---
title: "Manufacturers Want Scale, Distributors Want Profit: This Game Needs a New Strategy"
description: "A beverage distributor complains that tasks increase yearly while profits shrink, making the business unsustainable. Manufacturers set ever-higher sales targets, pressuring distributors to stock up, often leading to losses. Distributors must adapt by setting bottom lines, negotiating for support, identifying growth sources, and refining terminal operations to survive the manufacturer-distributor game."
author: "金名"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2026-03-29"
categories: "Dealer Operations"
language: "en"
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markdown: "https://xinjignxiao.com/en/articles/manufacturers-want-scale-distributors-want-profit-this-game-needs-a-new-3423046d.md"
original_source: "https://mp.weixin.qq.com/s/9EhTsknloTuZCTNXs5Yy5Q"
translation: "https://xinjignxiao.com/zh/articles/%E5%8E%82%E5%AE%B6%E8%A6%81%E8%A7%84%E6%A8%A1-%E7%BB%8F%E9%94%80%E5%95%86%E8%A6%81%E5%88%A9%E6%B6%A6-%E8%BF%99%E5%9C%BA%E5%8D%9A%E5%BC%88%E5%BF%85%E9%A1%BB%E6%8D%A2%E6%89%93%E6%B3%95%E4%BA%86-3423046d.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/manufacturers-want-scale-distributors-want-profit-this-game-needs-a-new-3423046d/"
citation: "金名. “Manufacturers Want Scale, Distributors Want Profit: This Game Needs a New Strategy.” New Distribution, 2026-03-29. https://xinjignxiao.com/en/articles/manufacturers-want-scale-distributors-want-profit-this-game-needs-a-new-3423046d/"
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---

# Manufacturers Want Scale, Distributors Want Profit: This Game Needs a New Strategy

> A beverage distributor complains that tasks increase yearly while profits shrink, making the business unsustainable. Manufacturers set ever-higher sales targets, pressuring distributors to stock up, often leading to losses. Distributors must adapt by setting bottom lines, negotiating for support, identifying growth sources, and refining terminal operations to survive the manufacturer-distributor game.

