---
title: "Nongfu Spring Adjusts Distributor System: What's the Intent Behind Upgrading Major Distributors?"
description: "Nongfu Spring, a well-known domestic beverage brand, has announced plans to implement a new system of cultivating major clients in certain regions, restructuring its existing distributor network. This move has sparked industry discussion, as Nongfu Spring is not the first company to adopt a major distributor system. Previously, for FMCG companies, penetrating lower-tier channels was key to market dominance, leading many to aggressively develop county-level distributors. Starting this year, many manufacturers have begun experimenting with major distributor systems to control operational costs. As the beverage industry gradually recovers, why are major players favoring this approach?"
author: "华丽的冒险"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2016-07-27"
language: "en"
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# Nongfu Spring Adjusts Distributor System: What's the Intent Behind Upgrading Major Distributors?

> Nongfu Spring, a well-known domestic beverage brand, has announced plans to implement a new system of cultivating major clients in certain regions, restructuring its existing distributor network. This move has sparked industry discussion, as Nongfu Spring is not the first company to adopt a major distributor system. Previously, for FMCG companies, penetrating lower-tier channels was key to market dominance, leading many to aggressively develop county-level distributors. Starting this year, many manufacturers have begun experimenting with major distributor systems to control operational costs. As the beverage industry gradually recovers, why are major players favoring this approach?

Recently, Nongfu Spring, a well-known domestic beverage brand, announced significant news: the company will soon implement a new system of cultivating major clients in certain regions, restructuring its existing distributor network.
The news has sparked heated discussion within the industry, as Nongfu Spring is not the first company to adopt a major distributor system. Previously, for FMCG companies, penetrating lower-tier channels was an important way to capture market share, so everyone was aggressively developing county-level distributors. Starting this year, many manufacturers have begun experimenting with major distributor systems to control operational costs. At a time when the beverage industry is gradually recovering, why are major players favoring this system? **Nongfu Spring Faces Major Channel Policy Change** “**Nongfu Spring May Undergo Channel Reform in October** Recently, a distributor in Henan revealed to the media that he had just signed a new contract with Nongfu Spring, becoming one of only four distributors remaining in the company's long-term market plan for the area. Subsequently, he will enjoy the benefit of products leaving the factory at bare prices, with the manufacturer covering all operational costs.
Another distributor in the same market confirmed the above, adding that it was already an "open secret" within the industry. According to him, Nongfu Spring's natural water is shipped at a bare price of 20 yuan per case, with tasks doubled, requiring annual sales of no less than 5 million yuan.
The statements from two distributors in the same region confirm one issue: Nongfu Spring is adjusting its channel system.
It is understood that previously, Nongfu Spring's contracts were signed every November, and annual tasks were settled based on November figures. However, starting last year, this time was moved up to October. Additionally, distributors from other regions have told the media that they have not received official notice, but Nongfu Spring suggested they merge with some smaller distributors, with the specific operation time tentatively set for October.
Based on this information, it is certain that this October, Nongfu Spring will pilot the major distributor system in certain regions. **In Channel Policy Shifts, Old Giant Mondelez Moves Faster** “**Major Distributor Adjustment Not Unique to Nongfu** The major distributor system is not unique to Nongfu Spring; as early as early July, global food giant Mondelez announced channel adjustments and the implementation of a major distributor system.
According to the Henan distributor's tip-off, Mondelez's "Major Distributor Strategy" mainly includes two key elements: First, by region, only one distributor is retained in each prefecture-level city, abolishing previous county-level distributors, with all markets allocated to prefecture-level city distributors. Second, the manufacturer's sales personnel are incorporated into the distributor's staffing, with salaries paid by the distributor.
For a company of Mondelez's size, the major distributor system not only optimizes channel resources but also effectively saves market and administrative costs.
