Click to read the original text for details New Distribution Note: In the digital era, major FMCG brands have been seeking transformation and innovation in recent years. As one of China's dairy giants, Mengniu has been continuously trying on the path of transformation and innovation. On August 23, at the FDIC2018 China FMCG Channel Digital Innovation Conference hosted by New Distribution, Mr. Yang Peili, General Manager of Mengniu's National Channel Management Department, shared and analyzed Mengniu's understanding and exploration of channel transformation and innovation with the attendees. The following is the content of Mr. Yang Peili's keynote speech: Some people say that the era of "channel is king" has passed. I don't quite agree. To be precise, channels are undergoing rapid transformation, with more emerging channels rising. While these emerging channels are developing rapidly, they are also impacting traditional channels. If at this point we can seize emerging channels, innovate, and follow up rather than fear and resist, we will surely create new sparks and achieve something. Digitalization has driven the transformation of consumption concepts, thereby giving rise to changes in consumption channels. I will explain from three aspects: "people, places, and technology": 1. People: Changes in consumers' consumption concepts drive the diversification of channels, giving rise to emerging channels such as unmanned convenience stores, cinema channels, and vending machines. 2. Places: Social development, especially the rapid popularization of smart devices, is reconstructing channel shopping scenarios. At the same time, the community economy is getting better, and the development of towns and villages is becoming increasingly important. Shopping scenarios are changing and exceeding our expectations. 3. Technology: The development of smart technology and the popularity of mobile payments have also brought about innovation in new channels. 01 Changes in Consumers Consumers' consumption concepts are undergoing rapid changes, mainly in the following four aspects: First, convenience. Consumers are becoming increasingly "lazy." Previously, they would go to hypermarkets to save one yuan or a few cents, but now few people go to hypermarkets for cheap prices. Unless it's bulk shopping, consumers prefer nearby convenience stores and small supermarkets. Second, intelligence. Consumers are willing to try new things and are more willing to use smart devices for shopping choices. Third, consumers are shifting from price sensitivity to time sensitivity. Some of my friends often say that what we lack now is time; if possible, I would rather spend more money to save time. Fourth, immediacy. Consumers' demand for convenience has made small, convenient formats full of vitality. The change in consumers' consumption concepts has also brought about changes in urban communities and rural towns and villages: Communities: With changes in the social business environment and the release of convenience needs, community consumption potential has grown year by year. We can see this from the population, consumption, and proportion of food and beverages in communities. Nowadays, communities have become increasingly important shopping scenarios. Towns and villages: In the past, towns and villages were dominated by small brands and knockoff brands, but with the rapid increase in income levels of residents in towns and villages nationwide, their consumption capacity is also significantly improving. Previously, I saw an article on Moments saying "escape from Beijing, Shanghai, and Guangzhou to return to the countryside," but when you go to towns and villages, you'll find that Coca-Cola sells more expensively than in the city. Coca-Cola 2L can sell for 4.5 yuan during promotions in the city, but in rural areas it sells for 6 yuan. Rural areas do not lack purchasing power; it's just that well-known big brands haven't gone down or the cost of going down is high. If products go down, there will definitely be purchasing power. 02 Changes in Technology Technology applications have spawned many enterprises and created many new business formats, including shopping scenario experiences (such as virtual fitting rooms). At the unmanned convenience conference some time ago, I realized that the development speed of unmanned convenience is already very fast. Nowadays, vending machines are becoming more numerous and more convenient. Nielsen data shows that the share of hypermarkets is declining. In the past, ordering from e-commerce might take 1-2 days to arrive, but now JD Daojia and Hema Fresh deliver within 30 minutes. All these are changes in the industry driven by technology. 