In March, I visited markets in Guangdong, Zhejiang, and Jiangsu. These are China's economically strong provinces with active populations. In the beverage industry, these markets have always been opportunity markets, representing strong development momentum and serving as strategic markets for enterprises. However, on the ground, these markets showed a certain weakness in the categories I focus on. Distributors, secondary clients, terminal store owners, and sales staff all exhibited varying degrees of lack of confidence, which was a stark contrast to what I had imagined. This may be related to the current economic situation, urban industrial transformation, urban renewal, or competitive dynamics. It also confirms the judgment of many industry experts that the beverage market is currently in a stage of shrinking volume. Of course, during the visits, we also saw a few brands making counter-cyclical efforts and achieving success in local markets.

In the era of shrinking volume, how can performance achieve growth? This topic will run through the daily work of every FMCG professional throughout the year.

For beverage companies, the second quarter battle has already begun, gradually entering the sales peak season. Based on some thoughts from market visits, let's first discuss the most urgent topic: As the beverage sales peak season approaches, how can beverage companies seize the position first? Under the current internal and external environment, how does this year's strategy differ from previous years?

Analysis of Market Problems

1. Poor Terminal Sales In the southern market, temperatures warmed in March and entered the peak season, but traditional channels, mainly mom-and-pop stores, generally saw slower beverage turnover than in previous years, including in some central cities. In the past, it was rare for products to be pressed into stores and placed on shelves without worry about selling. Even first-tier brands saw a general decline of nearly 15-20% in terminal distribution. Without sales staff to maintain and place products in good positions, they could only accumulate dust in corners.

The impact of surrounding snack discount supermarkets on traditional small stores and the decline in social consumption power is evident at the channel level. As a result, many terminal store owners are reluctant to overstock, and product inventory levels are generally low.

2. Obstacles in Sales Order Taking Affected by e-commerce platforms and snack discount channels, if there are no promotional activities, many terminal stores are unwilling to purchase from salespeople. Terminal store owners are more price-sensitive at this stage, and community group buying platforms like Duoduo Maicai and Meituan Youxuan have become their first choice. Salespeople find it harder to maintain customer relationships than before.

3. Channels Unwilling to Stock Up Lack of confidence in operations leads wholesale customers to avoid tying up funds and inventory, weakening the reservoir function of sales volume.

Wholesale customers are also facing increasingly fierce competition for downstream channels. To pursue short-term profits, many wholesale customers illegally supply goods to e-commerce platforms at low prices and engage in cross-regional dumping at low prices, causing market prices to decline and channel profits to shrink. To compensate for their own gross profit losses, they in turn demand more profit subsidies from upstream distributors or manufacturers, resulting in a situation where sales only occur with promotions.

4. High Distributor Inventory Due to reduced product turnover frequency, distributors face higher financial pressure than in previous years. Faced with sales tasks that manufacturers must complete, they even borrow money to pay for goods, and warehouse inventory only increases. After paying, they can only request delayed delivery. Coupled with various operating expenses advanced, labor and delivery costs, and frequent external regional product flow, distributors' anxiety remains high this year.

Discussion on Countermeasures

Based on the above problems in the beverage market, I believe that as the sales peak season approaches, manufacturers and distributors should quickly discuss and reach a strategic consensus. First, they must change the previous single-minded approach of focusing on payment and distribution. Instead, they should prioritize sales movement, and design resources and tactical actions around moving products. At the same time, they should grasp two major directions: control price in the existing market and find increments in the sinking market. Let's elaborate.

1. Inventory Existing Market and Resources, Focus Investment with Clear Rhythm. First, clarify the existing market, list regional distribution customers and channel details, sort by historical average distribution share, and lock in the distribution customers and outlets that truly support performance. These customers and outlets that truly generate sales and movement must be firmly defended at all costs during the peak season. It is important to know that the cost of adding a new outlet is far higher than maintaining an old one.

Second, make a resource budget. The use of resources during the peak season should follow four principles: sales-oriented, precise focus, clear standards, and regular review.

Specifically, investment should focus on shipment incentives, freezing, stack displays, promotional materials, and promotional gifts, with emphasis on covering outlets with movement or regional markets where target groups gather. At the same time, every investment should have standards. For example, freezing should occupy the 2nd to 3rd layers of the refrigerator, with 3 price tags and 1 promotional notice sticker per layer, and all products in the aisle should be fully stocked.

The effectiveness of expense implementation depends more on the hands-on ability of sales staff and daily communication with stores. Sales supervisors should conduct regular checks and review in daily meetings, and promptly stop stores where effectiveness cannot be guaranteed.

2. Standards for Freezer and Cut-Box Displays, and Atmosphere Building is Essential. Visible in golden positions, full and easy to take when frozen, clear promotional notices, consistent grading standards, and scenario promotion support are the five most important aspects for beverages to stand out during the peak season, in my opinion.

