Creating one's own brand is almost every distributor's dream. But in the real market, few distributors succeed. This article discusses a practical case of a distributor building a private label. Located in Taizhou, Zhejiang, Hongdi Trading represents brands such as Vinda, Kotex, and Saky, with 22 sales staff covering over 1,700 outlets. At the same time, Hongdi Trading's own brand, Lvya tissue, has achieved the No.1 position in local supermarkets in Taizhou. Recently, New Distribution had an in-depth conversation with Mr. Lu Zhengfu, General Manager of Taizhou Hongdi Trading, about how he transformed from a wholesale business to a leading daily chemical trading company, and how he successfully built the private label "Lvya". We believe Lu Zhengfu's insights and strategies for trading business and private label management can offer some food for thought to other distributors. From Stall Business to Trading Business Hongdi's Growth Path Before entering the trading business, Lu Zhengfu and his wife ran clothing wholesale and shoe/hat businesses. Due to the nature of the clothing business, they had to travel frequently, which was very tiring. In 1998, when the local wholesale market opened, Lu Zhengfu brought his wife back to open a stall selling general merchandise, establishing Taizhou Hongdi Trading. In 1999, Hongdi Trading secured its first agency for a local sanitary napkin brand, and the business gradually got on track, shifting from wholesale to agency. In the following years, they successively obtained agencies for non-first-tier brands such as Bolisi, Guangdong Meiwang, and Hubei Shulei. However, over time, the disadvantages of non-first-tier brands became apparent: a large amount of near-expiry products piled up in the warehouse. Lu Zhengfu realized that this product structure was problematic: although the brands they represented had some regional recognition, they were ultimately third-tier brands with slow sell-through, and the profit margins were insufficient to support in-store promoters, leading to a passive position in the channel and weak ties with retail terminals. Moreover, some small manufacturers had almost no after-sales support, leaving near-expiry products unmanageable. After identifying the problem, Hongdi Trading adjusted its product structure in a timely manner, cutting some non-first-tier brands that were continuously losing money and lacked manufacturer after-sales, and attempted to shift toward first-tier brand agencies. By 2009, Hongdi Trading secured its first nationally renowned brand, Vinda. Previously, Vinda's annual sales in Taizhou were around 5 million yuan; in the first year of Hongdi's agency, they doubled Vinda's sales to over 10 million yuan. Vinda's success was not accidental; looking back over the past decade, Hongdi Trading made many moves. First, they improved the internal organizational structure and compensation system, and deepened store operations. Hongdi Trading divided its sales staff into two departments: Department One responsible for large stores, and Department Two for small stores. Different channels, different strategies, with no overlap. But whether for large or small stores, Hongdi Trading requires its sales staff to achieve the "Three No.1s": No.1 in terminal display position, No.1 in promotional slot resources, and No.1 in paper & hygiene category sales. At the same time, they set up in-store promoters at core stores for terminal interception. To date, Hongdi Trading's sales team has grown to 22 people, with Department One consisting of 7 sales reps responsible for 280 large stores, and Department Two consisting of 15 sales reps responsible for 1,500 small stores. Additionally, to reduce the difficulty for frontline sales staff and make daily market actions more efficient, Hongdi Trading breaks down monthly plans into weekly tasks, and further details how each store should operate; sales reps only need to focus on execution. In terms of compensation, Hongdi Trading fully respects the subjectivity and flexibility of frontline employees. The company has standard documents to guide store activities and promotions, but specific expenses can be controlled by the sales reps themselves. Hongdi Trading's compensation and performance model: 0 base salary, with commission based on per-store POS output plus profit commission. Additionally, accounts receivable are assessed, with a penalty of 2 yuan per day for every 10,000 yuan overdue. This compensation and management model not only reduces the burden on employees but also fully mobilizes their enthusiasm to work together to build the market and the brand. Vinda's success gradually gave Hongdi Trading some influence in Taizhou, but Lu Zhengfu was not satisfied. He told New Distribution: "The brands we represent belong to the manufacturers; if the authorization is revoked one day, the business is gone. Only by launching our own brand can the market and the brand be truly ours." Over the past decade, based on deep channel cultivation, Lu Zhengfu accumulated extensive market experience and channel resources. In 2010, he launched his own paper & hygiene brand—Lvya. Quality First Insights on Managing a Regional Leading Paper & Hygiene Brand With a first-tier brand leading the way, it was not difficult for Lvya to reach terminals, but how to make the private label gain traction and attract consumers was a challenge. In the early days of creating the private label, Lu Zhengfu summarized two key strategies: 1. Use a 1-square-meter display to feature only one SKU to capture consumer mindshare. When a brand is not yet well-known, terminals do not allocate many resources. How to maximize the use of limited resources? Distributors need to make trade-offs and sacrifices. Hongdi Trading's approach was to use a one-square-meter floor display for only one SKU. On one hand, it looks more impressive and eye-catching; on the other hand, repeating the brand in a small space quickly captures consumer mindshare. 