03 Changes in Channels Driven by information technology, channels are undergoing rapid transformation. Whether you like it or not, fear it or not, the transformation has already arrived. What specific changes have occurred? We can find answers from small vending machines to large smart malls. The advancement and application of technology are the foundation for these new formats. For example, integrated stores (Hema Fresh, Super Species). To be honest, after visiting a Hema store once, I never went again because there were too many people, but I have been using the Hema app all along. As for grocery stores, according to Nielsen data, the number of grocery stores is declining. Have these stores really disappeared? Actually, some have been converted into convenience stores or small supermarkets, becoming more modern and intelligent, such as JD and Tmall convenience stores. In the past year or two, unmanned convenience stores have also been rapidly emerging. In summary, channel development has gradually become fragmented, diversified, and more intelligent, completely overturning the previous channel model dominated by traditional retail hypermarkets and large supermarkets. What challenges do these channel changes bring to brand owners? There are mainly three aspects: 1. Competition model change: In the past, the core of channel competition was traditional stores and how to win consumers in them. Digitalization and technological progress require brand owners to think more about how to bring product sales closer to consumers beyond traditional stores, making it more convenient and faster for consumers to buy products. 2. Channel integration change: The boundary between online and offline is becoming more blurred. How to do omnichannel marketing well is also one of the challenges brand owners face. 3. Distribution and logistics change: Channels are becoming more fragmented and diversified, which also requires our distribution and logistics system to undergo transformation. How to configure front warehouses, co-built shared warehouses, and other logistics forms will become a topic for brand owners. 04 How Does Mengniu Respond to Channel Changes? Mengniu is a company that likes innovation. In the past, Mengniu has done a lot of innovative work, which has enabled Mengniu to develop rapidly over the past 19 years, with sales exceeding 60 billion yuan. Mengniu perceives channel changes, lays out in advance, and embraces transformation. The channel innovation under digitalization mainly includes the following points: 1. B2B new retail; 2. Online-offline KA integration; 3. Community innovation; 4. Town-village system innovation; 5. Smart Network action. B2B New Retail: Mengniu was the first national brand owner to sign a strategic cooperation with Alibaba's Retail Link. In August 2017, it signed a strategic agreement with Alibaba in Hangzhou, and in October of the same year, it signed a strategic agreement with Huidan in Beijing. In B2B new retail, Mengniu took the lead. In 2018, Mengniu deepened its cooperation with Retail Link and Huidan. The two sides carried out World Cup marketing, online platform ordering meetings, system customization, and other activities, while establishing an independent team for operation. In 2018, we expect B2B new retail sales to exceed 1 billion yuan. Online-offline KA: Fully embrace new retail species, including Hema Fresh, JD Daojia, Wumart Duodian, etc. These new models are closer to consumers and meet their convenience needs. Mengniu has established dedicated sales and marketing teams in the KA system to serve these online-offline KAs and do a good job in omnichannel marketing. Community Innovation: I have already introduced the importance of communities earlier. What innovative work can we do around communities? Mengniu has mainly tried the following aspects: community apps, community convenience stores, unmanned convenience stores, etc. These formats can push our products to consumers faster. Community apps: Many people are not very familiar with them. In first-tier cities, many large property companies have made their own community apps, where you can pay property fees, buy things in the mall, or find decoration companies or rent houses. To increase the stickiness of community apps, some developers use the app as an access card. There are also community convenience stores and unmanned vending machines. In the past, many unmanned vending machines were placed in places with high foot traffic, such as train stations and commercial areas, but now there is also such demand in communities. Consumers' demand is for convenience. Mengniu is conducting pilot explorations around these community needs. Town-village Innovation: In addition to the community market in first-tier cities, the township-level market cannot be ignored. There are more than 30,000 townships in China, and nearly 600,000 villages. Each village has 2 to 3 stores, totaling nearly 2.3 million stores. In my research, I found that the consumption level in rural areas is very good. Many local brands deeply cultivate towns and villages, and their performance growth is very good. So what are the pain points for big brands not doing towns and villages? There are mainly two points: First, high logistics costs. Second, high labor costs for salesmen. A village has only 2 or 3 stores, and distributors are unwilling to run them. How do we solve this? Mainly two points: 1. Find partners in towns. 