Warm Reminder: Click the ↑ above for “FMCG Distributor Professional Consulting” to learn more about marketing and distributor internal management.
Channel stuffing is a common phenomenon and a double-edged sword. Some distributors can leverage manufacturer pressure to achieve leapfrog development, while others lose their voice in the fierce market competition—being eliminated by manufacturers and the market. Similarly, some manufacturers can consolidate regional markets through channel stuffing, while others end up with product overstock. Success depends on how manufacturers and distributors collaborate to achieve a win-win outcome.
Manufacturers and distributors are a community of shared interests, but their short-term goals differ. In the short term, manufacturers want their products to quickly capture the market, compete for market share, squeeze channels, boost sales, and ultimately reap profits. Distributors, on the other hand, focus more on whether they can profit from the brands they represent. For the same product in the same market region, the short-term goals of distributors and manufacturers differ greatly, leading to manufacturers wanting to stuff channels and distributors resisting, creating the current situation where "each side has its own argument."
Distributors in the Era of Channel Stuffing
Case 1: Reason for Stuffing: Regional Expansion of Second- and Third-Tier Brands
Distributor Mr. Li from Hunan entered the FMCG industry in 2009 and currently represents brands such as Heinong Peanut Milk and Tianxiafu Wine. His company's main sales come from Heinong Peanut Milk, a second-tier brand currently sold only in township markets through circulation channels, with little presence in supermarkets. In the first year of operating Heinong Peanut Milk, the company set an annual sales target of 500,000 yuan, but Mr. Li achieved 700,000 yuan. In the second year, the target was 1 million yuan, which he also exceeded. However, in the third year, the target suddenly jumped to 2 million yuan.
Besides the pressure of channel stuffing, Mr. Li faces another issue: his company is relatively new and has no sales staff of its own. This year, the manufacturer hired a local salesperson to assist Mr. Li, but after some time, Mr. Li doubts the salesperson's ability because the salesperson only achieved 10,000 yuan in sales in one quarter and is highly dependent on Mr. Li, always wanting to visit markets together. When Mr. Li reported this to the manufacturer, they said the salesperson needs time to adapt.
Apart from hiring the salesperson, the manufacturer has provided no other market support policies to help Mr. Li digest the 2 million yuan sales target. Mr. Li feels immense pressure: first, he doesn't know how to handle such a large sales task; second, he doesn't know how to deal with the salesperson; third, he doesn't know how to develop the urban market for Heinong Peanut Milk.
Case 2: Reason for Stuffing: Intensive Cultivation by Major Brands
Distributor Mr. Lin from Huizhou, Guangdong, has been in the condiment business for over a decade, representing dozens of brands including Haitian, Lee Kum Kee, Chubang, Jiapin, Hongqiao, Shuanghui, and Liangyuan. What troubles Mr. Lin is that some major brands not only stuff channels through annual targets but also further divide market regions, making the already difficult tasks even harder. Taking Haitian, which he has represented for over a decade, as an example: there are three distributors in Huidong County alone, responsible for supermarkets, catering, and circulation channels respectively. The current sales target for the county is 20 million yuan, with 13 million yuan from supermarkets and terminal stores.
Additionally, to prevent distributors from undercutting prices, the manufacturer requires each distributor to pay a 4 yuan per item profit guarantee deposit. What annoys Mr. Lin even more is that the manufacturer promised to return the deposit in the form of fast-moving products, but instead sent slow-moving items. Channel stuffing is understandable, but when the manufacturer fails to honor the terms written in the agreement, Mr. Lin is very dissatisfied. However, having invested years of effort in the brand, he feels it would be a waste to give it up in anger, leaving him frustrated.
Case 3: Disguised Channel Stuffing: The Trouble Caused by Manufacturer Shipping Policies
Distributor Mr. Rao from Meizhou, Guangdong, entered the FMCG industry in 2009, focusing on snack foods and festive products. He currently represents Want Want snack series, Hsu Fu Chi candy series, Panpan Aibili potato chips, Panpan French bread, and Meidan biscuits. Mr. Rao is highly regarded by manufacturers for his expertise in special channels, yet even such good manufacturer-distributor relationships face the problem of disguised channel stuffing.
Taking Panpan as an example, the manufacturer requires full-truck shipments each time, but the popularity of Panpan products varies. Often, fast-moving items are out of stock while slow-moving items accumulate in inventory. Ordering a single item may not meet the full-truck requirement, but ordering other items together leads to overstock. This causes slow-moving products to expire (snack foods typically have a six-month shelf life), making every order a dilemma.
Case 4: A Unique Approach: Heqizheng's Channel Stuffing Strategy
Regarding channel stuffing, Sun Kouyou, General Manager of Tongling Tiantianhui Trading Co., Ltd. in Anhui Province, said that every manufacturer has this issue, but the key is how they do it. Among the brands he represents, Fujian Dali Group's Heqizheng does it well.
