---
title: "Nongfu Spring, C'estbon, Ganten: The Prelude to the 'Water Head' Battle | A Guide to Expense Planning"
description: "At this time each year, major beverage companies are implementing their 'water head' policies, which they highly prioritize. The water head has two missions: first, to seize the funds and storage of distributors, wholesalers, and terminal stores; second, to adjust production capacity and manage logistics constraints between peak and off-peak seasons. To achieve these, investment is essential. This article discusses how first-tier brands and new brands should allocate launch expenses to effectively execute the water head strategy."
author: "海游"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2020-01-17"
categories: "Brand Marketing, Dealer Operations"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/s0DngvBhdK-4eddikVXWKQ"
translation: "https://xinjignxiao.com/zh/articles/%E5%86%9C%E5%A4%AB%E5%B1%B1%E6%B3%89-%E6%80%A1%E5%AE%9D-%E7%99%BE%E5%B2%81%E5%B1%B1%E7%9A%84-%E6%B0%B4%E5%A4%B4%E5%A4%A7%E6%88%98-%E5%89%8D%E5%A5%8F-%E8%B4%B9%E7%94%A8%E8%A7%84%E5%88%92%E6%8C%87%E5%8D%97-ee4d2a0b.md"
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citation: "海游. “Nongfu Spring, C'estbon, Ganten: The Prelude to the 'Water Head' Battle | A Guide to Expense Planning.” New Distribution, 2020-01-17. https://xinjignxiao.com/en/articles/nongfu-spring-c-estbon-ganten-the-prelude-to-the-water-head-battle-a-gui-ee4d2a0b/"
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---

# Nongfu Spring, C'estbon, Ganten: The Prelude to the 'Water Head' Battle | A Guide to Expense Planning

> At this time each year, major beverage companies are implementing their 'water head' policies, which they highly prioritize. The water head has two missions: first, to seize the funds and storage of distributors, wholesalers, and terminal stores; second, to adjust production capacity and manage logistics constraints between peak and off-peak seasons. To achieve these, investment is essential. This article discusses how first-tier brands and new brands should allocate launch expenses to effectively execute the water head strategy.