2. Seize promotional opportunities and leverage supermarkets for brand publicity. During new store openings or supermarket promotions, offer larger discounts, such as buy-one-get-one-free or low-priced bestsellers. Use supermarket DM flyers and advertisements to promote the product and brand, increasing exposure. Additionally, for high-end private label products with higher prices, if they don't sell initially, consider giving them away or bundling them with other products to let consumers experience the product; once recognized, repeat purchases will naturally follow. According to Lu Zhengfu, in the early days of Lvya, there was no pursuit of quality; the core products used the cheapest pulp paper. Even with low prices and big discounts, it was hard to generate repeat purchases. And without repeat purchase rate, it is fatal for a startup brand. After realizing the problem, Lu Zhengfu adjusted his strategy and re-planned the brand direction: The first priority was to strictly control quality; only high quality can lead to high repeat purchase rates, ensuring long-term brand development. The upgraded Lvya insists on benchmarking quality against first-tier brands, maintaining a high cost-performance ratio in the same category. Second, focus on packaging; good packaging design can capture consumers' attention and enhance brand competitiveness. Lvya's packaging design uses green as the main color, simple and fresh, giving consumers a visual impression of high quality and comfort. Finally, create a price ladder to meet the needs of different consumers for affordable and high-end products in different usage scenarios. Currently, Lvya's facial tissue is available in five SKUs priced at 9.9, 15.9, 19.9, 22.8, and 25.8 yuan, with the two highest volume price points being 9.9 yuan (360 sheets) and 19.9 yuan (450 sheets). Toilet paper is mainly available in four SKUs at 9.9, 12.8, 19.9, and 23.8 yuan, with specifications of 800g, 1000g, 1680g, and 1800g. Different specifications and qualities form a price ladder to meet the diverse needs of consumers in different usage scenarios. After making a series of adjustments, Lvya's sales doubled in 2023, achieving the No.1 position in the paper & hygiene category in local supermarket systems. Lu Zhengfu stated: "There is no shortcut to sales; it comes down to three things: number of outlets, resource share, and display position. If these three are done well, as long as product quality is good, packaging design fits the brand tone, and promotions are added, terminals will definitely sell through." The Next Decade: Broaden Categories Horizontally, Deepen Channel Penetration Vertically Regarding future development, Hongdi Trading stated: Future business opportunities lie in small stores. On one hand, due to the impact of online e-commerce, traditional supermarkets are experiencing severe sales declines, and this will continue, but small stores still have vitality. On the other hand, the base of small stores is large; even if per-store output is low, selling 0.5 cases per store, multiplied by 5,000 stores, can distribute 2,500 cases. Moreover, when a trading company can cover 5,000 stores, it will have higher control and bargaining power over both upstream brands and downstream stores. This comes from scale. For daily chemical and paper & hygiene distributors, the core issue for small and medium stores is low per-store output for daily chemical products; a few brands alone cannot support turnover. Therefore, to maintain personnel costs while being profitable, it is necessary to do multi-category brand combinations. Currently, Hongdi Trading has a combination of first-tier brand Vinda and its own brand Lvya in paper products, ensuring both brand influence and profit. However, some categories, such as sanitary napkins, still have a relatively single brand. In the future, Hongdi Trading will continue to expand the breadth of categories and price points, using a combination of one or two major brands plus two or three well-known second- and third-tier brands to gain more gross profit. While maintaining its absolute dominance in paper & hygiene, it will also expand into laundry and oral care categories, having already taken on brands like Blueland and Saky toothpaste. Broaden categories horizontally, deepen channel penetration vertically. In the trading business, only by combining multiple categories can scale effects be formed, continuously enhancing influence in downstream stores, seizing more resources, and gradually forming a virtuous cycle. On March 14-16, 2024, during the Spring Sugar Fair, the 2nd China FMCG Distributor Conference, co-organized by New Distribution and Zhoupu Data, will be held in Chengdu. At that time, we will invite 16 benchmark distributor owners and relevant industry executives to share their latest thoughts on distributor business. On March 15, a closed-door private session for distributors will be held, titled "Low-price impact, manufacturer direct control, declining foot traffic: What are the options for distributors?" It will feature one-on-one dialogues with outstanding large distributors to share experiences, explore business opportunities, and discuss the era's dividends. **We hope to provide direction and set a beacon for distributors facing drastic changes today, so that at least their business direction is not blurred or confused! The 2nd China FMCG Distributor Conference is not only a grand gathering of knowledge, cases, and methods, but also a conference that leads the future development of distributor business! In this era of supply chain revolution, a new business era will be born. We hope every participant will still have a place in this wave, and we believe this will be a worthwhile conference! For conference business cooperation, please contact: 🔺Scan code for ticket inquiries🔺