For example, beverage companies like Wahaha and Master Kong usually hold ordering conferences (some distributors jokingly call them "channel stuffing meetings") during the off-season from February to April, offering policies only at that time. Heqizheng, however, provides monthly market support policies, such as display fees and promotional support, with dedicated funds. Distributors also have greater autonomy: they can take what they can sell and decline what they cannot store.
Moreover, Heqizheng strongly supports distributors' market promotion activities. As long as distributors propose market promotion policies, the manufacturer basically supports them. Distributors also want to earn more, so as long as they have the ability to sell and the opportunity to promote, they will order more.
Manufacturer-Distributor Collaboration: Entering a New Era of Channel Stuffing
— Wang Shitao, Marketing Consultant of Wangzai Beverage (Shandong) Co., Ltd.
Manufacturer channel stuffing is a common sales tactic used to achieve specific goals, such as increasing product distribution rate, market share, clearing slow-moving inventory, or boosting sales during holidays. Manufacturers and distributors need to conduct detailed market analysis, formulate reasonable stuffing plans, and ensure that most distributors can achieve them through effort, leading to a win-win situation. Conversely, unscientific stuffing plans can lead to distributor resistance and ultimately a lose-lose outcome.
Clearing Inventory: The Manufacturer's Crucial Role
Looking at the cases above, the core issue is that distributors don't know how to clear such large inventories. Although manufacturers almost always offer rebates to support distributors' market operations, how many distributors are willing to invest that money back into the market? Once the goods are pushed to distributors, the manufacturer's goal is achieved. But this is only the beginning of sales. Goods sitting in a distributor's warehouse do not equal sales; only when products are consumed by end consumers is the task truly completed.
Therefore, how to help distributors reasonably clear stuffed inventory is a topic manufacturers must address. We can solve the channel stuffing problem from three aspects: first, understand the distributor's inventory and develop an inventory clearance plan; second, arrange sales personnel reasonably, use incentive policies to motivate them, and increase their sales pressure; third, use promotional tactics to stimulate retail terminals and move products to consumers quickly.
In fact, the most important thing for manufacturers is to assist distributors in reasonably decomposing and clearing warehouse inventory. Manufacturers should serve and help customers with a "customer first" philosophy. Distributors work hard and don't want their efforts wasted; as long as they can make money from the products, most will welcome reasonable channel stuffing.
Changing Mindset: "My Territory, My Rules"
The market can only be done well through manufacturer-distributor collaboration. However, most distributors currently complain and resist channel stuffing, while only a few use their wisdom to communicate with company executives and reasonably resolve the issue. Regarding the problems in the cases, the root cause is the lack of communication between distributors and manufacturer executives.
So, I suggest they promptly report their market situation: first, actual monthly sales for the last quarter; second, the number of newly developed outlets each month; third, current inventory at terminal outlets and their own warehouses; fourth, promptly report the actual situation to the company's sales manager and work together to set a reasonable and feasible sales target, achieving a balance between manufacturer and distributor tasks.
Additionally, regarding the issues raised by Mr. Li from Hunan, my suggestions are as follows: For the salesperson hired by the manufacturer, Mr. Li should change his attitude and build a good relationship, using incentives to motivate the salesperson, sincerity to win them over, and practical actions to help them expand sales, thereby driving sales growth.
Regarding how to operate the urban market, let me illustrate with the example of Distributor A in Xuchang city. Distributor A's products mainly go through township circulation channels, with almost no presence in urban areas. They have been operating Wangzai Yogurt and Walnut Milk for six months. In the first two months, the distributor couldn't find effective sales methods, with sales of only about 1,000 cases per month, and promotional expenses were spent on buying promotional items to stimulate second-tier distributors. They failed to meet targets for two consecutive months. In the third month, the distributor came to my company and communicated with me, and I found that both their sales approach and channel network were problematic.
Given the situation, we needed to use channel stuffing and promotions to drive channel expansion and sales. First, I persuaded the distributor to order 2,000 cases, and the company supported a sales manager to help expand urban retail terminals. Second, the company allocated promotional funds to buy floor displays, end caps, posters, special offers, and free tastings in medium-sized urban supermarkets to directly stimulate consumer purchases. Third, we encouraged the distributor to develop an urban distribution network. Finally, we expanded special channels such as internet cafes, hotels, and guesthouses. By the end of the month, actual stuffed sales reached 4,000 cases, and inventory was reasonably cleared. Currently, this distributor achieves monthly sales of 6,000 cases.
Like this article? Feel free to click the top right corner to share it on your Moments.
About us: WeChat Name: FMCG Distributor Professional Consulting Management Account Introduction: 20 years of FMCG distributor operation and management experience, professionally addressing distributor internal issues.
Click the "Read Original" below to enter our micro-community for interactive communication and questions.
Learning and Exchange QQ Group: 344257092
Reply 1 to enter the micro-official website to view historical messages.