Recently, a distributor friend visited me, and during our conversation, he shared his views on manufacturers. I thought his summary was quite good, so I'd like to share it with you (paraphrased, not verbatim). He categorized distributors into the following types: 1 First type: Good brand, good momentum, but heavy inventory pressure. Expiring products erode profits, leaving no money to be made. Distributors who are currently fleeing the business either failed in investments or were crushed by inventory pressure. How severe is the inventory pressure? Some liquor manufacturers' inventory takes years to clear. Currently, losses from expiring products are at least half. Some expiring products exceed 10% of sales volume. Handling expiring products inevitably means selling at low prices. If sold to consumers, it disrupts pricing. If sold to stores, they sell at normal prices. Because they prioritize selling expiring products, normal stock also becomes expiring. Since stores earn high profits from selling expiring products, some stores specialize in them, benefiting the stores while distributors make no money. These companies, despite high sales volume, tie up large amounts of capital and yield no profit. In the past, they could drive sales of other products, but now it doesn't matter. The manufacturer's goals are achieved, but the distributor's interests are not given enough attention. 2 Second type: Good brand, but sales have hit a ceiling. Because of a lack of new products, the manufacturer is eager to monetize profits. To maintain sales, expenses are high, with long-term in-store displays and promotions, and now even promoters are sent to rural areas. Distributors are required to advance expenses, and reimbursement cycles are long. Some manufacturers even use a lump-sum system for regional managers. Such brands will definitely see sales decline in the future. Many leaders in small categories are currently in this situation. The category has peaked, and breaking out of it is difficult. These companies have no future. In the past, they could drive sales, but now it doesn't matter. 3 Third type: Have brand, new products, sales, moderate inventory pressure, and profits. Such manufacturers are rare, but they exist, like the "Tong X" company. Because they have a brand, they can drive sales. Because they have new products, there are profits. Because inventory pressure is moderate, capital occupation is low, and expiring products are few. Working with such products is motivating. 4 Fourth type: Second- and third-tier brands with profits, requiring promotion, but with modest sales. In the past, they were chicken ribs (of little value), but this year they are generally growing. 5 After analyzing the types of manufacturers, my distributor friend asked me: How should we reassemble our manufacturer portfolio?

  • Here are my views: The current market environment has changed significantly, and past product portfolio strategies are no longer applicable, such as using brand products to drive sales, or the changing status of second- and third-tier brands. Therefore, distributors must also change how they select manufacturers and products. First, re-evaluate first-tier brands Having a brand that can drive sales is no longer the primary criterion for distributors. Brands that offer no profit but tie up capital are not worth doing. Moreover, the current environment does not necessitate doing first-tier brands, unlike in the past. Distributors should especially be wary of companies that have scale but no momentum. These companies may look good but have no future. Brands that cannot generate profit, no matter how big, should be dropped. In recent years, many big brands have faced difficulties in recruiting distributors for this reason. However, distributors should still have at least one first-tier brand, preferably one with brand strength, new products, and profits. First-tier brands help share costs and maintain bargaining power, which is still very necessary. Second, quickly seize new categories with momentum Some new brands, especially those excelling in internet-based new marketing, may be small now but have momentum. With momentum, they will grow rapidly. Moreover, to avoid falling behind, distributors should keep an eye on companies that excel in internet new marketing and become their agents. When the manufacturer grows, the distributor will surely grow with them. Manufacturers that master new marketing techniques allow distributors to learn through agency. You can't learn by just watching. Such companies must be seized as soon as they show signs of potential; waiting until they become established is too late. Third, revitalize second- and third-tier brands This is truly the key. 6 Second- and third-tier brands were chicken ribs in the past. Their weakness is brand strength, but now brand influence is actually declining because of general progress by manufacturers, and the baseline is safe. Non-branded products are also safe, as consumer confidence in non-branded items is increasing. Sales of second- and third-tier brands will definitely not match first-tier, but profits are certainly good. The key is whether they can be revitalized. Distributors cannot change the brand power of second- and third-tier brands, but they can definitely revitalize them. The key to revitalization is people. Therefore, I suggest letting the distributor's key staff partner with the boss to implement internal contracting for second- and third-tier brands, making the key staff "second bosses," focusing on these brands, and turning them into a source of profit. ◎ This approach has several benefits: ・First, many key staff are already in management and not on the front line, which is a loss; ・Second, making key staff "second bosses" is particularly important to motivate them, and their motivation can easily translate into sales; ・Third, revitalizing second- and third-tier brands starts with revitalizing key people, and key staff are the key people; ・Fourth, by revitalizing these brands, both key staff and the boss profit. In the context of B2B becoming a major trend, big brands will inevitably cooperate strategically with B2B platforms, and small "long-tail" brands are even more advantageous for B2B integration. Who can handle second- and third-tier brands becomes a test of distributor survival in the B2B environment. Because second- and third-tier brands definitely require personnel for promotion, relying solely on platforms is difficult to complete orders. Anything that depends on people is harder for platforms to replace. Source: Teacher Liu's Forum (ID: liuchunxiong1964) -END-