In a prefecture-level city, achieving annual sales of 50 million yuan is not uncommon, but doing so with only one brand is rare. Most distributors, after expanding their scale, tend to represent multiple brands to seek new profit growth points. Honghua Trading, located in Qinzhou, Guangxi, is a distributor focused solely on the Mengniu brand. In a fifth-tier city with a population of only 1.38 million, it relies on one brand, 2,500 retail outlets, and 25 salespeople to achieve annual sales of 50 million yuan. Recently, New Distribution had a conversation with Mr. Fu Wenlong, founder of Honghua Trading. Over 19 years, from a specialty store to a trading company, focusing on only one brand, how did he maintain growth in both sales and profits?

-01- Who Says You Can't Make Money with Just One Brand?

In 2001, Fu Wenlong opened a Mengniu specialty store in Qinzhou called Qinzhou Longhua Food Store, which was the predecessor of Honghua Trading. At that time, he was just a sub-distributor for the local distributor, with only him and his wife, and a human-powered tricycle, going door-to-door selling milk, selling about 500 boxes per month. In 2004, a turning point for Fu Wenlong, he became a first-tier agent for Mengniu through hard work, expanding the team to 5 people, and the business began to grow from that year.

Mengniu agents are divided into four levels: A, B, C, and D, with A being the highest. From 2004 to 2017, over 13 years, Honghua Trading rose from D level to B level. Sales also increased from an initial 500 boxes per month to the current 100,000 boxes per month. In 2008, Fu Wenlong represented Mengniu's national small and medium ambient customers in major corporate decisions, becoming one of the 15 members of the decision-making committee.

After the business scale grew, Fu Wenlong also tried representing other brands such as mineral water and Vitasoy, but with more brands, various problems emerged.

First, it was impossible to focus on one thing; he had to handle tasks and expense issues from various manufacturers. Salespeople couldn't find their work focus, and visit efficiency dropped significantly.

Second, although sales seemed to increase, at the end of the year, the accounts showed no more profit than before. Spending more time, energy, and money with low input-output ratio was not cost-effective.

Through comparative analysis, Fu Wenlong decided to focus on Mengniu and only represent one brand. Honghua Trading became a single-brand distributor focused on Mengniu, with stable growth in sales and profits each year. After concentrating his efforts, Fu Wenlong spent more time learning, focusing on internal management and improving salesperson efficiency.

Fu Wenlong mentioned, "Many distributors have been in the market for over a decade. Under the influence of manufacturers, they have a complete set of processes for distribution and sell-through of terminal market products. So, for distributors, the key is how to make salespeople seriously execute the processes."

To this end, Fu Wenlong, through learning and exploration, designed a unique compensation plan. To increase employee motivation and retain excellent employees, he also innovated a new method of internal employee management.

-02- Profit Sharing to Make Employees Think

The milk industry faces a problem: short shelf life, making it easy to produce near-expiry and expired products. Unconditional product exchange means salespeople, with a fixed monthly salary, are unwilling to do these troublesome tasks.

To solve this, Fu Wenlong designed a unique compensation system: basic salary + profit sharing + rewards. The basic salary is based on the completion of basic work by salespeople, which they must complete, such as store coverage rate, display share, and expense usage rate.

Rewards are based on basic assessments, such as rewards for new store development: 5-10 yuan per new store; single-store upgrade rewards: small stores are divided into 80 stores, 20 stores, and MA stores; when they meet the standard for upgrade, salespeople receive rewards.

The core part is profit sharing, which is more refined than the partner model or dividend system.

First, divide the area: each salesperson is responsible for a fixed area. The company's policies, expenses, and landed cost are given to the salesperson, and even promotional intensity is disclosed. Whether the product is 12+1, 6+1, or has contract discounts, everything is transparent. The potential profit of the area and the gross margin are told to the salesperson, who shares with the company according to a ratio.

The size of the store determines the sharing ratio. Large stores have high sales and profits, require less time and effort, so the sharing ratio is lower; small stores and mom-and-pop stores have lower sales and profits, and require more time, so the sharing ratio is higher.

80 stores: sales profit shared 70/30, with the salesperson taking 70% and the company 30%.

20 stores: sales profit shared 20/80, with the salesperson taking 20% and the company 80%.

MA stores: sales profit shared 10/90, with the salesperson taking 10% and the company 90%.

Through this sharing, salespeople's mindset changes; they are more willing to see themselves as owners of the area rather than employees, and they can earn money without spending a cent.

Fu Wenlong told New Distribution, "Salespeople can do the math; they will proactively think about problems and solve them. When fighting with competitors, they will also proactively propose ideas, plan, and actively attack competitors."

