Dear friends, As we meet through this letter, I am Yuan Lai from New Distribution. Recently, during a business trip, I visited a snack food distributor friend, Chen Hua (pseudonym), who has annual sales of 60 million yuan, mainly dealing in second- and third-tier brand snack foods. His overall business is doing well. Just two months ago, he independently opened a snack discount store. It's not a franchise, but a snack discount store he set up himself. The location was well chosen, and over the past two months, the store's business has been quite good. He is now preparing to renovate a second snack store. Regarding whether distributors can open stores? Before meeting this friend, I held a negative opinion, for simple reasons: First, many distributor bosses want to open stores out of a trend-chasing mentality, hoping to seize a wave of opportunity. But at this point, the dividend is basically gone. There are many examples of franchisees being exploited. Second, some distributor bosses want to open stores because they are already snack food agents. If they open their own stores, they can save on distribution links and achieve snack store prices, which is an advantage. But distribution and retail are two different businesses—one is trade, the other is retail. This was my perspective from the viewpoint of a distributor crossing over to retail. But after a deep exchange with Chen Hua, I was convinced. His core point is: Distributors are not crossing over to retail, abandoning their original trade, but rather, by opening one or two community snack stores, they truly understand retail logic and customer needs. Therefore, at the beginning of the article, I also suggest: Snack food distributors with strength and no intention of lying flat, with annual sales above 50 million yuan, if conditions allow, within a relatively controllable investment range, can consider opening three to five snack discount stores locally. Why such a big change? Listen to my friend's thinking. Distributors Opening Stores The Purpose Is Not to Become a Chain "Starting from June and July this year, I've been very anxious. After 10 years in trade, I've never been so anxious. Although I've faced periodic business declines before, in the past it was mostly competition among peers—if your business is better, mine is worse. I could only blame my own poor management and keep working hard. But now it's different. A local chain system of 100 snack stores means behind it is a snack food supply chain trading company. If one day they open the boundaries of their business and supply small and medium stores with bulk snack foods and other goods, distributors like us might not even get a sip of the soup." This is the real feedback Chen Hua gave me. It was precisely because he worried about not even getting a "sip of soup" that he opened his own snack store in September, at the earliest opportunity. Today's discussion is not about how the first store is doing, but his thinking after opening the first store. First, the purpose of opening stores is not to become a chain, but to feed back into the product structure of your own trading business. Currently, snack food distributors mainly focus on brand distribution, where upstream brands push distributors to sell products to downstream stores. Whatever the upstream pushes, the downstream sells. Most distributors' "butts" are seated on the stools of brand manufacturers, and they are completely unaware of the operational situation of downstream retail stores. Distributors' product agency is basically passive selection. Today this brand is selling well and growing fast; tomorrow that manufacturer comes through connections—all passive product agency. However, they ignore what downstream stores truly need. They simply sell products without knowing store operational metrics, category performance, or taste popularity differences. The purpose of opening three to five snack stores is: to personally engage, to shift your business mindset. Think from the perspective of retail stores, feed back into the distributor's product structure, adjust, optimize, and iterate. Based on consumer retail logic, distribute good products, rather than completely passively selling based on manufacturer agency. Second, the purpose of opening stores is not to become a chain, but to serve your own distribution stores. After opening three to five snack stores, you accumulate experience in product assortment management and store operations. When downstream distribution stores face competition and blockades from surrounding snack chain stores, you can consider helping them. Through accumulated product and store operation experience, help traditional mom-and-pop stores by empowering them, providing good-selling, sellable, and store-verified products. No franchise fees, no rebranding, still earning from supplying goods, thereby helping traditional distribution stores resist snack chains. Don't open stores as chains, let alone as a career. The chain trend has no opportunity left. Use store openings to understand retail store needs, and in turn help stores. Compared to traditional single mom-and-pop stores, distributors, whether in financial strength or cognitive ability, are somewhat higher. By opening three to five stores to empower, help small stores resist risks. At the same time, it's also a way to find a path for the continuous growth of your own trading business. Let's make a guess or assumption. If one day snack chains like Snack Busy, Zhao Yiming, or Snack Youming open the scope of their business, break operational boundaries, and set up a dedicated trading company to provide one-stop snack food supply platforms for traditional mom-and-pop stores. No franchising, no rebranding, only supply, and all good products at low prices (with absolute bargaining power from scale procurement), and products already verified in stores. Think about how much more