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Lao Wang's market is being split
Every dealer wishes for "higher sales and more profit," but most are destined not to achieve this.
Dealer Lao Wang, who has been in the industry for over 20 years, was once a "godfather" figure among local channel dealers. In a northern market known for being "barren," he maintained annual sales of around 100 million yuan. Together with two other local dealers, they staged a "Romance of the Three Kingdoms" in the local food industry, with almost every brand controlled by these three.
Initially, Lao Wang played the role of "Cao Wei" in this "Three Kingdoms," being the strongest pole: he held many Fortune 500 brands, and most notably, controlled the major domestic children's beverage brands.
But good times didn't last. Several brands with lower sales successively proposed "divorce" to Lao Wang! What angered him was that these brands chose Lao Huang—the weakest pole in the "Three Kingdoms"—as their "remarriage" partner!
At that time, Lao Wang thought, "If they want to leave, let them. Without going out to explore, they won't know how high the mountains are or how deep the waters are! They rely on Lao Huang, who has never done children's beverages. Don't blame me for not remembering old times!"
But facts proved Lao Wang wrong!
More than half of those "divorced" brands gained new life, with average annual growth rates exceeding those of Lao Wang's brands. Among them, Brand C, in the two consecutive years after 2011, had sales surpassing Lao Wang's second-largest brand in the industry!
As a result, Lao Wang had to do a lot of "welcoming and seeing off" work and made many "statements." As the market declined, factory inspections and even fines naturally increased.
"When it rains, it pours." Just as Lao Wang was in a bind, another piece of bad news dragged him into the abyss: the industry leader he represented planned to split his market. The supermarket channel would be directly managed by the factory's sales department, leaving Lao Wang only the traditional retail channel and township markets!
In Lao Wang's view, the trigger was just a minor friction three months ago. Was it necessary for the factory to be so furious?! Which dealer doesn't have a little temper, and which dealer hasn't thrown a drunken tantrum?
Lao Wang was truly indignant. Last year, he had responded to the brand's call and spent a lot of money on market infrastructure, such as store signs, additional personnel and vehicles, and key display renovations. He had also borne a considerable portion of the costs. If he gave up the distribution rights, wouldn't all his invested resources be like making a wedding dress for someone else!
Listening to the factory boss's high-sounding explanations about long supermarket payment cycles and how the factory's direct operation would ease their financial pressure, Lao Wang cursed inwardly: "Bullshit! Isn't this just taking advantage of a crisis? Now that the market is doing well, you come to pick the ripe fruit?"
But in the end, the arm cannot twist the thigh. Lao Wang reluctantly signed the "treaty under the city walls" with the factory.
Playing with fire or tightening the red line?
What Lao Wang saw as a trivial matter was, in the factory's view, rich in information. Moreover, Lao Wang had made the same mistake countless times.
This "trivial matter" was as follows:
After the Spring Festival, children's beverages entered the off-season. To ensure the year-on-year growth rate didn't turn negative, make the compound growth rate look better, and to attack Brand C while maintaining the leading position, the key channel department, led by the regional manager, targeted Lao Wang's market. They selected a best-selling probiotic beverage from the product line, positioned similarly to Brand C's main product, and planned a promotion:
A certain amount of subsidy per case, with terminal prices offering single-bottle specials or buy-multiple-get-one-free, resulting in a price reduction of 15%. Moreover, based on last year's average monthly sales volume during the off-season and this year's targets, they set a promotional purchase base volume for Lao Wang. On top of the per-case subsidy, they offered different purchase rebates at 105%, 110%, and 115% thresholds.
Such promotional intensity far exceeded that of major competitors. According to management's inference, with the brand effect of the industry leader and greater resource investment than main competitors, at the very least, they could temporarily halt Brand C's rapid momentum, right?
Initially, everything seemed on the right track. Lao Wang's purchase volume exceeded the base by 115%, regional reports looked good, and Lao Wang made a lot of real money.
However, the good times didn't last long.
