In the past two years, business models, channel structures, and consumer demands have been changing, placing China's commercial distribution business in a state of continuous transformation. The commercial distribution business has entered a knockout stage, requiring distributors to possess increasingly strong capabilities. More brand owners are shifting their approach to collaborate with local distributors to co-manage markets. However, in this process, we also observe a gap between distributors' operational goals and the value brand owners expect. Against this backdrop, New Distribution leveraged its exclusive distributor network resources to independently research and publicly release the "2023-2024 China FMCG Distributor Business Condition Survey Report" (hereinafter referred to as the "Report"). Through in-depth research on 302 medium and large distributors across different categories nationwide, the Report aims to present the true state of distributors in a complex market environment. It is intended to provide a valuable reference for distributors and brand owners, stimulate deep thinking about the future development of the FMCG market, and promote closer cooperation and mutual growth between manufacturers and distributors. The full Report will be publicly released at the 6th China FMCG Conference & 3rd China FMCG Hard Discount Conference & 3rd China FMCG Distributor Conference, held from August 20-22, 2024. This article excerpts some data and content from the Report for sharing.
Multi-category distributors generally have higher average business scale than single-category distributors
The market has entered a stage of grabbing cake; if others do more, you naturally do less. To capture more market share, distributors must upgrade their "weapons and equipment." Multi-category operation is one of the core directions for distributor upgrades. The 302 distributors surveyed cover more than 14 categories, including water and beverages, convenience foods, leisure snacks, rice, flour and oil, condiments, ambient dairy, chilled dairy, daily chemicals and household cleaning, personal care, paper and hygiene products, beer, other alcoholic beverages, ice pops and ice cream, and frozen packaged foods. We found that multi-category distributors account for 58.3%, and except for the condiment category, multi-category distributors generally have higher average business scale than single-category distributors. Distributors tend to adopt multi-category portfolio strategies to meet diverse consumer needs, enhance market competitiveness, and improve risk resistance.
Integrated online-offline multi-channel operation is the direction for distributor development
The market is changing rapidly, especially with the emergence of new channels, which more or less impact distributors. However, channel changes are an inevitable outcome of industry progress; distributors must not only adapt but also learn to leverage them. Many distributors realize that relying on a single channel is too risky, and online-offline integration is necessary. Although offline channels remain mainstream in distributor coverage, more distributors are adopting integrated online-offline operations and multi-channel coverage. According to the Report, the proportion of distributors with integrated online-offline operations is 38.7%; among distributors covering both upper and lower-tier cities, the integration rate is higher at 70.8%; and among large distributors with revenue over 300 million RMB, the integration rate is the highest at 76.2%.
Only 55% of distributors met brand sales targets; 63.2% saw profit decline
In the first half of this year, New Distribution visited a large number of distributors, and the common feedback was that business is indeed difficult this year. The economic downturn is one factor, but more importantly, the market is being redistributed, with various new channels such as snack stores, discount stores, and flash warehouses dividing the offline business. This has intensified competition among local distributors, making difficult business the norm. Among the surveyed distributors, analysis of the achievement rate of distributors' Top 1 brand sales targets shows that only 55.0% of distributors met their brand sales targets in H1. In terms of operating profit, 18.2% of distributors saw profit growth, 18.5% remained flat, and 63.2% saw a decline. The data indicates that overall, distributors faced significant challenges in H1. Additionally, New Distribution analyzed by scale and model, finding that larger distributors and those with integrated online-offline operations performed better. Among super-large distributors with revenue over 300 million RMB, 66.7% met brand sales targets, with an average achievement rate of 102.6%, and both revenue and profit performed outstandingly. By category, water and beverage distributors performed strongly, convenience food and condiment distributors were relatively good, while beer and leisure snack distributors faced greater pressure.
Core drivers of distributor business growth
Products and outlets In the Report, New Distribution also surveyed the challenges distributors face. Externally, on one hand, sluggish market demand and low-price competition among peers make sales harder and continuously compress profits; on the other hand, emerging channels such as snack stores, community group buying, and e-commerce significantly divert consumers, squeezing survival space. Internally, various costs continue to rise, especially personnel costs, market promotion expenses, and warehousing and logistics. Against this backdrop, the survival environment for distributors has indeed become more difficult. However, there are still some distributors performing well, and the Report summarizes the drivers of their revenue and growth. The rise in distributors' operating revenue is mainly due to adding more categories, brands, and products, expanding terminal outlets and business regions, and channel expansion. Improving operational efficiency and increasing sales at existing outlets are also key factors. The rise in distributors' profits mainly relies on sales growth and product mix optimization. Improving operational efficiency and optimizing low-profit channels can also significantly boost profits. Due to space limitations, only a small portion of the survey data and results are shown here. The complete survey data and findings will be publicly released at the 6th China FMCG Conference & 3rd China FMCG Hard Discount Conference & 3rd China FMCG Distributor Conference, held from August 20-22, 2024. Additionally, at the conference, New Distribution's Chief Content Officer Yuan Lai and Consulting Partner Wendy Li will provide an in-depth interpretation of the "2023-2024 China FMCG Distributor Business Condition Survey Report." Interested friends are welcome to scan the QR code to inquire about the conference details!