk, causing losses for distributors and easily triggering quality issues.

Wu Lijun analyzed the reasons, mainly three points: First, the market foundation was weak; in the ambient milk market in Shangyu, consumers' recognition of the Mengniu brand was not high. Second, frequent changes of distributors led to inadequate handling of terminal customer returns and exchanges, leaving a bad impression on customers and greatly reducing their enthusiasm for stocking. More critically, the price system was unstable; customers hoarded goods at low prices but couldn't sell them, and when products neared expiry, they demanded returns or exchanges, which inevitably put great pressure on distributors. However, refusing returns would lose customer trust.

After Wu Lijun took over Mengniu, the market situation remained severe, so he decided to start from scratch and effectively control product near-expiry by building a solid market foundation.

First, to restore the company's image in customers' minds, Wu Lijun decided to resolve the previous return issues in one go. Some customers reported that they had already disposed of near-expiry returns as bonus items, and he compensated them in full. Wu Lijun said: "Although the return problem was not caused by me, for the smooth progress of future work, these issues must be properly resolved. The key is to let customers see our sincerity. Only then can we establish a mutually trusting cooperative relationship." In this way, Wu Lijun took over all 400,000 yuan of returns in the market.

Second, re-establish the product price system and implement a unified supply price. In Wu Lijun's view, when customers say Mengniu doesn't sell well, the problem is not with the product but with the price. If distributors do not strictly control prices and blindly favor large customers by lowering prices, it may lead to their retail prices being lower than the supply price to small shop customers. For example, for yogurt, the normal supply price to small shops is 32 yuan per box, but some large customers might get it at 30 yuan per box and sell it at 31 yuan, which would inevitably harm the interests of small shop customers.

Moreover, if distributors only consider profit and sales volume while ignoring the smoothness of the entire sales process, they will ultimately suffer greater losses. Some large customers order large quantities, and distributors might think that even a 0.5 yuan profit per box is worthwhile. But in reality, if these goods cannot be fully sold during the actual sales process, the result is that the more they order, the more they return. Facing these returns, the distributor's losses cannot be compensated by the 0.5 yuan profit. Therefore, stabilizing product prices not only ensures the overall interests of customers and distributors but also promotes orderly and stable market development.

Wu Lijun stated that now, regardless of customer size, the company supplies at a unified price. Even if there are discounts, they are controlled within 0.5 yuan per box. Although this has also caused dissatisfaction among some large customers, in the long run, it undoubtedly better achieves a win-win situation.

Reducing Near-Expiry Products: The Key Is to Make Products "Sell"

Currently, Mengniu ambient milk's annual sales in the Shangyu area have exceeded 20 million yuan, while the annual near-expiry products are only 3,000 boxes, with losses basically negligible. Wu Lijun said that the reason Mengniu ambient milk's near-expiry can be controlled is that the products are now "selling." As long as terminal sales are fast, the number of returns and exchanges naturally drops significantly, thereby effectively reducing the occurrence of near-expiry products. Behind this is terminal service. To improve the quality of terminal service, the role of sales representatives must be leveraged.

Wu Lijun stated that in the past, it was more about the boss forcing sales reps to maintain customer relationships. Therefore, the first step is to enhance the initiative of sales reps, adhering to the principle of "more work, more pay," and telling them, "This area is fully under your responsibility. You are the boss. You are working for yourself." Second, let sales reps establish a correct service awareness. What is service? Many sales reps think they are one with the customer, working together to earn the boss's money. If a customer says there are five boxes of near-expiry products, the sales rep says there are ten. If the customer says the goods don't sell well and to order less, the sales rep simply says don't order at all... Sales reps habitually amplify customer feedback, which actually masks the real market situation.

Therefore, it is necessary to let sales reps understand the actual problems customers face and then help customers solve them together. "Now the company has over 900 outlets in Shangyu, all managed by our sales reps, strictly following a three-day visit schedule for maintenance. Through everyone's efforts, customers no longer say the products don't sell well, no longer bargain, and no longer argue over returns or exchanges. We also tell customers that they only need to be responsible for receiving goods and paying, and we will handle everything else, including warehouse stacking, shelf display, and date management, so customers have no worries."

Wu Lijun said that to avoid the occurrence of near-expiry products, the company has also strengthened the management of terminal product age. Products about two months away from expiry are exchanged among customers based on the sales conditions of different regions, or special promotions and bonus offers are organized in stores, thereby ensuring the smoothness of the sales process.

"When product sales are smooth, we can ensure that the products on the shelves are always fresh. More importantly, this allows customers to recognize your brand. In the past, when near-expiry control was not in place, the dates on the shelves were uneven, and customers would rummage through the shelves, always thinking that the products with better dates were hidden at the back. In fact, this is a sign of customers' distrust of the brand.

Now, we ensure that the products on the shelves are from the same production batch, and those with slightly older dates are taken out separately and given small gifts on top of the original price, such as cups or small toys, to interact with customers. Customers can choose according to their needs, no longer doubting product quality. This in turn drives terminal sales, thereby fundamentally solving the near-expiry problem."

Like this article? Feel free to click the top right corner to share it to your Moments.

About us: WeChat ID: FMCG Distributor Professional Consulting Management Account Introduction: 20 years of experience in FMCG distributor operations and management, professionally targeting distributor internal affairs.

Click the "Read Original" below to enter our micro-community for interactive exchanges and questions.

Learning and Exchange QQ Group: 344257092

Reply 1 to enter the micro-official website to view historical messages.