Click the image to register Introduction: At the end of 2017, a distributor reported to New Distribution that Daliyuan Doubendou was severely sluggish in channels, causing massive inventory backlogs in distributor warehouses, while the manufacturer ignored near-expiry products. New Distribution conducted phone interviews with multiple distributors of Daliyuan Doubendou and received a common feedback: the manufacturer forced heavy shipments, terminal sell-through was slow, and large amounts of inventory were nearing expiry, with no solutions or measures provided by the manufacturer. Speaking of the most attention-grabbing new product in the industry this year, Dali Doubendou certainly qualifies. From the end of last year when news leaked that Dali would launch a soy milk product, to its official disclosure in the 2016 annual report, to the product launch in April, every move of Dali's soy milk product attracted attention, sparking a soy milk trend in the industry. Soy milk, as a high-quality plant-based nutritional beverage, has gradually gained consumer recognition for its nutritional value. Dali saw that in the soy milk category, apart from regional brands like Weiwei, Vitasoy, and Weiyi, there was no national leading brand. In 2017, Dali invested heavily and launched Doubendou in April 2017 as a strategic product, hoping to secure the top position in the soy milk category. At the channel level, Dali required distributors to allocate dedicated funds, personnel, and vehicles exclusively for promoting Doubendou. After a year of market cultivation, it lived up to expectations. According to a recent securities research report by CICC, by the end of 2017, Doubendou contributed approximately 1 billion RMB in sales. Regardless of whether these 1 billion in sales were in the hands of channels or consumed by consumers, one thing is clear: with heavy market investment, Doubendou certainly captured consumers' attention. At the end of 2017, a distributor reported to New Distribution: Daliyuan Doubendou is severely sluggish in channels, causing massive inventory backlogs in distributor warehouses, while the manufacturer ignores near-expiry products. Initially, I thought it was due to improper market operations by individual distributors and didn't pay much attention. On January 22, 2018, another netizen voiced online: Dali Group's Doubendou distributor has over a thousand cases of near-expiry sluggish inventory, and the manufacturer shows no concern. These two incidents caught New Distribution's attention. Doubendou was launched in April, with a 9-month shelf life. By now, it's exactly the stage when the first batch of products is nearing expiry. How is this product selling in the market? New Distribution conducted phone interviews with multiple distributors of Daliyuan Doubendou and received a common feedback: The manufacturer forced heavy shipments, terminal sell-through was slow, and large amounts of inventory were nearing expiry, with no solutions or measures provided by the manufacturer. I did some calculations: According to the 2016 financial report, Dali had 4,225 distributors. Based on the initial payment for Doubendou distributor accounts being no less than 300,000-500,000 RMB, at least half of the 1 billion in sales came from the initial payments made by distributors when opening accounts. Wang, a distributor in Jilin Province, was one of the first batch of Doubendou distributors when it launched in May 2017 (also distributing other Dali brands like Lehu). He told New Distribution that Doubendou was opened as a separate account with an initial dedicated payment of 500,000 RMB, which served as both a deposit and payment for goods, used exclusively for this product. Cooperation started in May and ended at the end of the year. After more than half a year, Wang found that after the initial distribution, there were no repeat orders. "In November, the manufacturer asked me to order another 300,000 RMB worth of goods, but I refused. I can't continue; it would mean losses," Wang told New Distribution. Using the Doubendou Tetra Pak gift box as an example, he calculated for New Distribution: The ex-factory price is 22.3 RMB per case, and the terminal price is 32 RMB per case, leaving a price difference of about 10 RMB per case. Despite the high gross margin, there are many costs to bear. The display fees at circulation terminals are entirely paid by the distributor. The manufacturer requires dedicated personnel and vehicles, with 3 salespeople, and the manufacturer only provides a subsidy of 1,500 RMB per person. Although it's a subsidy, the performance assessment is very strict; if requirements are not met, deductions are made. After deductions, a salesperson might be left with only 800 RMB, so the distributor has to subsidize them, making it a loss overall. "Currently, I still have over 2,000 cases in my warehouse, and they have already expired (production date April). The manufacturer doesn't care now. Because I trusted the manufacturer, there was no agreement or contract at the time..." Wang told New Distribution helplessly. For years, Dali Group has adhered to a "copycat" strategy, not developing its own categories but