---
title: "Nongfu Spring Streamlines System Drastically: Where Should Distributors Go?"
description: "Following Mondelez's layoffs, Nongfu Spring is overhauling its distribution system by implementing a 'major distributor system' starting in October, which will eliminate small distributors and raise annual sales targets to at least 5 million yuan. The company aims to stabilize sales and give more autonomy to selected distributors, but the move has mixed reactions among distributors."
author: "贾顺谊"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-10-15"
categories: "Dealer Operations"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/rYUeO1_potG7ohrBw7PeKQ"
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citation: "贾顺谊. “Nongfu Spring Streamlines System Drastically: Where Should Distributors Go?.” New Distribution, 2016-10-15. https://xinjignxiao.com/en/articles/nongfu-spring-streamlines-system-drastically-where-should-distributors-g-02e3e2f6/"
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---

# Nongfu Spring Streamlines System Drastically: Where Should Distributors Go?

> Following Mondelez's layoffs, Nongfu Spring is overhauling its distribution system by implementing a 'major distributor system' starting in October, which will eliminate small distributors and raise annual sales targets to at least 5 million yuan. The company aims to stabilize sales and give more autonomy to selected distributors, but the move has mixed reactions among distributors.

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> In 2015, due to weak revenue growth, Mondelez shifted costs to distributors by transferring sales personnel to distributors or not renewing sales contracts, effectively downsizing its sales force. In other words, Mondelez was cutting staff. Following Mondelez, within less than a year, another FMCG company is making major changes to its distribution system: Nongfu Spring.
> Streamlining Distributors: Annual Task Starts at 5 Million, Implemented in October
Recently, media reported that a distributor in Henan, after signing a new contract with Nongfu Spring, became one of only four distributors remaining in Nongfu Spring's long-term plan for the local market. Subsequently, this distributor will enjoy the latest policy of bare-price ex-factory products, and the manufacturer will be responsible for all operating costs.
According to another Nongfu Spring distributor, the selected distributors will enjoy more favorable manufacturer policies, such as Nongfu Spring natural water at bare price, with an ex-factory price of about 20 yuan per case, but the task will also double, requiring annual sales of no less than 5 million yuan. Nongfu had mentioned to him several times that the next contract year might see a change in operation mode: bare-price operation, no rebates, starting at 5 million yuan task, and small distributors might be merged. In Liaoning, some distributors said that although they had not received official notice, Nongfu had proposed merging with another distributor, with specific operations expected by October.
From the above, it can be seen that Nongfu Spring will implement a "major distributor system" starting in October. As everyone knows, the main means for FMCG companies to develop the market is intensive cultivation, channel下沉, and expanding business teams, but Nongfu Spring chooses to go against the trend. Why?
> What Is the Intention?
On October 11, media called Zhou Li, the board secretary of Nongfu Spring Group. According to him, this move is a normal system adjustment based on stable sales, transforming Nongfu Spring's operation into a distributor-centric model. For example, previously, the company's expense投放, customer visits, etc., were done by sales staff; in the future, distributors will be responsible for these. The company will also give distributors more freedom in expenses.
This means that in Zhou Li's view, Nongfu Spring's "major distributor system" is actually to increase the authority of distributors. Is that the case in practice? According to a staff member at Nongfu Spring's Haidian office, the company currently implements a distributor contract system: the company assigns some sales staff to distributors in each region, and the regional distributor is responsible for managing all sales staff, expense投放, and other aspects, meaning the company hands over the entire region to the distributor.
While this increases the rights of distributors, it also places higher demands on their capabilities, inevitably leading to the elimination of some distributors. According to Zhou Li, the reform will provide a platform for new and old distributors to select excellent ones. In terms of specific proportions, it is initially estimated that 80% of old distributors will be retained, and the remaining 20% will be eliminated. The retention ratio in different cities will depend on the current number and needs of each region.
> How to Select Distributors?
So what criteria does Nongfu Spring use to decide which distributors stay? According to Zhou Li, there are three main criteria for selecting excellent distributors: first, the individual's willingness to distribute the Nongfu Spring brand; second, whether the distributor has entrepreneurial spirit and likes to forge ahead; third, whether the distributor has sufficient operational capability, which inevitably involves hard indicators such as warehouses and work sites.
In this context, many new and old distributors in various regions are busy bidding. Currently, whether old or newly applying distributors, to obtain distribution qualification, they need to have independent business premises, warehouses, and other facilities, and also make bid documents to participate in the bidding. After winning the bid, they must pay a deposit of 30% of the task amount to the company before starting work.
At the same time, for the Tianjin area, applications are evaluated through bidding, with a comprehensive assessment of new and old applicants in terms of experience, team capability, vehicle configuration, inventory, funds, network, etc., before selection.
As for distributors likely to be eliminated, according to Nongfu Spring personnel, the main targets are distributors operating as husband-and-wife shops, which can only serve as delivery points and cannot manage the entire region. Regarding the fate of eliminated distributors across the country, Zhou Li said that some will become sub-distributors, and some will no longer continue to distribute the Nongfu Spring brand due to insufficient willingness and capability. However, this will not have a significant impact on them because many Nongfu Spring distributors also distribute other brands.
> Major Distributor System: Mixed Blessings
After a series of investigations, most of Nongfu Spring's distributors expressed support. They believe that this reform is beneficial for large customers, and reducing competing brands in the same region is conducive to the healthy growth of the brand. Industry insiders analyze that Nongfu Spring's numerous small distributors have brought huge sales on one hand, but also caused chaos in the product price system on the other. Although sales may be affected in the short term, the decision to streamline distributors is still correct.
However, some distributors said that the abolition of the small distributor system should be gradual, otherwise it will cause a gap in the transition, and certain specific channels still need small distributors to maintain. At the same time, competition is the mainstream in the FMCG industry. Once a large number of small and medium distributors that cannot meet standards are besieged, the possibility of them being lured away by competitors is high, and these small and medium distributors are precisely the true kings in certain regions. For FMCG products, whoever is closer to consumers has more advantages.
Whether Nongfu Spring's implementation of such a distributor system is a blessing or a curse is still too early to say; only time will tell.
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## Citation metadata

- Publisher: New Distribution
- Author: 贾顺谊
- Published: 2016-10-15
- Canonical: https://xinjignxiao.com/en/articles/nongfu-spring-streamlines-system-drastically-where-should-distributors-g-02e3e2f6/
- Original source: https://mp.weixin.qq.com/s/rYUeO1_potG7ohrBw7PeKQ

## Copyright and AI use

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