our snack food distributors' business would decline? Some by 30% (losing wholesale distribution business), some possibly by 80% (losing direct coverage of distribution stores). Third, the purpose of opening stores is not to become a chain, but to digest some slow-moving products. This is easy to understand: with your own stores, you can set up special price zones or give good display positions for some slow-moving products from your trading business, helping to digest them. In the past, you could only give them away as benefits or, as a last resort, throw them away. Optimize the Product Structure of Trading Business from a Retail Perspective At this point, some snack food distributors who only cover supermarket systems might wonder: I don't do business with mom-and-pop stores; my focus is on local supermarkets and hypermarkets. Is it still necessary to open stores? I believe it is still necessary. Previously, I also exchanged views with relevant retail experts. The adjustment strategies for local supermarket systems to respond to snack discount stores focus on two directions:
1. Adjust the in-store snack food product structure
2. Adjust the snack food procurement cooperation model 1. Adjust the in-store snack food product structure First, lower the mainstream price band for bulk categories. For example, the mainstream price band for bulk snack foods in supermarkets is 20-30 yuan per 500g; adjust the mainstream price band to 10-20 yuan per 500g. Second, set up independent leisure snack zones, enrich categories: more SKUs, smaller specifications, lower average transaction value. Low average transaction value means that in the past, many supermarkets prioritized category in display, such as biscuits, candies, meat snacks, etc. In the future, the adjustment is to prioritize price in display, such as 9.9 yuan, 15.9 yuan, 20.9 yuan. Within the same price band, let consumers choose more. 2. Adjust the snack food procurement cooperation model First, for key products and key categories, manufacturers should sell directly, gradually removing distributors. If direct manufacturer sales are not possible, shorten the distribution level and must cooperate with first-tier distributors. At the same time, account payment terms are no longer the first priority; product and price are the first conditions. Second, set KPI assessment indicators for snack food procurement personnel. For example, monthly elimination rate of snack foods above 10%, mandatory continuous updating and replacement of snack categories, jointly with distributors to find and select products, and proactively introduce new products. Behind these two strategic directions, it shows that the cooperation between distributors and regional supermarket retail is no longer a simple trade supply relationship, but places higher demands on distributors, namely: category selection & operations experts. In short, distributors must understand products and retail, and can no longer just follow the manufacturer's lead like before. If you don't understand retail and their needs, sorry, we'll change distributors. If there's no suitable distributor, we'll directly source ourselves, integrating distribution and retail. Summary Finally, back to the beginning, I want to emphasize again: this article is not to encourage all snack food distributor bosses to open snack stores and abandon their original trading business. But rather, by opening three to five snack + community stores, truly go to the front line to understand retail needs and consumer needs. Ultimately, we must return to the main line: continuously iterate and optimize the trading business based on downstream customer needs, and achieve sustained business growth! So in 2024, how can FMCG manufacturers seize the dividend? Tonight from 20:30 to 21:30, we will connect on the New Distribution video account with Lian Jie, New Distribution's hard discount research consultant and author of "The Third Retail," and Ma Zheng, chief analyst of food and beverage at Cinda Securities, to discuss the theme "2024 White Label Dividend! How Should FMCG Manufacturers Seize It?" jointly exploring:
Supply-demand logic, the industrial environment for white label rise. 2. New channels carry new demand; whose dividend is white label?
Resources and capabilities, how to seize the opportunity? From March 14-16, 2024, the 9th China FMCG Innovation Conference & the 2nd China FMCG Hard Discount Conference & the 2nd China FMCG Distributor Conference, hosted by New Distribution and co-hosted by Anneng Zhilian, will be grandly held in Chengdu! The 2nd China FMCG Distributor Conference will be hosted by New Distribution and co-hosted by Zhoupu Data. On March 15, the 2nd Hard Discount Conference will spend a full day with discount retail industry experts, brand executives, etc., to re-examine new channels, new directions, new thinking, and new opportunities in the discount era! On March 16, a closed-door hard discount meeting will be held: hard discount models and operations, with one-on-one dialogue and discussion with expert teachers, sharing experiences, and discussing dividend opportunities in the hard discount era! In addition, at the conference site, over 3 days, with one main forum, one China FMCG Hard Discount Conference, one China FMCG Distributor Conference, and more than ten sub-forums and closed-door exchange meetings, we will meet with thousands of FMCG brand owners, distributors, retail transformers, and industry service providers from across the country in Chengdu, continuously brainstorming, and jointly discussing the challenges and opportunities, changes and ways out in the era of supply chain revolution. In this era of supply chain revolution, a new business era will be born. I hope every participant will still have a place in this wave. I believe this will be a conference worth attending! For conference business cooperation, please contact: