Introduction: In the working model of brand owners, writing well is often more important than speaking well.

Author | Chen Siting Review | Gou Gou Layout | He Wen

"Alas..." In the middle of our chat, Lao Liu let out a long sigh, looking worried. Lao Liu is a distributor for Brand A, a leading beer brand in the domestic market, in a prefecture-level city in the southwest. He is said to have been doing well in recent years, with continuous market growth and several commendations. When I met him in April, he was troubled by the fact that in March, he had been caught in more than 30 cases of cross-province product dumping.

Brand A's Zero Tolerance for Product Dumping

Product dumping is a common problem. Brand owners have always regarded it as the culprit that disrupts market order and the pricing system, and they have formulated various "strict laws and severe punishments" to combat it, but they have never been able to eradicate it, and it is unlikely they ever will. Why does product dumping occur? As long as there are policy differences between markets, there will always be the possibility of dumping; as long as there are channel promotions within a region, channel conflicts will arise. Marketing activities and product dumping are almost two sides of the same coin. The harm of product dumping is self-evident, and for a leading beer company like Brand A, it places great emphasis on preventing and controlling it. Therefore, in 2021, Brand A established a dedicated department for handling complaints, verification, and processing of product dumping, with vertical management, completely independent of the company's marketing system. At the same time, it formulated very strict penalty measures, with penalties for every instance of dumping, starting from a single case. In March of this year, just after Brand A headquarters repeatedly emphasized its zero-tolerance attitude toward product dumping, Lao Liu's products appeared in multiple terminals in a neighboring province. In just one month, more than 30 cases of dumping were detected. If penalties were imposed according to the rules, his company would have to close its doors. What really made Lao Liu feel depressed and wronged was that he had not engaged in dumping at all, and he had no idea why the products were dumped so far away and so many times. But the products were indeed his. Facing the impending penalties, he felt both aggrieved and unable to defend himself, unable to prove his innocence.

Cases like Lao Liu's are not uncommon among distributors of first-tier brands. Some distributors do engage in dumping and have to accept the penalties; but there are also those like Lao Liu who did not dump but cannot prove their innocence and end up swallowing their anger and accepting the penalties. I decided to have a good talk with Lao Liu to see if we could sort out some ideas.

Unraveling the Mystery

How Did Lao Liu's Products Get Dumped?

"Have you ever been penalized for product dumping before?" I asked Lao Liu first, to see if he was a repeat offender.

"No. I've been with Brand A for six years, and I've never had a single record of dumping. My growth has come from following the manufacturer's requirements and guidance to build a solid market foundation. If I had a record of malicious dumping, I wouldn't have been able to be selected as an excellent distributor." Lao Liu answered with certainty.

"Beer logistics costs are not low. Why would the same products be dumped across provinces so far? Is there a big policy difference?" I wanted to compare the policy differences between the two markets.

"The policy difference is definitely significant. In our market, Brand A's market share is only about 10% to 20%, so we are the attacker. The neighboring province is a base market, the defender. Our market investment is definitely much larger." Lao Liu said frankly.

"Can you tell me how these dozens of dumping cases were discovered? What characteristics do they have?" I continued to ask.

"These dumping cases were all complaints received on the complaint platform. As for characteristics, the goods are very scattered; each dumping case involves very few items, three to five pieces, and some even just one piece. I can't figure out why either." Lao Liu also looked puzzled.

"Was your sales volume in March normal? Did it increase significantly?" Planned dumping is either to reduce inventory or to boost sales.

"There was no significant increase; it was relatively normal." Lao Liu replied.

"Since sales were not abnormal, why didn't you appeal, or why did your appeal fail?" I pressed further.

"I appealed, but the anti-dumping department wanted to check inventory. My system inventory didn't match the actual inventory, so I couldn't prove that I didn't dump." At this point, Lao Liu was also frustrated.

"That's strange. Dozens of dumping cases, each with just a few items, and dumped so far away—what's the point? Have you had any analysis or guesses?" I felt there might be a possibility, but I needed Lao Liu to confirm.

"We guessed there are two possibilities. One is a local B2B platform. Before the Spring Festival, we reported that it had dumped A beer products with damaged codes, and the regulatory authorities fined it 50,000 yuan. It might be deliberately retaliating against us. Another possibility is the local leading brand C beer. In the past two years, we have made rapid progress in the market, with growing share. They have launched multiple counterattacks with little effect, so they might use this method to harass us. But these are just guesses without evidence. The sales department also agrees with our analysis, but the company's anti-dumping department operates independently and will not accept it." Lao Liu shared his guesses but felt helpless about the outcome.

Solving Complex Problems

Distributors Should Be Good at Writing "Reports"

"I roughly understand the situation now." I decided to have a thorough discussion with Lao Liu on how to avoid being blamed for dumping.

In fact, in front of first-tier brands, most distributors find it difficult to have a completely equal dialogue. Many distributors encounter problems similar to Lao Liu's, such as dumping, market expense reimbursement, and market target setting, but because they don't communicate correctly or don't know how to communicate, they are forced to suffer "unjust losses."

