The following is a keynote speech delivered by a Budweiser executive at the 5th FMCG + Internet Conference hosted by New Distribution, revealing Budweiser's understanding of channel digitalization. To cope with market changes, first, organizational restructuring is required, demanding more professional strategies rather than relying solely on traditional sales structures; second, visit strategies and in-store sales tactics should shift from a single-person approach to a 360-degree new visit strategy combining online and offline, enhancing sales efficiency to cover more stores and create higher returns; third, store interaction: the development of new retail allows us to reach customers more conveniently, interact with stores in real time, and after placing orders, stores can track orders, receive differentiated and timely promotional pushes, and access their own data analytics. Before diving into the topic, let me briefly introduce Budweiser. Budweiser has a long history, dating back to 1366. The current Budweiser company is the result of continuous mergers. In 2004, Interbrew from Europe and AmBev from South America merged to form InBev, becoming the world's largest beer company. In 2008, InBev acquired Anheuser-Busch, the parent company of the Budweiser brand, creating the new beer giant Anheuser-Busch InBev. Most recently, in 2016, it acquired SABMiller, becoming the current Budweiser company. Through continuous mergers and acquisitions, Budweiser has secured the world's best beer brands, the most advanced brewing techniques, and produces the finest beer. Among global FMCG companies, Budweiser ranks fifth, but from 2012 to 2017, it was the fastest-growing FMCG giant worldwide. In the 2018 list of the world's top 10 most valuable beer brands, Budweiser claimed seven spots, and its Harbin Beer was the only Chinese brand on the list. The relentless pursuit of disruption and innovation has made Budweiser the fastest-growing FMCG giant, with digitalization being the most important growth strategy currently. Future is now. In Budweiser's understanding, digitalization has two parts:
New retail at the consumer level
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Digitalization at the channel level Let's start with new retail. Essentially, new retail is the digitalization of all retail formats, from dining, hypermarkets, supermarkets, CVS, to traditional TT channels. All offline channels are integrated with online elements, achieving a shift from limited physical space to unlimited cyberspace. In the traditional e-commerce era, consumers purchased beer in the following scenarios: first, daily replenishment; second, planned gatherings; third, stockpiling driven by promotions, such as Double 11. Delivery typically took 1-2 days, with next-day delivery. These were the only scenarios. However, with the advent of new retail, when 1-hour delivery becomes a reality, more consumption scenarios emerge, such as social and sports scenarios, meeting immediate needs. As traditional e-commerce evolves into new retail, the purpose of shopping expands, and the number of drinking scenarios doubles. This requires brand owners or distributors to respond quickly, launching new packaging and combinations. Correspondingly, organizational restructuring is necessary; traditional e-commerce departments cannot cope, so establishing a dedicated new retail department is essential. Regarding channel digitalization, let me illustrate with three changes: manufacturer channels; store habits; big data analytics. First, manufacturer channels. Recently, we've been thinking about what changes will occur in channels over the next 3-5 years, or even 5 years. First, labor costs will continue to rise. Assuming a 50% increase, if personnel efficiency does not improve, many distributors or manufacturers will not make money. This is a very urgent issue. Second, store habits. According to New Distribution data, in 2018, 74% of stores already placed orders through FMCG B2B platforms. Consider that it's only been 3 years since JD New Channel and Alibaba Retail Link were established, and the change is already this significant. What about three more years? If over 90% of stores and over 70% of orders are placed through digital platforms, arranging a salesperson to visit and take orders manually or by phone would seem outdated. Would it still meet stores' expectations for ordering methods? Third, big data analytics. Diversified consumer demand is a certain trend. How to respond? Only through big data. Data supports product development, distributor product selection, and channel transformation. We are still in the 4G era, but the 5G era is coming soon. Behind 5G, there will be even larger volumes of data. How can we use this big data to bring greater value to stores? Let's place these three elements (manufacturer channels, store habits, big data analytics) in a quadrant. On the left are offline capabilities represented by store relationships, store services, and logistics capabilities; on the right are digital online capabilities. On one hand, due to cost constraints, improving offline capabilities will become increasingly difficult, but offline capabilities are the foundation and lifeline; offline logistics and sales personnel have many irreplaceable aspects online. On the other hand, as store habits change and digital technologies like big data analytics develop, the barrier to improving online capabilities will lower, while the channel value they provide will increase. Future competition will be on digital capabilities, built on a solid foundation of offline capabilities. Developing digital capabilities is urgent. Digitalization is a global process. Budweiser started its digitalization journey early. China is not the most advanced country because some countries face greater offline cost pressures. To cope with market changes, first, organizational restructuring is required, demanding more professional strategies rather than relying solely on traditional sales structures. Second, visit strategies and in-store sales tactics should shift from a single-person approach to a 360-degree new visit strategy combining online and offline, enhancing sales efficiency to cover more stores and create higher returns. Third, store interaction changes: the development of new retail allows us to reach customers more conveniently, interact with stores in real time, and after placing orders, stores can track orders, receive differentiated and timely promotional pushes, and access their own data analytics. Finally, let me summarize with three words. First, awareness. Many brand owners and distributors know digitalization is important. One of our distributor friends told me that what he feels most deeply is not just rising labor costs, but also that people are harder to retain. In the traditional way, losing a person not only means losing sales from covered stores but also creates a vacuum in store connections. Recognizing this, digitalization for brand owners and distributors is not something for the future but something to do immediately, right now. Second, accumulation. As I mentioned, digitalization and digital operational capabilities are not formed in a day; they require continuous exploration and accumulation over time. Currently, implementing a system is not difficult or expensive, but forming an optimal organizational structure requires accumulation, and operational experience and processes need to be accumulated. This is why digitalization must start immediately. When others have already mastered channels and can operate digital channels, it's too late for you to implement a new system. Third, together. Digitalization across the industry. Third-party platforms have become important new partners for Budweiser; that's the first "together." Second, Budweiser's distributors have contributed to Budweiser's current market in China over the past 30 years. We believe that in the next 30 years, distributors will remain Budweiser's most important partners. Since 2016, Budweiser has developed its own digital platform, not for our own use, but tailored for each of our important distributor partners. Budweiser invests to help distributors move their offline capabilities online. Distributors can put all their products online, seek implementation and operational guidance from Budweiser headquarters and regions, and integrate with their existing systems. Budweiser hopes to embrace the future of digital channels together with industry peers. Thank you. Click Read Original to see more highlights from the 2019 5th FMCG + Internet Conference... -END-