Over the past two years, China's commercial distribution business has continued to evolve. Traditional business models are changing, with the big eating the small, and digitalization and local supply chain integration becoming the direction for more distributors. The channels of operation are also changing, with new formats such as hard discount snack stores and front warehouses rising rapidly, forcing distributors to expand into more channels. Distributors' capabilities are becoming stronger, and more brand owners are starting to co-operate with local distributors to build and manage markets. However, we also find that there is a gap between distributors' business goals and the value expected by brand owners. Against this backdrop, New Distribution, together with Zhoupu Data, conducted a survey and publicly released the "2022-2023 China FMCG Distributor Business Survey Report" (hereinafter referred to as the Report). Through a survey and study of 279 medium and large-scale FMCG distributors across the country, covering different primary product categories, we gain insights into distributors' operations, management, efficiency, and development trends, revealing the challenges and opportunities in distributor market operations and upstream-downstream cooperation, providing cutting-edge first-hand information and inspiration for the upgrading of cooperation between distributors and brand owners.
Preface: The Evolution of China's FMCG Distributors Before the formal report, let's briefly share the evolution of China's FMCG distributors based on New Distribution's past research and insights. We divide the commercial distribution field into six periods on a timeline: stall-ism, warehousing-ism, brand-ism, category-ism, channel-ism, and consumerism. In development, distributors have also transformed from resource-based, relationship-based, and individual businesses to capital-based, professional, and corporate businesses. Since it is now professional and corporate, New Distribution has also sorted out five types of distributors in the overall commercial distribution industry: warehousing distributors, brand distributors, category distributors, channel distributors, and platform distributors, and provided standard definitions for each type. Based on New Distribution's classification of the distributor group, over a period of one month, we conducted an in-depth survey of 279 distributors within mainland China, spanning more than 14 categories, including water and beverages, convenience snacks, leisure snacks, rice, flour and oil, seasonings, milk and dairy, washing and daily chemicals, paper and hygiene products, baijiu, beer, other alcoholic beverages, infant products, and frozen foods.
Functions in Manufacturer Cooperation First, let's look at the functions of distributors in cooperation with brands. The survey found that distributors' brand cooperation functions are continuously improving, becoming more comprehensive, not limited to basic functions such as warehousing and logistics, expense advances, and terminal services. According to data, the function of sales representative management has significantly increased compared to previous years. Compared with previous survey results, the proportion of distributors with only warehousing and logistics functions has decreased; the proportion of distributors with sales representative management functions has increased.
Pressure on H1 Sales Target Achievement 2023 is different from previous years, not only as the first year after the pandemic but also a year widely felt as a "cold winter." The survey on target achievement shows that distributors generally faced pressure in achieving their H1 sales targets, with grain, oil, seasonings, and dairy being particularly severe; while washing, paper hygiene, and convenience snacks performed relatively better. Only 23.7% of distributors achieved their brand sales targets for the first half of the year. The average target achievement rate for distributors in H1 was 85.4%.
Organizational Performance System Innovation Organizational performance management is the core manifestation of distributors' daily operational management capabilities. We divide organizational performance management models into four types:
- Sales commission
- Net profit sharing
- Category partnership
- Regional contract From the survey, we found that the innovation of distributors' organizational performance management systems has effectively improved enterprise human efficiency, and combined performance management mechanisms show higher efficiency than single mechanisms. For single organizational performance management models, the average human efficiency is 1.415 million yuan/year. For combined organizational performance management models, the average human efficiency is 1.978 million yuan/year.
Primary Reasons for Business Downturn External environmental pressure is the consensus among distributors in their current operations. What specific pressures and challenges? The shrinking of downstream store business, increased operating costs, and the impact of new channels are the primary reasons for the downturn in distributor operations. In addition to online channels such as B2C e-commerce, B2B e-commerce, and community group buying, offline emerging channels like discount supermarkets and snack bulk stores also have a widespread impact on distributors' businesses.
Types of Cost Increases for Distributors Under the business downturn, internally, the most common cost increase for distributors is personnel costs, but the primary cost growth type varies by category. Ranked first, 52.1% of distributors saw an increase in personnel costs; ranked second, 36.1% saw an increase in sales expenses.
Manufacturer Expense Support Distributors generally believe that manufacturer expense support has decreased. About 80% of distributors said that manufacturer expense investment did not increase or even decreased. Among them, distributors in grain, oil, seasonings, and daily chemicals believed that more brand owners reduced market expense investment. Distributors in convenience snacks, water and beverages, beer, and baijiu believed that more brand owners increased market expense investment.
Key Drivers of Revenue and Profit Growth Expanding outlets and channels, optimizing product structure, and improving operational management are the top three drivers for distributors' revenue and profit growth.
Primary Path for Transformation and Upgrading Distributors believe that the primary path for transformation and upgrading is to enhance execution, organizational capability, and operational capability.
Integrated Manufacturer-Distributor Cooperation Building regional key accounts is the trend in cooperation between brand owners and distributors. Brand owners deepen integrated manufacturer-distributor cooperation through key account development, building a community of interests and development, and forming local competitive advantages.
Future Path for Distributors Becoming bigger, stronger, and more professional is the only way forward for distributors.
The above is part of the report content. For more details, please refer to the full report. Add WeChat to obtain the report.
Attachment: Outline of the Full Version of the "2022-2023 China FMCG Distributor Business Survey Report"
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