Nowadays, young consumers often make beverage purchase decisions within 3-5 seconds. The first effective opportunity in the store is visibility in golden positions. Golden positions generally include the 2nd to 3rd layers of the refrigerator display cabinet near the door handle, directly in front of the cash register, end caps near the main entrance, and the main aisle at the store entrance (for BC supermarkets).

Sales staff should adapt to the store, observe consumer traffic flow, and choose the most cost-effective position based on their resource allocation and the product category's movement in the store. In summer, the most valuable displays are still the freezer and cash register. The cash register should have a personalized and beautiful cut-box display.

In actual market visits, I found that many brands occupy good positions but do not maximize their value. Either the display is severely out of stock, or competitors have infiltrated, or the display's vivid atmosphere is far from sufficient to attract consumers' attention.

Consumers have reasons for choosing products. While doing good product displays, it is necessary to convey the product's advantages that differentiate it from competitors. For example, larger capacity, lower price, more natural ingredients, stronger functionality, higher winning rate, etc. Use eye-catching promotional materials like explosive tags and jumping cards to present to target consumers.

Channel is communication. A good case found during market visits: a betel nut brand achieved a distribution rate of about 50% in traditional small stores. Each store's display position was at the cash register. The manufacturer provided multi-layer shelves with the brand logo, filled with various price points of bagged betel nut, and the shelves clearly printed promotional information. The color scheme was eye-catching, and every person entering the store was attracted. What's most rare is that not only in one market, but from Guangzhou to Zhejiang, all the outlets I saw had the same display method, truly achieving a thousand points with one face. I believe this brand will soon be remembered; the channel's standard display amplified the brand's momentum.

3. Control E-commerce, Provide Exclusive Products, Stabilize Prices, and Strengthen Product Flow Control. This is something beverage manufacturers and distributors should pay special attention to this year. Because the overall beverage industry is in a shrinking volume era, the growth pressure of major brands has not decreased much with the market decline. Faced with sales targets that exceed market capacity, product flow problems will inevitably arise. Controlling product flow and stabilizing price gives customers stable profits, making them willing to cooperate and dare to stock up.

The closure of Alibaba Retail Link seems to signal a cooling of the e-commerce competition in the retail industry. However, when the whale falls, everything thrives. Platforms like Duoduo Maicai and Meituan Youxuan, as well as other national and local e-commerce platforms, remain active in the retail market, catering to terminal small store owners seeking extreme cost-effectiveness. There is also the impact of snack chain discount stores and low-priced external product flow on traditional price. How should we respond?

My view is that the trend of channel diversification must be accepted, not resisted. Because the emergence of each channel represents the satisfaction of some consumers' personalized demands. Brand manufacturers should deeply understand their operating mechanisms and find ways to collaborate tactically.

The best way to deal with e-commerce and snack discount supermarkets is to provide exclusive packaging. Manufacturers can provide products with channel labels on capacity or case quantity for these platform channels. At the same time, traditional channels should have advantages in consumer promotions and terminal promotions, allowing wavering offline small stores to enjoy differentiated packaging and services (e.g., in-case code promotional products only for offline channels).

Of course, many manufacturers may have doubts about this, as sales volume may not support producing such exclusive packaging. In that case, to maintain the traditional channel price system, they should resolutely issue a stop-supply order: prohibit all distributors and their downstream customers from supplying to e-commerce platforms or snack discount stores.

For illegal product flow in traditional channels, many companies have their own penalty clauses. It should be reminded that between penalties and violations, many "product arbitrageurs" calculate carefully. If companies do not take a firm stance and impose severe penalties, the phenomenon of cross-regional dumping cannot be effectively curbed.

In addition, resource investment should be optimized and controlled simultaneously. For customers with dumping behavior, resource investment must be cautious.

4. Innovate Promotions and Smooth Channels, Build a Push-Pull Force for Sales. Promotion innovation seems to have become a slogan, but this market visit still showed that there are ways to make the slogan a reality.

I saw a case: for consumer promotions, the conventional approach is nothing more than "scan code to get red envelope" or "one-yuan exchange." However, a certain brand launched an activity: "Buy a certain brand series products, win an 88.88 yuan consumption voucher." After consumers purchase products and do not win the "one-yuan exchange," they scan the non-winning bottle cap and get a 100% WeChat red envelope reward, with cash amounts of 0.88 yuan, 1.88 yuan, or 3.88 yuan. Additionally, there is the 88.88 yuan consumption voucher. When a consumer wins the voucher, the corresponding terminal owner immediately receives 88.88 yuan credited to their account, and the consumer can choose any products worth 88.88 yuan in the store. Many store owners highly praised this activity and actively recommended the brand's series products to consumers. Going against the grain, when other brands are still offering a 20% winning rate, someone has already achieved a 100% winning rate, and the winning methods are also innovative, fully mobilizing the enthusiasm of terminal store owners and adding momentum to the brand.