At this time each year, major beverage companies are implementing their water head policies, and brands place great emphasis on the water head.
**The water head has two missions: first, to seize the funds and storage of distributors, wholesalers, and terminal stores; second, to adjust production capacity and manage logistics constraints between peak and off-peak seasons.**
To achieve these, investment is essential. Today, we will discuss how first-tier brands and new brands should allocate launch expenses to effectively execute the water head.
**Let's first analyze the traditional use of water head market expenses:**
**-01-
Analyzing from the product flow**
**1. Brand factory to distributor warehouse:**
This stage generally requires three types of expenses:
**a. Distributor payment fees** (rate: 0.5%-1%), manifested as working capital rewards, rebates for timely payments, etc., aimed at reducing the difficulty of grassroots sales staff in collecting payments. Where the money is, there is the voice.
**b. Distributor shipping fees** (rate: 3%-8%, usually requiring distributors to distribute to downstream channels in tiers), manifested as product bonuses for shipping, such as offering a certain number of free products for a certain quantity ordered within a specified time. The later the shipping, the smaller the bonus, encouraging distributors to temporarily rent warehouses to stock up.
**c. Task completion rewards** (rate: 1%-3%), manifested as rewards for completing task targets within a specified time (usually 1-3 months during the water head period). These three points account for over 70% of water head promotional expenses.
**2. Distributor warehouse to terminal stores:**
This stage generally requires four types of expenses:
**a. Channel promotional fees**, mainly in the form of product bonuses, promotional item bonuses, cumulative rebates, etc., funded by the brand's shipping bonuses to distributors.
**b. Distributor staff incentive fees** (rate: 1%-2%), also known as distribution fees. In actual operations, exclusive distributors are rare; most are exclusive or mixed. The purpose is to increase the distributor team's attention and focus on the product.
**c. Terminal display fees** (rate: 2%-6%), mainly in the form of traditional visual merchandising such as stacking boxes, shelves, and cut cases, aimed at accelerating sell-through.
**d. Other fees** (rate: 1%-2%), such as product entry fees, barcode fees, and floor display fees, which facilitate public relations in special channels.
**3. Terminal stores to consumers:**
This stage generally requires two types of expenses:
**a. Promotional fees** (rate: 1%-2%): mainly in the form of promotional item bonuses, such as giving away bowls or basins with instant noodles and ham sausages.
**b. Sales guide fees** (rate: 1%-2%): mainly through sales promoters to enhance consumer awareness of the product.
**Summary: From the product flow perspective, expenses are invested at every stage from factory to consumer, escorting product traffic. Many first-tier companies do this and have indeed succeeded.**
**-02-
Common characteristics of water head promotional expense usage**
> **1. Equal distribution: Expenses are invested at every stage from factory to consumer;**
>
> **2. Uniform timing: Used simultaneously across all markets at the same time period;**
>
> **3. Conditional: Distributors receive certain expense rewards only after completing specific targets.**
**Summary: Externally, it ensures nationwide market resonance with great impact; internally, it ensures fairness and unity among the company's marketing team and distributor teams, achieving a win-win situation.**
Many marketing professionals will recall these two points and are familiar with them, having used them for years with considerable benefit. Thus, they have become the default universal formula for water head expenses, applied to various brands, markets, and distributors. However, results are not always satisfactory, and some have even put companies in a very passive position.
Everyone knows that the land reform policy in the early days of liberation greatly solved our food and clothing problems, an undeniable success. Behind this success were two important factors: **first, farmers inherently know how to farm; second, the system was problematic.** Without reform, the existing system constrained farmers' work; after reform, the system better stimulated farmers' inherent attributes.
By analogy, many first-tier brands like Nongfu Spring and Ganten have succeeded with the above water head expense allocation. The logic behind their success lies in their inherent attributes:
> **1. Strong product strength: As long as there is no malicious overstocking, sell-through is not a problem;**
>
> **2. Strong brand strength: They are hard-circulating goods, and reasonable concessions can quickly achieve goals.**
**The main purpose of the water head is to open up channels and make them more conducive to product sell-through. Logically, success is inevitable for such products; if your product lacks these attributes, failure is also inevitable.**
**-03-
How to formulate water head policies for new products**
For products lacking the above brand attributes, such as new product launches, how should water head policies be operated? Here are some suggestions for reference:
**1. Two pitfalls to avoid in water head expenses**
**Pitfall 1:** For new product launches, distributors generally do not prepay expenses they are not sure to receive. Therefore, fees like working capital, deposits, and target incentives—rewards for completing certain targets—are usually not prepaid to the channel by distributors. Even if distributors later receive them, they become their own profit, contrary to the original intent of expense investment.
**Pitfall 2:** Distributors and distributor salespeople are two separate entities. If salespeople benefit, it is better than the distributor profiting, as it is more conducive to outlet breakthroughs and display achievements, ultimately benefiting the distributor. Therefore, expenses should be separated; it is best not to give a lump sum to the distributor for allocation.
**2. Combine water head expenses with brand promotion, focusing on one process item**
**A. In media-covered areas: Focus water head expenses on outlet coverage (distribution rate), and work hard on distribution.**
1. Rewards for outlet development staff (e.g., 10 yuan for each new outlet opened, and another 30 yuan when that outlet reorders);
2. While quickly distributing, avoid price chaos; use promotional items instead of product bonuses (e.g., cooperate with national brands like Midea and Supor that have high premium rates): 5 cases get an electric fan, 10 cases get a rice cooker, 20 cases get a water air conditioner, strongly pushing displays and stimulating whole-case purchases;
3. Outlet target rewards (complete targets for specified time, number of outlets, and cases per outlet, with heavy rewards). The principle for using water head expenses: fast speed, high quality, good coordination.
**B. In non-media areas: Focus water head expenses on targeted outlet coverage, i.e., a combination of sales and display distribution.**
1. In the early stage, sell based on display units (e.g., standardized display layout: either a store takes 10 cases for a display set, or not sell at all; of course, add a few cases for shelves and coolers). Display fees should be generous (beyond the terminal owner's expectations), and staff should be well compensated for each store.
2. During peak season, focus on coolers. Distributors capable of placing coolers should be given ample ammunition; location is more important than fees. Reserve sufficient special funds for this.
3. Define targeted outlets and goals, with heavy rewards upon completion. For example, after a period of distribution, accurately describe the characteristics of fast-moving outlets, develop targeted outlets accordingly, set goals, and reward heavily upon achievement.
**3. History cannot be compressed, but time can**
Every brand's success has its own complete logic, accumulated step by step, process by process, each indispensable. However, time can be compressed with expenses, shortening the time to brand success. Therefore, precise and appropriate use of water head expenses after new product launch is particularly important.
**1. Break the equal distribution:** The rates should not be the same for every market; 'robbing the poor to give to the rich' is the first principle of water head expense use. Let some markets become strong first, create benchmarks, and then other markets can follow.
**2. Break the uniform timing:** Determine the expense usage period based on specific market conditions. For example, temperature differences between south and north can make new products uncomfortable. First-tier brands can have distributors digest and adjust this, but new product distributors lack this capability.
**3. Break the conditionality of expenses:** First, clarify two viewpoints:
> **a. Unconditional support for market impact is called expense investment;**
>
> **b. Conditional support for completing corresponding targets is called target rewards.**
The essential difference: one is process, the other is result; one benefits new products, the other benefits mature products; one is used for the market, the other goes into pockets.
**For new product launches, the market outlook is unclear. It is recommended to prioritize ammunition, supplemented by rewards. Brands should plan expense quotas to ensure distributors can use expenses with no or low thresholds, so they can fight on the front lines without worries and shorten the time for market advancement.**
**Final thoughts:**
The core principles for planning water head expenses are as follows:
> 1. More conducive to distributor payments;
>
> 2. More conducive to distributor shipping;
>
> 3. More conducive to distributor distribution;
>
> 4. More conducive to terminal store sell-through;
>
> 5. More conducive to consumer awareness;
While keeping the basic principles unchanged, it is essential to recognize your product's attributes. In today's competitive market, the 'universal formula' no longer exists. With market personalization and diversification, decision-makers should visit markets more, call on distributors, sub-distributors, wholesalers, terminal stores, and consumers to understand the front line, and formulate water head policies that align with market development, making the market healthier and products more sellable.
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## Citation metadata

- Publisher: New Distribution
- Author: 海游
- Published: 2020-01-17
- Canonical: https://xinjignxiao.com/en/articles/nongfu-spring-c-estbon-ganten-the-prelude-to-the-water-head-battle-a-gui-ee4d2a0b/
- Original source: https://mp.weixin.qq.com/s/s0DngvBhdK-4eddikVXWKQ

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Contact: zhaobo258@gmail.com · +86 158 5481 7671