---
title: "First Step of Supermarket Reform: 'Squeeze' Distributors, Second Step: 'Drive Crazy' Brand Owners?"
description: "At Yonghui Superstores' 2025 Global Supplier Conference, Ye Guofu proposed supply chain reform, explicitly eliminating intermediaries, which caused an uproar in the industry. Intermediaries are essentially distributors in the traditional distribution chain who handle logistics and advance funds. On the surface, only distributors seem affected, but historically, distributors have often acted as 'workers' for brand owners. As supermarket reforms proceed, upstream brand owners will inevitably face a new set of game rules."
author: "汪海"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2025-05-13"
categories: "Brand Marketing, Dealer Operations, Retail Formats"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/aj0t4uSsq9yNA04EMzRzpQ"
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citation: "汪海. “First Step of Supermarket Reform: 'Squeeze' Distributors, Second Step: 'Drive Crazy' Brand Owners?.” New Distribution, 2025-05-13. https://xinjignxiao.com/en/articles/first-step-of-supermarket-reform-squeeze-distributors-second-step-drive-7f5c085d/"
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---

# First Step of Supermarket Reform: 'Squeeze' Distributors, Second Step: 'Drive Crazy' Brand Owners?

> At Yonghui Superstores' 2025 Global Supplier Conference, Ye Guofu proposed supply chain reform, explicitly eliminating intermediaries, which caused an uproar in the industry. Intermediaries are essentially distributors in the traditional distribution chain who handle logistics and advance funds. On the surface, only distributors seem affected, but historically, distributors have often acted as 'workers' for brand owners. As supermarket reforms proceed, upstream brand owners will inevitably face a new set of game rules.

