“New products aren't selling at the terminal; we hope the company can provide more promotional resources to boost sell-through,” a beverage distributor stated at a monthly review meeting. Another distributor added, “New products are approaching expiry at the terminal; we need to recall them, which incurs logistics costs, and then we have to spend money to dispose of them. After all this hassle, we've actually lost money on this product.” In the past, for high-end new products, manufacturers would allocate a series of promotional resources, and if products approached expiry, they would fully cover disposal costs, essentially protecting distributor margins. Now, to cope with sales and profit pressures, companies still launch new products annually, but promotional budgets are continuously squeezed, and most new products don't even have matching promotional resources. New products have gradually become a tool to squeeze distributors—simply to get them to stock up, after which the promotion and sell-through responsibilities are handed over to the distributors.
New Products Roll Out in Succession, but Distributor Profits Suffer
The success rate for new products is inherently low, and manufacturers are increasingly impatient, pursuing rapid volume growth, even disregarding market realities and distributor viability, ultimately leaving distributors to clean up the mess.
1. Blindly Launching New Products Is Doomed to Fail
1.1 Going Against Consumer Trends: Introducing New Flavors and Packaging Based on Old Products. For example, a leading dairy company has a product that was a dairy beverage launched over 20 years ago. As consumers' demand for healthy drinks has increased, sales of this product have declined year after year. To halt the decline, the company has continuously introduced new flavors, but consumers haven't embraced them, and the old product continues to slide. Today, products that don't align with trends largely rely on lower-tier markets for sales, because consumption concepts there often lag behind big cities. Why do manufacturers' marketing personnel continue to make mistakes that go against marketing principles? It's not that their brand managers don't understand; it's that they have no better options. It's understood that the company's structure is managed by sub-brands, and the brand manager for this product is only responsible for its promotion and development. This means all efforts must be directed at the sub-brand, even if they're futile, otherwise how would their value be demonstrated?
1.2 Blindly Following Trends with Products Lacking Competitiveness. A leading FMCG company, seeing the huge capacity of the functional beverage market, followed the trend and launched a functional beverage. They required it to benchmark against the main competitor, with nearly identical packaging, price, and selling points, and demanded that at the terminal, it be displayed next to the competitor with no less shelf space. “In my market, the new product's coverage and display are even better than the competitor's, but consumers still seek out the competitor. I hope the company can provide better methods to increase consumers' choice of our product,” a distributor said helplessly. The manufacturer, relying on years of channel development, solved the problem of getting the product into stores and displaying it, but didn't solve the problem of consumer demand. In an environment where Red Bull and Dongshen have already captured consumer mindshare, they followed a path of homogenization with Red Bull. If you're the same as Red Bull, why would consumers buy you? Homogeneous products rely on first-mover advantage, and you haven't offered greater benefits (like cost-effectiveness) or differentiated value compared to Red Bull.
2. Pursuing Rapid Volume Growth and Handing Promotion and Sell-Through to Distributors
Many manufacturers are solely focused on getting distributors to take delivery, then wash their hands of it. Some market operations are textbook examples of what not to do. Distributors unwilling to stock high-end new products are forced to accept a one-to-one ratio with old products—meaning for every case of old product, they must take one case of new. After that, there's no follow-up, and no expense coverage for near-expiry products. To minimize losses, distributors resort to selling at low prices or giving them away as gifts with other products. “Every time the company launches a new product, they force distributors to take a certain quantity. I still have over 1,000 cases of new product approaching expiry, and the manufacturer won't handle it,” a dairy distributor complained. “Company leaders completely ignore market realities and allocate new product sales targets evenly. The new product is expensive and simply doesn't sell in our county-level market. Retailers took 10 cases and returned 9; the one that sold was given away as a freebie.” Many distributors end up covering the costs of disposing of large quantities of near-expiry products, severely damaging their profits. With already thin margins, some distributors can't hold on and reluctantly exit the business, causing the market to further collapse. Such examples are not uncommon.
3. Lack of Sustained Market Penetration
New product promotion is often short-term and quick, with some expecting short-term policies to solve sales problems once and for all. Initially, it's all fanfare, using resources to buy sales, with heavy investments like free samples and 1-yuan exchanges to drive trial. After three months, the manufacturer stops supporting costs, leaving distributors to clean up. “In the first year, the company had a return policy for near-expiry products. We were ready to go all out in the second year, but then they canceled the policy and said we had to bear the costs ourselves. The market immediately lost momentum,” distributor Lao Zhang sighed. “To recover capital and reduce profit losses, we had to sell the products at low prices.” When new products are sold at low prices, it's already a sign of their death. In summary, most new product launches don't bring benefits to distributors; instead, they drain distributors' energy and resources, exacerbating their operational difficulties. Ironically, in recent years, some large companies have seen sales decline, but thanks to new product launches, their profits have actually increased. That's because new products have larger profit margins, and manufacturers have cut promotional spending, shifting the risk to distributors.
