In the current market, among many functional beverage brands, the most outstanding and promising is undoubtedly the local functional beverage brand Dongpeng Tequila.

Recently, rumors circulated that Dongpeng Tequila would cut its four business centers (internally called business divisions), eliminate all business teams, no longer retain business divisions (regions) and city sales office structures, dismiss all business personnel, and hand over market operations previously directly managed by the company's business teams to distributors...

As soon as the news broke, it attracted industry attention: What does Dongpeng Tequila intend to do?

Manufacturer's response: The rumors are false; three models will be adopted in parallel.

Just when everyone expected Dongpeng Tequila to make another move, why would it suddenly cut its business team and hand over market operations to distributors? The Food and Beverage Journal (Shiyinjun) sought confirmation from Dongpeng Tequila, which replied that the news was "untrue."

Dongpeng Tequila stated that the rumor of cutting the business team was false, and the layout of the five major business divisions across the country remains unchanged. The only change is that the general approach of channel refinement will be divided into three models based on actual conditions, market maturity, and retail store layout: company refinement, distributor refinement (key account system), and large circulation system. In mature markets, the company will continue to lead refinement services; in certain regions, for a few distributors with strong capabilities and networks, the company will assist in management, better leverage distributor value, and avoid redundant resource allocation; for growing markets with sparse populations, company refinement would waste manpower, so funds will be packaged and allocated to distributors to strengthen their teams, with distributors leading development.

"We have made new breakthroughs in leveraging new technology to restructure corporate marketing models, specifically by using one-item-one-code and cap-opening scanning to connect with the C-end (consumers), enabling the company headquarters to directly market to consumers. On this basis, the company also uses one-item-one-code and box-opening scanning to connect with the small b-end (retail stores), enabling direct marketing to small b-ends (retail stores). Through these two connections, we achieve a direct handshake with consumers and retail stores."

Dongpeng Tequila emphasized that although one-item-one-code and cap-opening scanning have improved communication efficiency with terminals and consumers and solved some traditional drawbacks in the FMCG distribution chain, contributing to its rapid development in recent years, it does not mean that business teams are no longer needed. That logic is completely wrong. The Chinese market is too large, and brand development is uneven across regions. Therefore, Dongpeng Tequila's adoption of three models—company refinement, distributor refinement (key account system), and large circulation—is a pragmatic, locally adapted, and more efficient approach to integrating market resources. For Dongpeng, there has always been an imbalance between north and south development. The parallel adoption of three models should be a change based on greater respect for market differences.

Distributor confirmation: Annual sales exceeding 5 billion is not a problem.

After receiving Dongpeng Tequila's reply, the Food and Beverage Journal also communicated with Dongpeng Tequila's distributors.

Among them, one distributor reported that his region had not yet implemented this. He also said that some places might be selected for pilot testing, which is good for distributors because more market expenses would ultimately be in their hands. But if it were flat management, that would be bad, because after refinement, some counties originally belonging to large distributors would be carved out, making market areas smaller, which would hurt old distributors and feel like "killing the donkey after it finishes grinding."

Another distributor said that his region was currently negotiating the implementation of the above policy and was bargaining with the manufacturer. In his view, under this policy, distributors would advance expenses, and the manufacturer's expense allocation process is cumbersome, coupled with payment terms, which invisibly increases distributors' financial pressure.

However, according to the Food and Beverage Journal, Dongpeng Tequila's market operations in Xinjiang have always been handled by distributors, with all salesperson expenses shared by the manufacturer and distributors. Therefore, this policy has no impact on local distributors.

It is worth mentioning that when the Food and Beverage Journal asked about this year's market performance, the above distributor said that Dongpeng Tequila's sales have indeed increased this year, and the brand's overall annual sales exceeding 5 billion should not be a problem.

In summary, Dongpeng Tequila's current channel strategy of three parallel models has also been confirmed by distributors.

Pros and cons of distributor refinement

Nowadays, implementing distributor refinement is nothing new. After all, its benefits are obvious: it helps strengthen channel quality by supporting quality distributors, optimize the number and quality of distributors, reduce management difficulty and logistics distribution costs, and reduce the difficulty of redeploying sales support personnel while improving per-capita efficiency and output.