At Yonghui Superstores' 2025 Global Supplier Conference, Ye Guofu proposed supply chain reform, explicitly eliminating intermediaries, which caused an uproar in the industry.
Intermediaries are essentially distributors in the traditional distribution chain who handle logistics and advance funds. On the surface, only distributors seem affected.
But as is well known, historically, distributors have often existed as 'workers' for brand owners. As supermarket reforms proceed, upstream brand owners will inevitably face a new set of game rules.
Recently, I visited several distributor bosses who supply to reformed supermarkets. Under the 'strong wind' of reform, how should the tripartite relationship be coordinated? How should brand owners cooperate with reformed supermarkets? In this article, I share what I have learned.
# **What Are Supermarkets Adjusting and Changing?**
Over the past year, 'Pang's reform' has brought the long-quiet supermarket sector back into consumer view. Many leading and regional supermarkets have joined the reform wave.
On one hand, they focus on optimizing product structure, adjusting fee mechanisms, and upgrading supply chains; on the other, they require upstream suppliers to offer direct, net-price deals and provide services to stores.
Whether leading enterprises or regional supermarkets, all have been reforming in the past two years, with remarkably consistent steps.
Take the newly opened Yonghui Superstore in Zunyi as an example.
In product structure, they streamlined SKUs, highlighted bestsellers, and increased the proportion of private label and exclusive products.
The store originally had 20,543 SKUs; they removed 14,169 and added 4,345. After adjustment, the product structure is 80% similar to Pangdonglai, with imported goods rising to 12%, forming a triple competitive edge of 'local characteristics + quality selection + Pangdonglai same items'.
In display and terminal resources, the height of central island shelves was reduced from 2.4 meters to 1.6 meters, and main aisles widened to 2.4 meters. Shelf, end-cap, and stack resources are now more biased toward brands with excellent sell-through performance.
In channel fee systems, traditional entry fees and barcode fees were abolished, emphasizing a 'sales contribution orientation'.
Almost all reformed stores use this model as a basic template.
In the traditional model, supermarkets 'rented' shelves to brands, charged fees, and brands distributed products through distributors, relying on price elasticity with 'high pricing + promotions' to maintain profits.
In the reformed model, supermarkets take back shelf control, select products and set prices independently, implement direct net-price deals, streamline SKUs, and develop private labels.
These reforms undoubtedly have a major impact on the entire value chain of the FMCG industry, forcing all participants to re-examine and adjust their strategies and operational models to adapt to rapid market changes.
For brand owners, supermarket reform is not only a challenge but also a survival-of-the-fittest screening.
# **What Impact Does Reform Have on Brand Owners?**
**1. Higher entry barriers; mid-to-low-tier brands find it hard to enter.**
From the streamlining of SKUs and allocation of display resources, many of the cut products are from mid-to-low-tier brands.
In the past, mid-to-low-tier brand products often had inflated prices in supermarkets, leading to a situation where sales only occurred with promotions. But with the 'one-step' pricing rule, mid-to-low-tier brands naturally become the main targets for elimination.
**2. Shelf capacity is compressed, intensifying competition among surviving first-tier brands.**
After reform, supermarket shelf space becomes limited. Previously, to add more shelves and collect more fees, aisle space was minimized, with two medium shopping carts almost completely filling the aisle between two shelves.
Now aisles are widened, and shelves have changed from traditional 2.4-meter high shelves to 1.6-meter low shelves. This indirectly indicates that the living space for major brands in supermarkets has been drastically compressed.
With limited shelf resources, brands that remain on shelves are allocated evenly, with each brand getting roughly three to four columns. Therefore, many first-tier brands are also being asked to reduce SKUs.
**3. Stack displays are eliminated, end caps use a scheduling system, hindering brand new product launches.**
In the past, stack displays were relatively easy to obtain through personal connections or payment. Today, reformed supermarkets have eliminated stack displays, which will undoubtedly increase the difficulty of launching new products.
Although many end caps have been added, it is understood that end caps are scheduled, and only those scheduled can use them. Launching new products through end caps may be very difficult.
**4. Impact on traditional regional distribution networks.**
Previously, brand owners had their own complete distribution network systems in each region. Under the old shelf-selling system, brands had to set high prices to leave margins for distributors and funds for promotional activities.
With the advancement of direct net-price deals, the original operating rules are gradually becoming ineffective, and brand owners' regional distribution networks will inevitably be impacted.
This logic was dominated by brand manufacturers, so brands are very passive in the face of rule changes. The larger the brand, the more mature the distribution network, and the greater the impact.
1) Traditional distributors may be marginalized due to direct procurement or net-price cooperation, potentially leading to a decline in brand regional coverage. Distributors need to transform into service-oriented, sell-through-focused category operators, not as brand promoters but as retailer buyers.
2) Net-price policies compress brand profit margins, making it impossible to adjust channel profit distribution through promotional fees.
3) Product and brand power are redefined. No sell-through means no shelf space; products must have high turnover and high contribution; even strong brands need to continuously innovate hit products to avoid 'slow-moving elimination'.
# **Suggested Response Strategies for Brand Owners**
**Facing the reform trend, different types of brands should have different response strategies:**
**1. Head brands: Deepen collaboration, work with regional category operators to help supermarkets 'sell' better.**
Here, I must mention the term 'category operator'.
Although 'eliminating intermediaries' is underway, it is not difficult to see that what is being eliminated are mostly small traders without the ability to undertake. Most distributors with good category management and operation capabilities will naturally be the best candidates in this reform.
For example, as reported by New Distribution, Chen Yixin of Haocheng Pet Products. He turns the pet category into whole-shelf output, providing one-stop solutions for supermarkets.
Mr. Chen serves many reformed supermarket stores. From festive displays to daily pet activity planning and operations, Haocheng takes the pet category to the extreme, providing excellent service to downstream supermarkets.
He also manages upstream brands, from quality to price, ensuring that products on supermarket shelves are almost at the same price as e-commerce. Therefore, most first-tier pet product brands directly seek cooperation with Mr. Chen.
**2. Mid-tier brands: Flexible breakthrough, work with suppliers to launch joint customizations for supermarkets. Focus on specific tracks, differentiate, and accumulate data assets.**
I once visited a supplier of a snack food category for Pangdonglai in Xuchang. Based on Pangdonglai's requirements for products, he proposes customizations to brands and requests reasonable resources.
Unlike traditional distributors, these suppliers are more like 'buyers' for supermarkets, customizing good products with suitable packaging and specifications based on supermarket needs.
Brands can also leverage their presence at Pangdonglai, using Pangdonglai's endorsement to market to reformed supermarkets nationwide.
**3. Emerging internet-famous brands: Curve layout; supermarkets are not the primary battlefield; prioritize e-commerce and community group buying to build public awareness; select a few KA stores for trial to obtain real sell-through feedback.**
Although reform raises entry barriers and most low-tier brands have slim chances, based on my visits, cooperation is not entirely impossible. Many reformed supermarkets also select products that perform well on e-commerce channels for shelf placement.
However, it is still necessary to note whether internet-famous products will have 'discomfort' when going offline, and whether they can accurately identify offline customer groups. This will be a great test for emerging internet-famous brands.
Final Thoughts
At the 10th China FMCG Innovation Conference, we released the '2024-2025 China FMCG Channel Change Research Insight Report'.
Undeniably, channel changes have been rapid in the past two years. Whether it's the rise of hard discount snack stores, the expansion of community savings supermarkets, or the ongoing supermarket reforms, all have caused great unease among FMCG practitioners.
Reform is a screening and an evolution.
Supermarket reform reconstructs the channel order of the FMCG industry. For brand owners, this is a comprehensive capability test. Only brands with true product strength, sell-through capability, channel strength, and organizational strength may become the biggest winners in the new round of industry concentration.


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## Citation metadata

- Publisher: New Distribution
- Author: 汪海
- Published: 2025-05-13
- Canonical: https://xinjignxiao.com/en/articles/first-step-of-supermarket-reform-squeeze-distributors-second-step-drive-7f5c085d/
- Original source: https://mp.weixin.qq.com/s/aj0t4uSsq9yNA04EMzRzpQ

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