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Since 2013, I have visited nearly 30 regional markets and interacted with over 300 distributors of various types. During my exchanges with many distributors, I found they are also pondering a topic: In the next five years, how will we make a profit? How do we stay ahead? Whether driven by inner unease or deep contemplation, this reveals a common theme: Thoughtful wine merchants think further ahead; beyond survival, they aim for longevity!

Survival and longevity require different mindsets and perspectives (Different perspectives yield different views)

Survival and longevity are two states of a company's existence, and also two realms. They represent different stages, thus differing in focus and manifestation.

In the survival stage, distributors sell whatever sells well and chase opportunities wherever they arise, primarily to solve basic needs—this is typical "speculative" management. At this stage, distributors are adept at seizing opportunities, but due to differing visions, they focus on different points, leading to divergence among distributors:

  • The first type of distributor grabs a bunch of "trendy" products—best-sellers at the time—strictly becoming a "large secondary wholesaler." Lacking core products they represent, they fail to secure essential resources or build a team around key products. These distributors currently have manageable cash flow but low gross margins and weak profitability.
  • The second type leverages famous brands to drive company growth, strengthening while diversifying product portfolios to become strong regional distributors. A small portion, through operational models, grow into super distributors.
  • The third type is famous liquor agents, often transformed from state-owned sugar and wine companies. Due to inherent advantages, they secured famous liquor resources. Some, with the revival of famous liquors, become regional giants; others cling to famous liquor products without innovation or expansion, causing market shrinkage. Despite holding "golden babies," they face operational difficulties.

In the survival stage, the distributor boss's personal ability plays a driving role. During this period, the boss's business skills are key, typically shown when salespeople fail, the boss steps in and clinches the deal. Due to strong personal control, both the company and market advance rapidly. This group later diverges: some bosses still lead from the front, handling everything personally; others transfer their skills to employees or recruit more capable people to charge ahead. The former are exhausted but the company doesn't thrive; the latter are relaxed but the company excels.

In the longevity stage, distributors don't just sell what's hot; they decide whose business to take and whose to decline. Thus, when introducing products, price differences and policies are no longer decisive factors. Instead, the manufacturer's market plan, future market potential, and resource alignment are what distributors consider more. So many manufacturers clinging to old notions like "my product has high profit margins and strong support" can only attract distributors still in the survival stage, failing to capture excellent ones because their "selling points" no longer match these distributors' internal needs. During the journey to longevity, the organizational structure of distributor companies also evolves. Whether in survival or longevity, the organizational structure is "2+1": "2" for sales and finance, "1" for HR. Sales generate profit, finance controls costs, and HR ensures profitability.

In the survival stage, distributors focus on sales. But for longevity, relying solely on sales volume is insufficient because profits from sales struggle to offset rising costs. At this point, distributors must emphasize cost control and employee development, driving sales growth through overall growth while curbing cost increases. Therefore, at this stage, individual heroism and going it alone become insignificant; relying on the entire company's strength proves powerful.

In the survival stage, distributors show low interest in new concepts and models, feeling they cost money without returns. For longevity, they must actively engage with and try new models because they represent future trends and profitability. Seizing profitability at each stage is the foundation for long-term survival.

Transitioning from survival to longevity is a must-consider issue for distributors now. Without a longevity mindset, even if they survive today, they will live painfully and exhaustingly in the future.

Insights from Long-Lasting Companies

I've encountered many distributors with strong crisis awareness, knowing that without transformation, they won't survive. But the problem is they don't know where to turn, like a butterfly on a windowpane seeing brightness but not knowing how to get out. This confusion breeds anxiety. Looking at distributor companies that have thrived for over 10 years and rank top in their regions, their businesses grow larger and paths widen. Their development direction is what distributors transitioning from survival to longevity should focus on. "What we're doing now, Old Zhang did two years ago. What he's doing now is what we'll do in two years—that's the difference," said a strong regional distributor, noting that the gap with the local No. 1, Old Zhang, is that he always acts two years ahead. Analyzing these consistently successful distributor companies, their profit models can be summarized as follows:

1. Leverage famous brands to form product clusters and aggregate upstream and downstream resources. If the last decade's integration focused on upstream enterprises, the next five years will focus on integrating downstream consumers, because whoever owns consumers controls cash and consumption flow! Consumer levels and demands vary. To become the "wine steward" in consumers' eyes, multi-category, multi-outlet, and multi-service offerings are the direction for distributors.