For example, since Master Kong introduced channel refinement 20 years ago, FMCG companies have invested a lot of manpower and resources in distribution, stocking, display, and promotion, making many distributors only responsible for functions such as capital provision, warehousing and distribution, and settlement.

Nongfu Spring also attempted channel refinement as early as 2015. However, this process did not mean no sales personnel assistance; rather, it required shifting the focus of management and service to jointly improve regional output efficiency.

Meanwhile, Mondelez officially implemented the large distributor system last year. With the large region as a unit, only one distributor is retained in each prefecture-level city, county-level distributors are abolished, and all markets are assigned to prefecture-level city distributors. Secondly, manufacturer sales personnel are incorporated into the distributor's staffing and paid by the distributor.

However, in the face of the vast Chinese market, distributor refinement is not a panacea.

First, although distributor refinement consolidates resources in the hands of a few strong distributors with good networks, which is conducive to optimizing resources, those eliminated distributors or those at the end of the supply chain in third- and fourth-tier markets, once they lose the backing of a strong brand, may largely lose their supply advantages in channels and terminals. Therefore, for this considerable group, switching to competing products becomes a necessary and inevitable choice. At the same time, a large amount of "combat power" will be directly lost in third- and fourth-tier market channels, giving competitors an opportunity.

Second, under the distributor refinement system, as sales targets increase, the pressure of deep distribution on distributors also rises sharply. If this pressure cannot be effectively channeled and alleviated, it may become a "hidden mine."

Third, distributor refinement ties the market to a small number of key accounts. Compared to entrusting the market to more distributors, the risk of being held hostage is higher.

In fact, no business model in the world is flawless. The large distributor system, like the traditional "meticulous cultivation and channel sinking" human-wave tactic, is just a channel strategy, with no right or wrong.

Future prospects are promising

Now it seems that Dongpeng Tequila is indeed a patient brand.

As is well known, Dongpeng Tequila has always been picking up market share behind Red Bull, skillfully avoiding direct confrontation with the unicorn in terms of product packaging, product strategy, and product pricing. After more than a decade of accumulation, Dongpeng Tequila's wish to surround cities from rural areas is gradually being realized. When Red Bull became mired in brand disputes, it began to bide its time.

To seize this opportunity, Dongpeng Beverage Group has not only been steady in product strategy but also invested heavily in marketing methods.

In addition to investing heavily in sports marketing and brand building, Dongpeng Tequila uses one-item-one-code and cap-opening scanning activities to sell the red envelope splash screen to other companies for advertising, and then returns the advertising fees to consumers, thereby attracting fans. Dongpeng Tequila stated that currently, the number of C-end consumers who have scanned codes has reached 100 million, with daily active users exceeding 3 million, and B-end retail store registrations exceeding 1 million.

These measures are also directly reflected in sales data. From 2015 to 2017, Red Bull China's sales were 23 billion yuan, 21 billion yuan, and 19.6 billion yuan respectively, and its market share fell from 63% in 2016 to 58% in 2017. According to Hu Yajun, deputy general manager of Dongpeng Beverage Group, in 2017, Dongpeng Tequila completed its annual sales task ahead of schedule in August, with annual sales exceeding 4 billion yuan, a growth of 40%.

Regarding how to maximize the benefits of the 1 million merchant members, Dongpeng Tequila responded: One-box-one-code is just the beginning of direct dialogue with terminal outlets. It is a good tool and a good entry point, and in the future it will undertake more management and service missions. In today's market, cash flow, people flow, logistics, and information flow have undergone tremendous changes. How to use the power of technology to restructure marketing scenarios is a proposition that every FMCG company must face and continuously explore.

When the unicorn Red Bull is dragged down by trademark disputes, Dongpeng Tequila, following closely behind, is not content to remain the industry runner-up but continues to increase efforts in marketing innovation and channel reform. Therefore, it remains one of the most anticipated functional beverage brands.

Source: Food and Beverage Exchange Internal Reference (ID: SYHNC8)

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