For example, previously, when a competitor's promotion was 18+1, salespeople would apply for 13+1 to compete with a bigger promotion, killing 1,000 enemies and losing 800. But now, if 12+1 can compete, they won't easily adjust to 10+1.

Salespeople will find ways to use value-added services like display and logistics instead of promotions to attack competitors, because they first think about profit; if profit is low, their share is low, and they won't be happy.

Fu Wenlong told New Distribution, "The key to profit sharing is price transparency, so employees fully trust you." Many distributors worry that if prices are transparent and employees know the landed cost, there might be issues of interest entanglement. Actually, the worry is unnecessary; employees are smarter than we think. And paper can't wrap fire; if the clerk knows the company's landed cost, no one can guarantee the clerk won't leak it. Secondly, if you trust employees, they will willingly work for you.

Through the reform of the compensation model, Honghua Trading's salespeople earn about 30% more than local peers, over 65% of employees have worked for more than 5 years, employee turnover has greatly decreased, and company income has grown steadily.

-03- The Best Way to Retain Employees: Get Along with Them

Fu Wenlong told New Distribution, "The success of a distribution business is based on understanding market demand. Salespeople run the market every day and understand market demand better than we do. What distributors need to do is retain them."

1. Give Employees What They Want

Each year, have employees write a life plan, including goals and rewards. Find the breakthrough point of desire from employees' life plans; when salespeople achieve a certain level, give them the rewards they want.

For example, if an excellent employee wants a car, the boss pays the down payment, but a contract must be signed requiring the employee to stay for 5 years. If they leave before 5 years, they must return the down payment; if they complete the 5 years, they don't have to return it.

2. Send Employees to Learn

Many employees have a desire to learn; give them opportunities. Visiting excellent companies not only helps salespeople discover their shortcomings but also makes them feel valued by the boss.

Moreover, Honghua Trading has a small class every week where everyone exchanges and learns, and every employee has the opportunity to present on stage.

3. The Boss Should Know How to Have Fun

Besides senior employees, most of the company's staff are post-90s, whose characteristic is loving to play. As the boss, to maintain team enthusiasm, you need to be able to play with them and manage in the direction of fun.

For example, organize team-building activities every quarter, and let these post-90s employees plan them. Many post-90s like sports and playing ball; the boss can actively participate and get along with employees.

-04- Future Directions for Distributors

Many distributors are pessimistic about the distribution business, but I don't think so. Society has developed with division of labor; brand owners cannot sell all products through online channels.

The existence of the distributor group has its value; this group is the key to achieving the last mile. No matter how community new retail or online-offline develops, distributors are indispensable.

Online ordering is possible, but business requires emotional communication; many things can only be conveyed through communication.

Now, every brand has its own online channels. As brand agents, distributors should also adapt to the situation, keeping up with online-offline communities, and even live streaming.

The pandemic is an opportunity. Previously, online selling was hard for many customers to accept, even mistaken for pyramid schemes. But after the pandemic, new retail methods like community group buying and community selling have gradually been accepted by customers. Distributors should seize the trend and grasp it in time.

Secondly, the dividend period of the distribution business has long passed. As the tide recedes, to achieve long-term success, you must ultimately return to core competitiveness. Fu Wenlong believes there are three core competencies:

First, the ability to replicate talent. Only when distributors have a core team does entrepreneurship begin. Enterprises need a mechanism to replicate talent and cultivate management talent. Outsiders may not necessarily be good; talent is cultivated by the company, not poached from the industry.

Second, the ability to connect with terminal customers. Cultivate the team's closeness with terminals, so that salespeople not only talk business with customers but also teach customers how to do business, such as vivid display and online traffic techniques. If you can provide such value-added services, their business will get better and better, and they will definitely be grateful, favoring you in customer relations and displays.

Third, the ability to focus. Focus means going all out to do this thing, and the relationship between distributors and upstream brand owners will get better and better. When manufacturer-distributor relations are harmonious, everything is twice the result with half the effort. If the relationship is bad, it's just you scheming against me and me scheming against you, which is meaningless.

In conclusion: Regarding the company's development, Fu Wenlong told New Distribution that he has sufficient confidence in the brand and the industry. In the future, the company will adhere to a team-centric approach, combining online new retail and live streaming, and continue to deepen the milk market.

Returning to the distribution business, in New Distribution's view, there are two future directions for distributors: brand service providers and channel suppliers. Whether relying on brands to directly operate terminals as upstream brand service providers, or deeply cultivating network channels as channel suppliers, the core cannot be separated from people.

The case of Honghua Trading regarding employee motivation is worth learning from for other distributors. Through profit distribution, let employees share the money well; through innovative management, let employees have a sense of belonging to the company and reach consensus with the boss. Only when distributors and salespeople reach consensus and align goals can the enterprise have a healthy growth environment.