After more than a month, Lao Wang's loud voice rang out: "This probiotic has a shelf life of only three months. Now more than half of the shelf life has passed. To sell it, we need a 'big discount,' and supermarkets require us to make up the price difference. I'm losing a lot on this product, so the company must take responsibility!"
Moreover, Lao Wang's wife kept pressuring the sales staff, and the frontline marketing representatives and city managers bore the brunt. Enduring the scolding and harassment from Lao Wang and his wife was their daily routine. Lao Wang always believed that he must overwhelm the factory's salespeople in momentum to squeeze out policies, because if you don't challenge others, they will challenge you!
When Lao Wang's market had problems, he didn't solve them himself but directly pressured the factory. His famous saying was: "In business, 'seeking profit' is my 'duty,' and 'market development' is your factory's 'duty.' To do the market, we rely on the factory. If you don't 'bleed,' do you expect us to 'vomit blood' and risk our lives to conquer the market for you?"
This time, when the factory's salespeople said it was difficult to get expenses approved, Lao Wang was furious: "Is this your attitude towards the market? I will report your regional inaction to higher-ups. The company has repeatedly ordered no channel stuffing. What are you trying to do by forcing this on me?"
Lao Wang's anger was taken seriously. To avoid damage to the market from near-expiry products, the industry leader paid to resolve the dispute.
The company was not stupid. Why was inventory piling up so badly despite the investment?
A covert investigation into Lao Wang revealed that he had only implemented the company's policy in some supermarkets, and many terminal stores had not executed the promotional discounts at all. It was also unexpectedly discovered that Lao Wang had skimmed off the previous promotional policies, even including display investments in international hypermarkets!
Lao Wang cries, Lao Huang laughs
In stark contrast to Lao Wang, Lao Huang's business was thriving. By the end of 2012, Lao Huang's sales surpassed Lao Wang's for the first time, making him the strongest pole.
From weakest to strongest, Lao Huang took only three years. He knew best the hard work and wisdom involved.
Take the case of the industry leader's probiotic attack mentioned above. Besides seeking support from the factory, Lao Huang also counterattacked immediately. At the defensive and counterattack points, he made three major moves:
- "Scorched earth" in channels
★ In large supermarkets, he tried every means to place Brand C in the first position, adding more temporary aisle displays. His long-standing good relationships with supermarkets came in handy.
This minimized the promotional effect and announcement of the industry leader, using better positioning and increased displays to drown out and weaken the leader's special price effect.
★ In urban retail channels, Lao Huang required his market staff to start terminal visits one hour earlier, creating a time gap with Lao Wang's fixed visit schedule, thus preempting shelf space and capital.
★ In township markets, he increased visits from every three days to every two days, widening the gap with Lao Wang's four-day visit frequency. He also decided to accept barter for probiotic beverages: farmers had tight cash flow, so they welcomed exchanging agricultural products for goods. It was just a bit more trouble for him to convert the agricultural products into cash, but in reality, the net profit margin rose. Due to information asymmetry, farmers thought it was a good deal to exchange grain for goods at their doorstep!
Lao Huang believed that in rural areas where people live in clans, the advice of opinion leaders was crucial. So, he lobbied township leaders and county/city education department heads. Taking advantage of the "Nutrition Meal Project" in township primary schools and kindergartens, he made his represented Brand C the designated beverage supplier for "nutrition meals," with probiotics as a mandatory item. "Healthy beverages start with children!"
This channel was especially valued by Company C, which not only increased expense support for this channel but also listed Lao Huang as a model for channel development and a benchmark for learning!
- "Feint to the east, attack to the west" in product mix
Since you target my main product, I'll find your weak spot!
The industry leader's products have always emphasized "taste" and "intestinal absorption," but they didn't explain the direct link between nutrients and healthy growth. They only stressed that it was beneficial for children's growth and contained essential growth elements. However, they were vague about the direct physical changes probiotics bring to children after improving intestinal flora distribution.
Through previous market visits, Lao Huang discovered that consumers needed a direct sensory connection, even if it wasn't strictly clinically verified. If he could exploit the industry leader's vague claims, could he create a breakthrough?