In fact, facing the slowdown in global FMCG industry growth, Mondelez had already launched the "Himalaya Project," a variant of the major distributor system, last year. Thanks to various measures, Mondelez's net profit in 2015 reached $7.267 billion, a 232.7% increase compared to the same period in 2014. **What Can Channel Changes Bring to Manufacturers?** “**What Can the Major Distributor System Bring to Enterprises?** In the past two years, as the FMCG industry gradually emerges from its downturn, more and more companies have begun adjusting various policies adopted during the crisis, with channel policies being the first to be affected.
Previously, manufacturers widely established county-level channels, generally on the premise of having branches or offices in the province. This effectively enhanced the manufacturer's control over channel resources in various regions. However, these branches and the county-level channels they managed had high operational costs. Shifting operational costs is the starting point for manufacturers implementing the major distributor system.
Some may ask: under the major distributor system, how are township channels maintained?
The answer is that the management of township distributors is generally transferred to prefecture-level city distributors. For example, in some provinces in the eastern and central regions, each prefecture-level city has about 5-10 county-level cities/districts, each with about 10-15 townships/streets. Thus, each prefecture-level distributor would manage approximately 20-150 townships. Taking the median of 80, within a prefecture-level city, only 3-5 employees are needed to complete maintenance tasks, significantly reducing costs. Simple calculations reveal that under the major distributor system, the manufacturer's control over grassroots channels is not weakened at all. Additionally, manufacturers can eliminate multiple layers of distribution, making products more competitive. After experiencing a cold winter of rapid market expansion, China's FMCG industry is now seeing true recovery, and the major distributor system favored by many is just the first spring breeze after the cold.
Source: FMCG Distributor Insider (ID: kxpjxsnc)
**Extended Reading:**
## Zhong Shanshan: Traditional Enterprises Need to Upgrade, We Have Achieved No. 1 in China!
Nongfu Spring, Nongfu Orchard, Oriental Leaf, Water-soluble C100, Scream, Duo'er, Qingzui Lozenges, Mother's Beef Sticks, Yangshengtang Vitamins, Nongfu Spring 17.5°C Oranges... These classic FMCG brands all share a common "father"—Zhong Shanshan.
In China's FMCG industry, Zhong Shanshan's name is more or less associated with the word "legend": a billion-yuan enterprise, classic cases, and Zhong Shanshan's personal journey from bricklayer, media person, to entrepreneur are all irreplicable.
Zhong Shanshan is quite low-key; whether online or in the media, stories about him are brief. However, his public speeches are full of wisdom and widely circulated in the industry. Disliking social engagements, he spends most of his time and energy on conceiving and designing products. People think his success is due to marketing, but in fact, he believes more in the power of products.
Speech source: Cosmetics Observation | Compiled by: Food Business
Recently, Zhong Shanshan appeared at the China Cosmetics Conference and shared a speech titled "Regaining Brand Confidence for Traditional Enterprises." The editor has transcribed the full speech below, hoping it will provide insights for food and FMCG professionals.
**Full Speech Text**
The theme I'm going to talk about today is regaining brand confidence for traditional brands. The transformation of concepts and the power of human will have shaped today's world, as Nobel laureate Hayek said. He emphasized that the most critical are concepts and will; all human existence relies on concepts and will.
Individual knowledge and collective knowledge are constantly changing. Since the advent of the internet, individual knowledge has grown hundreds of times compared to the past. But in the overall world, the scale of individuals is getting smaller. Our individual ratio is getting smaller, so we must strengthen the construction of new knowledge systems, and everyone needs the ability to make independent judgments.
Traditional enterprises are highly habitual, relying on long-established life customs of humanity. The strength of traditional enterprises lies in the knowledge, craftsmanship, standards, traditions, and methods accumulated over the past ten or twenty years—this is their power.
**We have invested 120% effort for 20 years, and now we have achieved No. 1 in China and No. 3 in the world.**
**——Zhong Shanshan**
Nongfu Spring is a traditional enterprise, celebrating its 20th anniversary this year. After entering this industry, we found that it was full of world-class leaders, so we invested 120% effort for 20 years, and now we have achieved No. 1 in China and No. 3 in the world. We believe time has given us space to learn; time is the strength of traditional enterprises.