2. Use systems to solve labor cost problems. In fact, the best performers in towns and villages are beer companies. If you have the opportunity, you can go to towns and villages and see that the highest stacked products in stores are beer. Find partners in towns to jointly reduce logistics costs. At the same time, use innovative apps, so that store owners can place orders themselves without salesmen visiting stores, reducing the labor cost of salesmen. This way, we can quickly expand in towns and villages. Smart Network System: A previous guest mentioned that the current pain point is that brand owners and distributors don't know what changes are happening in the outlets below. Many brand owners have promoted their own SFA systems, but most have failed. The main reason is that brand owners develop systems more from their own perspective, hoping to use the system to manage distributors. Mengniu has learned from its own and other brand owners' experiences and lessons, and developed the Smart Network system. This system is positioned to empower customers, not manage them, achieving business and financial integration. At the same time, this system is multi-brand compatible and supports multiple forms of distribution, thereby empowering distributors, truly helping them conduct business, and achieving terminal visualization. Because we stand from the distributor's perspective and develop products according to their needs, as long as we meet the needs of distributors, they will be willing to use it. In the future, through the Smart Network system, we can provide customers with accurate and reliable digital channel insights, establish a data bank, aggregate all data, form consumer profiles, and provide precise product customization and services to consumers. Mengniu keeps up with the pace of the times and grasps the needs of future consumers. Mengniu is a company that loves innovation and is very willing to innovate. I believe it will bring consumers more and better products and services in the future. On October 23-24, during the Autumn Sugar and Wine Fair, the "2018 FMCG City Distribution Logistics Conference" hosted by New Distribution will be held. At that time, we will invite industry bigwigs, FMCG warehousing and distribution experts, and distributors who have transformed into unified warehousing and distribution platforms to discuss and answer questions about the future development trends of FMCG city distribution logistics and practical cases of distributor transformation to unified warehousing and distribution, around the theme of "New Distribution, New City Distribution." We hope to bring you different inspiration and thinking! The specific meeting topics are as follows: List of Participating Companies In no particular order Hunan Zonglan Diandan Network Technology Co., Ltd. Jingbang (Wuhan) International Freight Forwarding Co., Ltd. Mengniu Dairy Qinghai Hanxiang E-commerce Co., Ltd. Unilever Service (Hefei) Co., Ltd. Shanghai Branch Huicong Hunan Xuan'ang Food Co., Ltd. Guangzhou Tongdaoren Information Technology Co., Ltd. Qingdao 888 Trading Co., Ltd. Uni-President Enterprises (China) Investment Co., Ltd. Hunan Province Zhongxiang Gongpei Logistics Co., Ltd. Shenglong Ingredients COSCO Shipping Logistics Warehousing and Distribution Co., Ltd. Guangxi Yongpai Liquor Co., Ltd. Shangqiu Kangrong Trading Co., Ltd. Jinan Dingzhong Economic and Trade Co., Ltd. Liaoning Bimai Agricultural Technology Co., Ltd. Kunming Xiongjia Trading Co., Ltd. Shaanxi Houheng Trading Co., Ltd. Guangzhou Dingwo Enterprise Information Consulting Co., Ltd. Shaodong Jiajiale Trading Firm Boda Trading Industrial Bank Changsha Branch Wuhan Muchen Convenience Store Chain Co., Ltd. Fujian Fuxing Yuncang Logistics Co., Ltd. Guizhou Yilimi E-commerce Co., Ltd. Jiangxi Xiao Laoer E-commerce Co., Ltd. Jinshankoufu Shanxi Taihang Yuanjing Supply Chain Management Co., Ltd. Shanxi Dezhun Supply Chain Management Co., Ltd. Shaoyang Tongdeli Trading (Xiangbang Logistics) Huanfu Tongda Express City Distribution Beijing Xinjingxiang Food Co., Ltd. Wuhan Huizhong Tianhong Liquor Co., Ltd. Changsha Paide Biotechnology Co., Ltd. Chao'an Tuqiang Guizhou Yihe Bopin Supply Chain Management Co., Ltd. Jiangxi Kang'en Industrial Development Co., Ltd. Xiangtan County Yisuhe Town Yuhua Paper Store Luoyang Yuanlang Trading Co., Ltd. Tongchuan Yaozhou District Huayuan Supermarket Co., Ltd. Hunan Yongfu Jiujiu Trading Co., Ltd. Zhejiang Chengchengtong Logistics Co., Ltd. Chongqing Kaiguo Materials Trading Co., Ltd. Beijing Xianmaixianmai Data Technology Co., Ltd. Hanchuan Qixing Trading Co., Ltd. Tongxin Jiuzhiru Trading Co., Ltd. Guizhou Meiguo Guoguo Network Technology Co., Ltd. Hubei Anjie Logistics Co., Ltd. Hubei Kuaixiao Hulian Technology Development Co., Ltd. ...... Representatives of Distributor Transformation (Proposed) In no particular order Jiangsu Huashang City Distribution Network Co., Ltd. Chairman, Rong Jun Hubei Yijiaren Logistics Co., Ltd. Chairman, Wang Bo Sichuan Chengdu Xingrenxing Trading Co., Ltd. General Manager, Jiang Shuming Shandong Yunbang Warehousing and Logistics Co., Ltd. Chairman, Liu Jichen Chongqing Lingyu Consumer Goods Supply Chain Management Co., Ltd. Chairman, Tu Mingyu Guangzhou Zhongshan Wanrong Marketing Co., Ltd. Chairman, Yang Su Sichuan Bajie Supply Chain Management Co., Ltd. Chairman, Yuan Xia Hubei Pengdun Meiyitian Supply Chain Management Co., Ltd. Co-founder, Li Qiangyun Henan Xuchang Jiulegou E-commerce Co., Ltd. Chairman, Zhang Jianyong Hebei Changyi Logistics Co., Ltd. Founder, Ma Haichao Hebei (Chengde) Wulian Yuncang Co., Ltd. General Manager, Meng Yucun Xinjiang Urumqi Su'an Jinchi Logistics Co., Ltd. Chairman, Zhang Xun Jilin Sansheng Lianguo Chairman, Zhang Hailing Hebei Dunjie Supply Chain Management Co., Ltd. Founder, Qiang Huitao Hunan Damei Supply Chain Management Co., Ltd. General Manager, Liao Lei ...... -END-