He checked the ingredients and found vitamin D. From a nutritional perspective, vitamin D promotes calcium absorption, and the clear, intuitive effect of calcium is that children grow taller. So, on Lao Huang's suggestion, Brand C quickly adjusted its product structure in that market, with the main selling point being "strong bones."
- "Smear and defame" in promotional planning
After laying the groundwork, Lao Huang chose the most famous restaurant in the local area to hold an ordering meeting for retail terminals.
Lao Huang required: First, the venue's interior and exterior decoration should be exquisite, "grand" and "high-class," distancing from Lao Wang's always "stingy" image.
Second, the invitation list was deliberate. Besides key stores, he specifically selected some customers who had "stiff" relationships with Lao Wang, creating conditions for them to speak from experience and smear Lao Wang.
Finally, different products had different sales trends, so flexible promotional methods were needed: rebates, price discounts, bundled product purchases, lucky draws, and terminal construction awards (not just a few certificates, but real market construction funds, such as replacing manual hand trucks or directly giving goods as rewards).
This combination of positive and negative approaches stimulated the enthusiasm of retail terminals. "Follow Lao Huang, make money together, and live comfortably! Let stingy Lao Wang tremble!"
Dealer's advantageous capabilities
How can dealers effectively counter manufacturers? How can they avoid being flattened by manufacturers?
Manufacturers and dealers are business partners. Although manufacturers always talk about "partnership" and "win-win," this so-called partnership is not equal. Equality is based on strength. Without strength, you have no say; others will decide for you!
So, dealers must clarify: What core competitiveness makes the manufacturer listen to me? How can this core competitiveness be maintained long-term?
Some dealers might say, "I have a complete distribution system"—wrong. Distribution is just the most basic function of a dealer.
Some might say, "I have channel radiation capability; I have years of friendship with certain malls and distributors"—also wrong. Channels are fickle; they go where the benefits are.
Others might say, "I have excellent execution; I will 100% implement the manufacturer's requirements"—still wrong. Many manufacturers implement "dealer embedded management," trying to guide dealers in various ways. So, dealers just execute, and over time, your own thinking is "castrated." If you execute well, someone else will execute even better. Without the manufacturer, how would you survive?
So, having marketing capability is crucial.
A dealer's marketing capability should include the following aspects:
First, "product capability," like Lao Huang, by sorting out his product line, analyzing the opponent's product line weaknesses, and finding attack points.
Second, "channel building capability," which includes not only basic distribution, distribution, and execution capabilities but also the ability to discover new growth points and delay or weaken opponents. Lao Huang succeeded in the "Nutrition Meal Project" in township and village markets, and within the channel, he maximized the disruption of Lao Wang's offensive by adjusting delivery rhythm and display positions.
Third, "promotional planning capability." Lao Huang held an "ordering meeting," using a combination of positive and negative, orthodox and unorthodox methods to squeeze out channel momentum. Conventionally, promotion is a push, but Lao Huang made it reflect many pull elements.
Fourth, execution capability of core advantages.
Refined and professional management is the basic guarantee for leveraging core advantages.
For example, many dealers think that dividing into districts is enough, but in reality, dividing districts is not equal to contracting districts; assessment and follow-up are needed.
Unlike most dealers, Lao Huang set up a market performance assessment team, and he then assessed that team. The assessment scope included delivery frequency, service indicators, safety stock, delivery quantity, SKU per store, store coverage rate, and product shelf age, etc., with rankings. Those with low scores were assessed, and those with no improvement were transferred or had their districts split.
As for Lao Wang, he started as a mom-and-pop shop and still handles everything personally today. Although the vest has changed from "wholesale department" to "company," the spiritual core remains the same: despite the scale of hundreds of millions, he still uses the old "wholesaler" mindset. For petty profits, he has lost his integrity! Multi-headed leadership, bureaucratic habits, district personnel unchanged for years, no assessment, and under the big contract system, there's naturally a lack of vitality, and execution is greatly compromised.
Such a "transit warehouse" and "porter" for the manufacturer—anyone can do that job.
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