following when it sees a category rise, using full-media advertising bombardment plus high channel margins to gain market share. From following Orion to launch Daliyuan Egg Yolk Pie, to entering the herbal tea market with Qizheng large bottles, to the functional drink Lehu, Daliyuan's imitation and follow-up strategy has proven effective time and again. Although Daliyuan's follow-up strategy means most of its products are not the leading brand in their categories, the extremely low market trial-and-error risk and almost zero consumer education costs have allowed Daliyuan to reap substantial profits. High channel margins drive sales, leaving the manufacturer with no energy or extra funds for deep market cultivation A former colleague who worked at Dali for many years told New Distribution: "Doubendou invested most of its budget in online advertising, leaving offline ground expenses tight, and these ground expenses were all spent on supermarket end-cap displays, with no promotions, resulting in inventory buildup. Due to slow turnover and many near-expiry products, the company has no related expenses or measures to handle them." Due to the lack of effective grassroots execution, Dali's regional managers could only rely on area managers to supervise and assess distributors. Daliyuan's business managers do not target terminal sell-through but rather distributor payments; "payment and shipment" is almost the only criterion for assessing Dali's business managers. In this context, after distributors take on Daliyuan products and complete the initial market distribution, they are quickly subjected to a second round of inventory pressure by Daliyuan's business managers. Anyone in FMCG knows that new products typically require a long cultivation period to gain traction. At this stage, channels are already saturated, and distributors have no outlets to sell to, often leading to tragedy... "Dali's assessment system means no business manager has the energy to clear channels. Instead, most adopt a carrot-and-stick approach to management. If distributors fail to complete tasks, they face deductions in activity rebates and display fees, plus fines for non-completion. They use a mix of coaxing and deception. Those who comply get squeezed, and those who don't are made examples of," Wang told New Distribution. The follow-up strategy also means Dali almost lacks the genes for independently promoting new products The premise of the follow-up strategy is that the category already has a mature market and a leading brand, and there is market capacity not yet filled by competitors. In the past, whether it was herbal tea or functional drinks, there was a leading brand that had cultivated the market and educated consumers for years, giving Dali the opportunity to "benefit from the labor of others." To aspire to be the leader and pioneer of a category, one must bear the responsibilities and costs associated with that position. Although Dali invested heavily in online promotion and required distributors to use dedicated personnel, vehicles, funds, and accounts to operate the market, essentially Dali still used the old methods: "full-media advertising bombardment + high channel margins" to drive rapid market growth. The problem is that this driving model is not suitable for pioneering new categories, and Dali's channel management is extremely rough, lacking the refined channel cultivation systems of companies like JDB and Red Bull. With Dali's existing channel management model, it's no surprise that distributors have large amounts of near-expiry inventory. Good products don't necessarily lead to good sales; good sales require excellent terminal execution and sufficient patience. Before 2013, China's FMCG industry experienced over a decade of rapid growth. After that, many FMCG companies saw varying degrees of decline or negative growth, with growth stagnation becoming the norm and the industry hitting a ceiling. During the growth period, Dali's follow-up strategy meant that even if problems arose, they were often masked by high growth. As long as growth stagnates, problems become apparent. Now, the consumption environment has changed: mainstream shifts, consumption upgrades are trending; the channel environment has changed: B-end e-commerce is invading, channel transformation is imminent, and channel restructuring is on the horizon. When we still use old channel models to manage distributors and rely on their own abilities to promote products, it is inevitably outdated. Marketing expert Liu Chunxiong once said: Strong Chinese companies are not those with good brands, but those with good channel management. An important indicator is that channel management is an extension of internal management. When times change and problems arise, brand owners should first reflect on themselves. As Dali Group's core strategic product, Doubendou should abandon illusions, return to the essence of business, respect market development laws, value partners, and genuinely work with distributors to cultivate the market and refine channels. Instead of treating this new product as a gamble—if it wins, everyone is happy; if it loses, it harms a batch of distributors.