**“Tasks get higher every year, profits get lower every year—this business is really unsustainable!” A beverage distributor stared at the 2026 cooperation agreement and couldn't help complaining.**
Manufacturers' sales targets increase year after year, and 2026 is no exception. To motivate distributors to meet targets, manufacturers, as usual, set incentives or penalties: meet the target and get rebates; miss it and face threats of market division or even replacement.
In recent years, with the economic downturn, stocking up has become the norm to meet ever-growing sales targets. Many distributors even sell at prices below cost, relying solely on manufacturer rebates for profit. If they fail to meet year-end targets, they lose bonuses and end up losing money overall—a highly risky profit model.
Under this model, many distributors fall into losses and are forced to exit brand operations.
**Why Do Manufacturers Increase Sales Targets Every Year?**
**In the FMCG industry, manufacturers' sales targets increasing year by year has become an unspoken mutual understanding. Behind this growth lie deeper reasons.**
**1. Capital's Profit-Seeking Nature**
Capital's extreme pursuit of profit, and economies of scale are the guarantee for reducing costs and achieving profit growth.
In the recent economic downturn, manufacturers' sales and profit targets still grow annually. To meet these targets, senior management can only squeeze employees and distributors, leading to frequent wage cuts and layoffs, and increasing distributor attrition. If growth targets aren't met, even the president can be replaced, let alone frontline employees.
Unrealistic targets are equivalent to disguised wage cuts. Bosses might say, "Despite the tough environment, our salary system hasn't been cut. Employees with lower wages simply didn't meet their sales targets."
Additionally, they compress expense investments, and expired products are handled by distributors at their own cost. Even market investments borne by the manufacturer are advanced by distributors, but the reimbursement process is increasingly complex, often deducted for "non-compliance," becoming a means for manufacturers to shift costs.
In reality, profit target growth doesn't mean manufacturers aren't making money; they want to make even more.
A leading beer manufacturer has increased profits nearly tenfold over the past decade while reducing its workforce by 40%.
**2. Competitive Necessity**
The FMCG industry has relatively low barriers and intense competition. If you don't increase your targets while competitors do, you're effectively handing over market share. In a zero-sum game, if you don't grab, competitors will. So, growth targets are used to push teams and distributors to seize others' share.
Many small brands from a decade ago are now invisible in the market because their share has been continuously squeezed by big brands. Once squeezed to a certain point, small brands can't sustain operations and exit, with remaining share divided among leading companies. This is how duopolies form in various FMCG categories.
**Facing Manufacturers' Ever-Growing Sales Pressure, Where Should Distributors Go?**
In the zero-sum environment, distributors face manufacturers' rising targets. Some are angry and outright refuse, even quitting; others blindly comply, stockpiling and selling at low prices, severely damaging profits until they can't continue; still others choose to "lie flat," doing whatever they can, losing hope in incentives, which also hinders their development.
**1. Hold the Bottom Line:**
**Cash flow first, profit second, sales third. Minimize or stop actions that harm profit, and refuse to sacrifice profit and capital safety for inflated sales.**
1. Set a "stocking red line": based on monthly outbound volume per SKU, control inventory turnover days to 30-45 days; stop purchasing if exceeded.
A county distributor, dealing only in beer for over 10 years, has annual sales hovering around 50,000 cases—small in the beer industry—but still supports two salespeople.
The distributor shared his approach: "I don't stockpile, so I rarely have expired products. I don't lower supply prices to boost terminal orders. I earn money on every case sold."
2. Guard cash flow: assess terminal operations; temporarily stop supplying terminals with overdue payments to cut losses.
In 2025, I visited a beer distributor who had exited the industry and asked why.
"Terminals owed over 3 million yuan in payments, the capital chain broke, and I couldn't afford to order more," the distributor said, exhausted and helpless. "Now I'm out collecting debts daily, but many debtor terminals have closed, and the owners are nowhere to be found."
3. Focus on products: abandon products that lose money.
More products aren't necessarily better. A product needs investment and volume to be profitable.
"This year I reduced my product range, cutting low-volume, negative-margin SKUs. Now I'm more focused. Sales dropped, but net profit increased," a snack distributor shared.
**2. Negotiate with Manufacturers for Sales Support and Risk-Sharing Policies.**
In 2025, I visited many distributors who achieved growth in both sales and profit, especially large ones whose profits didn't decline. The key reason is they know how to negotiate and demand resources.
"My inventory is too high; I can't order more unless you apply for a clearance policy from the company, then I'll take another truckload," a distributor would say, always seeking resources like cost-sharing for expired products or subsidies for slow-moving items.
"The squeaky wheel gets the grease" is an eternal truth.
Manufacturer reps find such distributors annoying, but to meet their own targets, they reluctantly apply to the company each time. In fact, many policies are meant to incentivize distributors; they need to be requested because reps want distributors to stock more as a bargaining chip. If they can get orders without using policies, it's easier for them.
With manufacturer support, targets are easier to meet.
"This year we exceeded our target. The terminal sell-through for Product X picked up noticeably. The company supported sampling and consumer engagement, which boosted consumer recognition and sales. We're more confident now," a children's beverage distributor shared.
At the annual meeting, a regional head of a leading dairy company said bluntly: "If I support you, you can meet your target. If I don't, let's see how you do it."
**3. Inventory Your Terminal Channels to Identify Growth Sources.**
Growth sources mainly come from new channels (e.g., developing blank stores, partnering with emerging channels) and grabbing share in existing stores (which requires hard work). Adding new products is unrealistic; new products have a slim chance of survival.
On one hand, overlooked channels like instant retail, community group buying, and special channels can be tried with manufacturer and own resources, focusing on one channel for incremental growth.
"Our 2025 sales growth mainly came from partnering with a few small chain systems," a beverage distributor shared.
On the other hand, for terminals with low share, determine how much resource to invest and which actions to focus on to capture share.
Thus, distributors must understand terminal competition to know where to focus efforts. Only then is the business controllable; otherwise, it's just doing whatever, leaving everything to chance, and eventually being eliminated by the market.
**4. Refine Terminal Operations to Enhance Profitability.**
Extensive growth is nearly impossible (in today's environment, explosive growth often occurs only when competitors make major mistakes, which is rare).
Refined terminal operations are a standard requirement for distributor profitability.
A beverage distributor saw sales and profits decline for two consecutive years. "The economy is bad, terminal business is poor, and products aren't selling," the distributor blurted out.
A market visit revealed that most terminals had expired products. Some expired stock is normal, but this distributor handled over 20 SKUs, and nearly every SKU generated significant expired products—that's abnormal. The root cause was extensive terminal management: delivering goods and forgetting about them, ignoring display position, display quantity, visual merchandising, and consumer activities.
Handling expired products is a profit killer. This distributor spent a considerable amount annually on such products (though the manufacturer covered part, the distributor still lost profit).
Recently, I visited a Qingdao distributor in a certain market who has seen continuous growth in sales and profit for years, mainly due to refined terminal operations started years ago.
"Product selection, display, promotion, and sell-through—these are what we've always insisted on. My staff go to terminals to organize displays, secure prime positions, rotate expired products promptly, run consumer activities, and publicize them. Through these terminal actions, we've grabbed share from competitors," the distributor shared his experience.
**Final Thoughts**
Manufacturers' targets increase yearly—a fact distributors can't change. Blindly complying makes you a lamb to the slaughter; confronting head-on leads to mutual destruction.
Holding the bottom line, securing resources, and enhancing profitability are the keys to standing firm in the manufacturer-distributor game.


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## Citation metadata

- Publisher: New Distribution
- Author: 金名
- Published: 2026-03-29
- Canonical: https://xinjignxiao.com/en/articles/manufacturers-want-scale-distributors-want-profit-this-game-needs-a-new-3423046d/
- Original source: https://mp.weixin.qq.com/s/9EhTsknloTuZCTNXs5Yy5Q

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