As the number of confirmed COVID-19 cases continues to rise, the strictest prevention and control policies in various provinces remain in place. This has had a huge impact on dairy distributors. At the end of 2019, dairy distributors began stocking up for the Spring Festival, hoping to achieve a strong start in sales in 2020. To secure prime locations in offline retail terminals, many distributors invested heavily in display fees and purchased end-cap displays in advance. However, as COVID-19 broke out in Wuhan and subsequently spread across many provinces, provinces implemented city and road closures, and residents stayed home. The entire consumer market has been bleak. And the most affected are dairy distributors. -01- Three Major Concerns of Dairy Distributors 1. Concern One: Stores with No Sales and Huge Inventory As the number of cases continues to climb, major cities have adopted various prevention and control measures, including road closures, city lockdowns, and reduced public transportation, all of which restrict consumer movement and directly cut off the dairy purchasing group. As of the seventh day of the Lunar New Year, many cities extended work resumption dates, delaying the return-to-city wave. Even in open retail stores, foot traffic remains very low, and dairy products with gift attributes are selling slowly. For distributors with large stockpiles, this is undoubtedly a devastating blow. A dairy distributor in Xi'an said that due to the epidemic, his whole family stayed in their hometown, and the epidemic had a significant impact on them during the Spring Festival, but there is currently no good solution. The distributor said that even during the SARS outbreak in 2003, dairy products were not as affected as now, and even saw slight growth. The main problem now is that no one is going out to shop, so any offline marketing activities are useless. 2. Concern Two: Short Shelf Life and Endless Despair With the increasing number of confirmed cases, provinces have delayed work resumption, and the return-to-city wave has been postponed. This will affect offline retail formats, and more worryingly, we cannot accurately predict when the epidemic will end. For dairy distributors, every day brings huge losses because dairy products have short shelf lives. Ambient dairy products have a shelf life of about 6 months, while chilled products have even shorter ones. During the Spring Festival, distributors' dairy stock was mostly produced in November, December 2019, and January 2020, with the former being cross-year products. Normally, during the Spring Festival in January, promotional activities could help clear these dated products, but due to the epidemic, the most optimistic estimate is that restrictions will be lifted in mid-to-late February, by which time these products will already be near their expiry dates for distributors. Even with promotions, it will be difficult to clear all of them. For chilled dairy products, the January batch is now close to or past its shelf life. If there were no sales during the Spring Festival, these products will be returned to distributors after the epidemic ends. 3. Concern Three: Who Will Bear the Losses for Dairy Distributors? Besides unsold goods and approaching expiry dates, dairy distributors also face the question of who will bear their losses. On one hand, distributors have already paid upfront for end-cap and display fees at retail stores during the Spring Festival, which are not cheap. On the other hand, distributors have used a lot of capital for stocking up, some even borrowing from banks. In addition to purchase costs and marketing expenses already paid, dairy distributors also face the inability to handle their own inventory and a large volume of returns and exchanges due to slow sales at retail terminals. Who should bear the losses caused by force majeure is a common concern among distributors. Some distributors said that SARS in 2003 did not seriously affect dairy products, so why has COVID-19 had such a huge impact? First, from an industry perspective, 2003 was a period of rapid growth for the dairy industry. At that time, dairy products did not have gift attributes; they were daily necessities. Now, dairy products have gift attributes, and the epidemic coincided with the Spring Festival. Additionally, consumers are shopping less frequently offline, and most distributor inventory has been transferred to offline stores. No customers, products approaching expiry, large inventory, and pressure from returns and exchanges—these are the three mountains facing dairy distributors. What should they do? -02- How Dairy Distributors Can Save Themselves 1. Discount Promotions Based on Epidemic Severity Distributors in areas with less severe epidemics can offer discount promotions at open retail stores. Although foot traffic has decreased significantly, there will still be some sales. Buy one get one free, buy two get three—even at a loss, do it. Quickly recovering capital is the main task for distributors now. 2. Partner with Residential Property Management for Home Delivery Today, a property management company in a Henan community issued a notice to provide purchasing services on behalf of residents. It is certain that even though consumers are trapped at home, their consumption needs have not decreased; they have shifted from offline to online. However, during this special period, logistics and express delivery are also affected. At this time, home delivery services highlight their advantages. Distributors can partner with surrounding community property management to offer milk delivery services. 3. Cooperate with Pharmacies During the epidemic, pharmacies are doing the best business. Consumers need masks, disinfectants, hand sanitizers, and even large quantities of Chinese patent medicines to fight the virus. Milk has the attribute of boosting immunity, so distributors can cooperate with pharmacies to offer a box of dairy products for purchases over a certain amount. 4. In Some Areas, Cooperate with Restaurants for Delivery Distribution In some areas, for chilled yogurt products, distributors can cooperate with open restaurants to distribute products through delivery, such as adding one yuan for yogurt. 5. Live Streaming Sales During the epidemic, tens of millions of people across the country are passing the time through live streaming. At this time, distributors can use live streaming to promote the nutritional value of dairy products and distribute goods through promotional activities. It is worth noting that distributors should mention their city during the live stream to attract local consumers, and can use same-city delivery to quickly deliver products. 6. Cooperate with Suspected Case Collection Sites Currently, to deal with the epidemic, various provinces and cities have designated places for collecting suspected cases, mostly in designated hotels and hospitals. Distributors can cooperate with such places to handle inventory through donations or low-price sales. 7. Promote Dairy Knowledge via WeChat Moments and Use WeChat Business for Distribution During the epidemic, consumers are scrolling through WeChat Moments every day. Distributors can mobilize relatives and friends to push dairy knowledge, product introductions, and prices in WeChat Moments daily, and distribute through WeChat business models. 8. Follow Industry New Media Timely After the outbreak, new media in the FMCG industry have been actively speaking out and spreading positive energy. For example, the FMCG industry new media "New Distribution" immediately established a communication group for post-epidemic trade distributors, summarizing distributor needs in a timely manner and building a supply-demand matching platform for distributors. 9. Wait for Enterprise Rescue During the epidemic, dairy companies and distributors are on the same front. Currently, most dairy companies have not resumed work, so support policies for distributors have not yet appeared. However, some companies have indicated that they will consider providing near-expiry subsidies and return/exchange policies for distributors based on the situation. But some distributors also said that companies are also struggling in this situation and are unlikely to provide large-scale policy support to distributors. After the outbreak, major dairy companies have made donations, including cash and large quantities of dairy products. Some of these products may come from distributor inventory, and later the companies will replenish distributors with new products. This might be a win-win choice. But it is certain that dairy companies will not abandon distributors in this crisis. As the epidemic eases and companies resume work, they will definitely give distributors a satisfactory answer. Currently, what distributors need to do is to save themselves, quickly recover capital, and sell goods at all costs. Although the epidemic cloud has not yet dispersed, it is certain that with the arrival of spring and rising temperatures, the virus will soon disappear. Compared with the SARS period, this epidemic will not last too long. Although it will affect distributor sales in the first quarter, the long-term impact on the industry will not be significant. Hold on, dairy distributors!