2. Dominate advantageous channels in small regions. This is common among specialized distributors, such as those focusing on hotels, supermarkets, or group buying, profiting from monopolizing a channel. Mastering one channel is viable; with years of accumulated resources, it achieves "small investment, big returns."

3. Brand operators. These now fall into two types: single-brand and multi-brand operators. The former is more common, with Qiaoxi Sugar and Wine being typical. Though their profit models differ, they share common operational philosophies, summarized by keywords: focus, positioning, and adjustment. A sign of company maturity is focus, much like personal maturity. We see many companies rise behind a well-known brand; indeed, a famous brand's success often brings success to a batch of distributors. Take familiar examples: Anhui Baichuan Trading with Wuliangye, Zhejiang Shangyuan with Yilite—both over 10 years, and these products remain their main profit sources. This focus solidifies and expands their networks, enriches connections, and after a decade of sharpening, achieves their current success. Distributors focused on specific channels like hotels, supermarkets, or circulation also achieve substantial growth, forming unique, irreplaceable advantages and accumulating energy for future development. For those who rose on specific market factors, it's time to re-evaluate their direction. Heroes are made by the times; their rise depended on the market environment. When it changes, heroes should rethink: What truly drove my success? Where are my strengths? How do I leverage them? Is my current market positioning accurate?

If survival requires hard work, longevity demands looking up at the sky. This "sky" is market change; adjusting business strategies accordingly enables continuous leaps. So, what changes must distributors make in the next five years to stay ahead?

First, secure positions with famous liquor resources. Given current baijiu trends, brand concentration is certain. The next five years will still belong to famous liquors and strong regional brands.

Second, secure positions among distributors. Within a region, distributors have rankings—first, second, third. Leading in rank brings not just satisfaction but also the capital to aggregate excellent resources. The future of distributors lies in dual-brand development: product brand and company brand. Initially, the product brand drives the company brand; later, the company brand drives the product brand. Focusing on the company brand matters not only for securing excellent agency brands but also for horizontal expansion into related industries.

Third, emphasize dynamic adjustment. This includes: (a) Internal structural adjustment—key to a distributor's second takeoff. Market competition now isn't won by a single point but by a system. Similarly, sustained profit isn't just the sales department's job but every employee's. To motivate all employees to create profit under a shared vision, bosses must consider company philosophy and incentive methods. (b) Control over development speed. If last year's sales were 50 million and this year 40 million, adjust product structure and staffing; if last year was 40 million and this year 60 million, adjustment is also needed because growth is too fast. "When going fast, learn to brake"—a piece of advice from Yanghe's Chairman Zhang Yubai.

Fourth, stay attentive to new models and thinking, such as e-commerce, O2O, WeChat marketing, micro-stores, customization, and sealing ceremonies. "What exists is reasonable." Their popularity represents certain demands and may become future trends. If you don't pay attention or secure a position now, when the trend erupts, it won't be a matter of "stagnation" but of being overturned and surpassed.

Fifth, the boss's magnanimity. A big issue now is that distributors have plans and directions but fail to execute. Why? Because the boss lacks "inner strength," i.e., magnanimity. Imagine a boss who, if someone scratches his BMW, immediately curses and even fights—such a person can hardly grow big. Therefore, a boss with tolerance, good reputation, and credibility will surely grow stronger and bigger because he can unite employees and downstream clients.

Sixth, start now, start from the basics, and build the highway to the future.

Source: Wine Talk

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