Traditional channel rebates, terminal tiered purchase incentives, and display rewards are becoming less effective in the current situation. The way profits are distributed also urgently needs innovation and change.

For example, in-case code red envelopes for terminals can increase the rate of opening cases. After consumers purchase and redeem, terminals can immediately enjoy commission rewards. When terminal distribution reaches a certain standard, upstream wholesale customers can immediately enjoy per-case commission rewards (each time a downstream terminal opens a case, the secondary customer immediately receives an incentive bonus). Distributors' resource advances can also be quickly calculated through the system, with real-time feedback on the advanced amount, which can be used to offset payments.

There are many other innovative ways to share profits, which can truly help brands achieve channel synergy and bC integration, building a strong digital marketing system.

Of course, achieving the above requires enterprises to quickly establish the "five-code integration" channel digital infrastructure.

5. Strong Execution of Frontline Sales Incentives, with Immediate Payment for Effectiveness. High-quality performance achievement cannot be separated from a wolf-like team with strong execution.

During the peak season, team management must establish an incentive system of "the brave earn, the weak are eliminated," encouraging frontline teams to get more rewards as long as they are willing to work hard. On the basis of traditional monthly performance assessments, a special bonus pool for peak season promotions for sales staff can be added.

By further detailing the most critical daily actions and indicators, such as the number of freezers organized, the number of cut-box displays, the number of core stores with increased SKU purchases, and the number of effective vivid atmosphere displays, each item is assigned different scores based on execution difficulty, with each score corresponding to a certain amount of cash. Based on the day's execution, payment is made the same day.

Of course, this process also requires a digital AI management system that can accurately identify execution situations and give reasonable scores.

Many companies always say that tasks are not completed because employees lack execution. I believe that for frontline employees, we should not expect them to have great foresight and initiative. How you set your bonuses, they can reasonably break down and complete them as required.

Many problems may be that management did not provide specific broken-down methods and paths. For example, if you require salespeople to complete distribution targets and active store counts, but they lack the ability to break down into actions and don't know how to do it, you must further refine the requirements. So the more pressure you put on salespeople, the clearer you need to break down the goals.

And the immediate payment method can fully stimulate the enthusiasm of salespeople. They can see their efforts quickly rewarded, which also encourages them to develop a review mindset, reflect on what they did right, and continue to do well in the future.

The traditional way is to provide channel purchase incentives to salespeople, which can lead them to find ways to mix expenses for terminal stock pressure. If we can adjust to provide terminal sales incentives, it may greatly improve salespeople's service capabilities at the terminal and further enhance customer relationships.

For example, SFA can be used to identify distribution by monitoring terminal inventory changes, or by scanning product in-case codes to count the number of opened cases. Once five-code integration is achieved, this data will be easier to obtain. So truly changing and stimulating the behavioral motivation of salespeople is one of the effective ways to improve terminal sales.

6. County, Township, and Village Markets Have Strong Consumption, with Many Opportunities for Joint Promotion. Does the era of shrinking volume mean there is no increment? Facing downward economic pressure, the national tone of promoting consumption is continuing.

For the so-called middle class in cities, with increasing work and employment pressure, they are becoming more cautious in consumption. For people in counties, townships, and villages, influenced by short video and self-media development, their horizons have been rapidly expanded during the three years of the pandemic, and their consumption potential is in a stage of rapid release. Coupled with policy support for rural revitalization, I believe that the sinking market will be an opportunity market for many beverage companies.

I strongly agree with Teacher Zhao Bo's view that the sinking market is currently the most suitable for deep distribution.

Many marketing tactics that have failed in recent years can be used in township expansion. For example, big truck brand roadshows, wall ads, turntable draws, small gift purchase incentives, grabbing main aisles in supermarkets, car sales market impact, block-based visits, etc. So many companies have realized this and have set aside budgets for the sinking market, planning to fight a good battle of "rural surrounding cities" this year.

But I want to remind that although the sinking market has great opportunities, unlike deep distribution in cities, if you rely entirely on the manufacturer's strength without the distributor and channel system, the human relationship society will be more thoroughly reflected in such markets. Therefore, to truly achieve results in the sinking market, you need to first select good distributor customers and build the most suitable channel system for the brand.

This year is indeed different from previous years. Under internal and external pressures, many actions of brand manufacturers inevitably deform. To complete set goals with high quality is not an easy task. But it is precisely at this time that a company's determination is tested: whether it can firmly do the basic actions, whether it can have the courage to break the old, and whether it can plan ahead with foresight.

I hope more companies can survive the cold winter and build a century-old foundation.

Xing Renbao, with 14 years of marketing management experience, has served famous FMCG companies such as Coca-Cola, Yili, and Red Bull, focusing on corporate marketing diagnosis, manufacturer-distributor relations, channel operations, and digital transformation.