"Mr. Liu, you've been cooperating with Company A for so many years and know it well. No brand owner's management is intended to deliberately target distributors. First, we must firmly believe that Brand A's anti-dumping system is designed to maintain the market, not to 'deal with' distributors, and it is certainly not unreasonable; it can be communicated with..." Looking into Lao Liu's eyes, I analyzed for him.

"Second, your appeal must be written as a report. Many bosses like to complain verbally or send voice messages on WeChat, but they lack the habit and ability to write down their situation in a report." At this point, I emphasized again, "In the working model of brand owners, writing well is often more important than speaking well."

"Take your case as an example. You just told me so many details. If you didn't write a report, how long do you think senior leaders would listen to you? Could you explain clearly? Would your words be more credible than written text and supporting materials? Even if the leader agreed with you, what should he do? Directly tell the team below? That's definitely not the working model of a leading brand company like Brand A." I fired off so many rhetorical questions at Lao Liu that he was a bit stunned.

"So, everything should be reported in writing, and the more important the matter, the more so. Only a written report can systematically explain your problem and attach your supporting materials; only a report can enter the brand owner's work system, be escalated level by level, and allow managers at all levels to comment and forward it, effectively solving complex cross-departmental problems. Relying on verbal communication is neither credible to the company nor effective in handling matters. But it is precisely here that many distributors suffer in silence." Hearing this, Lao Liu seemed thoughtful and couldn't help nodding repeatedly.

"Third, how should you write the appeal report for being caught dumping?" After my long digression, I finally got to the key point, and Lao Liu couldn't help straightening up.

"The report should explain the matter clearly and be divided into three parts. Part One: State the basic facts clearly. The goods are yours, but you really didn't dump them. Don't admit to something you never did, but explain why. You have a good past record and materials from excellence awards to support it; you have no motive for dumping. Your sales in March were also normal, so you had no benefit from dumping. This basic fact should be stated clearly. It doesn't matter that your inventory doesn't match the system; this is a management deficiency that 90% of Brand A's distributors have. You should improve your management, but this cannot prove that you dumped."

"Part Two: State your and the regional sales team's guesses and analysis of this dumping incident. Whether or not this was done by competitors, you must portray this abnormal dumping behavior as the competitor's doing in the report! How should you analyze it? It is precisely because of your excellent market performance in recent years, having repelled multiple encirclement campaigns by competitors, that the competitors, finding no other way, have exploited Brand A's strict and vertically managed anti-dumping system to deliberately use 'small quantities, multiple times' dumping to make the manufacturer heavily penalize the distributor, disrupt morale, and damage the manufacturer-distributor relationship before the peak season."

"Part Three: List your market achievements in recent years and, importantly, obtain the recognition and evaluation of the regional manager. The logic of the entire presentation is this: The market has grown too fast in recent years, competitors are at their wit's end, and they have finally resorted to despicable competitive tactics. We must not fall for their divisive scheme. Finally, express your firm determination to win the market!"

"Why is this report most likely to gain recognition and support? First, it is the most likely truth. If you don't want to be penalized, you have to put the blame on the competitor. Second, being targeted by competitors is not shameful; on the contrary, it shows that you are doing well, and the regional manager and branch company also share the glory, so approval at each level should not be a problem. Finally, since this dumping incident was designed by competitors, the manufacturer must not fall for it, so they definitely should not penalize you."

Hearing this, Lao Liu finally had a sudden realization. After thinking for a moment, he felt that this was indeed the case and couldn't help chuckling.

On April 26, Lao Liu called me to say that after investigation, the company determined that the March dumping incident was most likely the work of competitors, so no fine was imposed. He was greatly encouraged and full of energy, ready to give competitors a lesson in the upcoming peak season.

Afterword

More and more brand owners are gradually transforming their frontline market organizations into supervision and management roles, while the main work of market operations is being handed back to distributors. A new type of manufacturer-distributor relationship is forming. However, in this new relationship, many distributors suffer heavy losses because they don't use the right language and methods to communicate with manufacturers. The old relationship maintained by eating and drinking is now the most primitive and fragile. Only by mastering professional communication language and methods with brand owners can distributors adapt to the new relationship, dispel unnecessary misunderstandings, obtain the market support they need, and sustain a good integrated manufacturer-distributor relationship.

In June 2023, New Distribution took the lead in the FMCG industry to launch the "Distributor Member Club." We organized over a hundred outstanding FMCG distributors from across the country to share their successful experiences and wisdom, jointly assess future development trends, and learn and grow together! Among them, the topic "How to learn to communicate with manufacturers using new language and methods in the era of new manufacturer-distributor relationships?" will be interpreted in subsequent exclusive sharing sessions for members of the Distributor Member Club. Distributor friends are welcome to scan the QR code below to actively participate.

Author Bio: Chen Siting, CEO of New Distribution, senior FMCG media professional, and consulting advisor. Former editor-in-chief of "Sales and Marketing" magazine, marketing consultant for Tanmu Crafts, and founder of the internet supply chain project "Wanchaobang." He has studied the Chinese market with a professional perspective, conducting in-depth research and practice in brand planning and communication for consumer goods, distributor model transformation and upgrading, and supply chain innovation and reform.

Extended Reading