In the Era of Shrinking Volume, How Should Manufacturers Cultivate and Develop New Products?
In the FMCG industry, the survival and development of new products don't happen by chance; certain conditions must be met.
1. The Prerequisite Is Differentiated Value
6 Walnuts, though a trademark, for most consumers initially didn't know if it was a trademark, but it gave consumers a clear positive implication, reducing communication costs. Jane's, promoting “...nothing else,” is such a simple value that consumers need and easily understand, thus winning over a host of consumers.
2. Continuous Scene Penetration
2.1 New Products Appear in the Most Suitable Consumption or Purchase Scenes Consumers have different needs in different scenes. Placing products in scenes that match their value makes it easier for consumers to try and accept new products. Professor Liu Chunxiong said, “How many scenes, how much sales.” Mingren Soda Water was lukewarm in early sales until it found the “hot pot” scene, then began to grow steadily. Electrolyte water focuses on sports scenes because in those scenes, the product offers a better experience for target consumers. Back then, Wanglaoji, because its taste was hard for ordinary consumers to accept, chose to promote in hot pot scenes, precisely targeting consumers' fear of getting heaty. Young people are starting to focus on health, and various health beverages are springing up like mushrooms, making it hard for consumers to choose. Master Kong's Tea's Heir focuses on campus channels and quickly gained favor among young people.
2.2 Communicate the Core Value of the Product to Build Cognitive Advantage
“Good wine needs no bush, but in a competitive market, it does.” In the era of shrinking volume competition, whoever can better occupy consumers' minds will have a better chance to stand out. Many companies think low price is competitive. But if consumers don't know your product, they won't buy it even if it's cheap. Awareness precedes purchase—that's the basic logic of consumer buying. This year, while visiting terminals covered by a beer brand, many shop owners reported, “Consumers say your beer is a no-name brand.” This indicates the product lacks publicity in the market, and consumer awareness is very low, which is indeed the case. In a market with over 2,000 terminals, only 2 store signs were made, and promotional materials were pitifully scarce. The value of a product must be loudly proclaimed; if consumers don't perceive the value, the product won't be included in their consideration set. In recent years, while major beer companies have seen sluggish sales, Yanjing U8 has grown rapidly, driving Yanjing Beer's overall sales and profits to double-digit growth for consecutive years. Market visits reveal that in markets where Yanjing U8 grew rapidly, the manufacturer conducted extensive publicity in the first two years after launch—store signs, posters, fridge stickers, lightbox ads were everywhere. Almost every store with Yanjing U8 had some form of promotion, subtly influencing consumers. In the heat of competition among similar products, consumers have only one chance to interact with a new product. If they learn about a competitor first, buy it, and the experience meets expectations, they'll likely choose the competitor next time—that's first-mover advantage.
2.3 Continuous Penetration to Make Competitors Despair
Finding effective promotion/sell-through methods and consistently repeating them is the core of building cognitive advantage. For many new products, repetition is the most effective promotional method. Once the promotional content is designed, the next step is continuous dissemination. The elevator ads in our office building show X La Wang Zi almost every day of the year, with essentially unchanged content. I rarely eat latiao, but once at a supermarket, I saw X La Wang Zi and instinctively grabbed two packs to try. That's the power of repetition—it influences your behavior without you noticing. I visited a county-level Yanjing distributor: “In the first year, Yanjing U8 took in 1,000 cases and 800 were returned; in the second year, there were still many near-expiry returns, but in the third year, sales suddenly took off. Now consumers actively ask for Yanjing U8.” Yanjing U8's success lies precisely in continuous penetration of suitable scenes, integrating packaging design, scene coverage, product promotion, and sell-through pull, and consistently executing. The distributor added, “Actually, most promoters' profits don't cover their wages, but we keep promoters at core terminals because they're important for brand promotion and sell-through pull.” Many new products repeatedly fail in the market because manufacturers are just testing the waters, selecting a few key terminals for promotion and sell-through, and after three months, if results don't meet targets, they abandon resource investment and let the product fend for itself. Product explosions aren't linear; they accumulate to a point and then suddenly grow exponentially. We feel a product suddenly became popular precisely because of its sustained accumulation in the early stages.
What If Resources Are Insufficient?
Casting a wide net disperses resources, and if no market is thoroughly developed, resources are wasted. You can select a few markets to create benchmarks; for distributors, you can choose one township or even one street. When resources are insufficient, focusing resources to thoroughly develop a market is far more effective than spreading them evenly across all markets.
Final Thoughts
Consumer demand is diversifying, and new products can better meet new consumer needs. However, many new products lack market insight in the early stages and lack market strategy during execution, thus bringing distributors not opportunities but a catalyst for their exit. New products carry the strategic mission of sustainable corporate development. Only those truly based on consumer needs, with clear market strategies, and maintaining strategic focus can build a company's second growth curve and become the engine for sustainable development.