**What do traditional enterprises need? We need to upgrade, upgrade, and upgrade again, elevating Chinese products to world-class standards. We have only one path, because we have no other choice.**
**——Zhong Shanshan**
The internet as a tool is similar to Watt's invention of the steam engine in the 18th century. The steam engine solved human physical strength issues; the internet solved digital communication and remote transmission problems. Both are tools invented by humans, but the internet is not a "mindset"; mindset is a uniquely human ability that coexists with life and has warmth.
As for the internet as a tool, traditional enterprises must not only learn but also fully and completely utilize it. Because tools can help strengthen management, tools must be embedded in all work environments.
**What do traditional enterprises need?** We need to upgrade, upgrade, and upgrade again, elevating Chinese products to world-class standards. We have only one path, because we have no other choice.
**How to upgrade?** We must comprehensively upgrade content, packaging, manufacturing processes, and equipment levels. Nongfu Spring's upgrade path is a good case in point.
**1. Nongfu Spring's first upgrade is conceptual—the evolution of internal concepts, which requires new composite knowledge to support.** Different products and brands have different upgrade paths, but one path is common: conceptual upgrade.
Nongfu Spring's earliest understanding of water was for quenching thirst; the second step was safety; the third was health, because water contains mineral elements. Now, Nongfu Spring's understanding of water represents an ecology: water is a barrier for human survival, and the basic environment for human survival is closely related to water; wherever there is water, there is good ecology. Therefore, the first thing in producing water is to find a good water source. Nongfu Spring's choice of Moya Spring at the northern foot of Changbai Mountain is a practice of this understanding.
In selecting water sources, benchmarking and surpassing international brands is something local traditional enterprises must do. The process of selecting a water source is closely related to this philosophy.
**We traditional enterprises cannot compete on the fast track; we must compete on the slow track with our individuality and uniqueness.**
**——Zhong Shanshan**
**2. Nongfu Spring's second upgrade is packaging.** Packaging upgrade is a challenge for Chinese companies because aesthetics may be innate, making it the most difficult step. To reflect the unique ecological culture of Changbai Mountain in the design of its high-end water bottle, Nongfu Spring spent 3 years, invited 5 design companies from over 30 countries, and went through more than 50 drafts.
Nongfu Spring started developing high-end water in 2012, but we only launched the product in 2015. We believe that among all packaging, only the final selected one is closer to what Nongfu Spring wanted—expressing the ecological civilization of the Changbai Mountain region. Ecological civilization is the cultural value Nongfu Spring attaches to this product.
We traditional enterprises cannot compete on the fast track; we must compete on the slow track with our individuality and uniqueness. After this product comes out, I believe China's drinking water packaging status will be established in the world. This product embodies world-class wisdom in the beverage industry, not only an upgrade for Nongfu Spring but also believed to promote the upgrade of China's beverage industry.
**Nongfu Spring has stories; we are not short of stories.**
**——Zhong Shanshan**
**3. Nongfu Spring's third upgrade is brand and advertising.** I have noticed current cosmetics advertisements, and most still remain at the "three-stage" shouting format using celebrity endorsements as gimmicks—a typical P&G style.
We need to move from the three-stage format to story form. Why rise to story form? Why should traditional enterprises fully utilize and apply the internet? You can make your ads and stories as long as you want; as long as there is content, it will automatically be spread. I hope everyone spends less money and does more, because traditional enterprises hold products and experience that internet companies do not know. Nongfu Spring has stories; we are not short of stories.
These stories of Nongfu Spring are a microcosm of employees' hard work; without long-term accumulation of sentiment and emotion, they cannot come out of thin air. The brand is built on the hard work of every employee; these are valuable assets of traditional enterprises. We believe in the power of traditional enterprises, which is the power of people, because tradition coexists with people.
-END-
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