---
title: "Surviving and Thriving with Distributors: How Nongfu Spring, Genki Forest, and Master Kong Do It"
description: "“I've lived a full life!” “I'm betting my life on this bed!” On October 21, Kuaishou influencer Xinba shouted excitedly in his livestream, after selling 1 billion yuan worth of domestic mattress brand DeRUCCI in a single session, breaking the Guinness World Record for single-product sales. While online sales boom, offline channels suffer, and distributors are increasingly marginalized as manufacturers directly partner with top livestreamers, a common trend in many consumer industries. “The distributor business is getting tougher; we now just handle delivery and payment,” lamented Lao Wu, a decade-long beverage industry veteran."
author: "新商业价值媒体"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2023-11-08"
categories: "Dealer Operations, Management & Methods"
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original_source: "https://mp.weixin.qq.com/s/Oojjam45V3pRqLqLXUjrOg"
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citation: "新商业价值媒体. “Surviving and Thriving with Distributors: How Nongfu Spring, Genki Forest, and Master Kong Do It.” New Distribution, 2023-11-08. https://xinjignxiao.com/en/articles/surviving-and-thriving-with-distributors-how-nongfu-spring-genki-forest-c25a5662/"
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---

# Surviving and Thriving with Distributors: How Nongfu Spring, Genki Forest, and Master Kong Do It

> “I've lived a full life!” “I'm betting my life on this bed!” On October 21, Kuaishou influencer Xinba shouted excitedly in his livestream, after selling 1 billion yuan worth of domestic mattress brand DeRUCCI in a single session, breaking the Guinness World Record for single-product sales. While online sales boom, offline channels suffer, and distributors are increasingly marginalized as manufacturers directly partner with top livestreamers, a common trend in many consumer industries. “The distributor business is getting tougher; we now just handle delivery and payment,” lamented Lao Wu, a decade-long beverage industry veteran.

“I've lived a full life!” “I'm betting my life on this bed!” On October 21, Kuaishou influencer Xinba shouted excitedly in his livestream, after selling 1 billion yuan worth of domestic mattress brand DeRUCCI in a single session, breaking the Guinness World Record for single-product sales.
Online sales are booming, but offline channels are struggling, making life harder for distributors. Manufacturers are directly partnering with top livestreamers to sell products, cutting distributors out of the loop—a common situation in many consumer industries.
“The distributor business is getting tougher; we now just handle delivery and payment,” complained Lao Wu, a decade-long beverage industry veteran, to reporters. **In recent years, the beverage industry's favorite buzzword is 'intensive cultivation'—claiming to keep channels in their own hands. Companies divide sales territories, have sales reps visit end customers to take orders, and distributors are pushed to the margins.**
This trend began around 2015, but its roots go back to the turn of the millennium, with companies like Master Kong, Coca-Cola, Nongfu Spring, Wuhan No.2 Factory, and Dongsheng Beverage. Their ambition to bypass distributors and build their own systems starts with the supply chain.
**Building a Self-Owned Supply Chain System**
**A successful brand is the result of the sum of all corporate relationships and reputation management, but what truly supports it is repeat purchases driven by pricing power. To achieve such repeat purchases, the supply chain plays a decisive role.**
For mature companies aiming to control channels and reduce dependence on distributors, the first step is designing and optimizing their supply chain.
Take Master Kong, the 'king of instant noodles and beverages,' for example. Since the 1990s, it has shown ambition to become China's top beverage brand.
From 1997 to 2000, Master Kong expanded its production bases from 7 to 10, including Harbin, Shenyang, Tianjin, Hangzhou, Guangzhou, Wuhan, Xi'an, Chongqing, Qingdao, and Fuzhou, and increased production lines from 139 to 162. It also established 100 warehouses nationwide for direct use.
Image from the internet. Before 1998, Master Kong had already built a widespread distributor network through its instant noodle business, and beverages were sold alongside noodles through the same channels. After 1998, as Master Kong's business grew rapidly and its supply chain became more sophisticated, it began bold reforms: building its own logistics to deliver products from production bases to its own warehouses, then to sales outlets, bypassing some distribution links and reaching end customers directly.
Now consider Nongfu Spring, the 'porter of nature.' From 2012 to 2019, it maintained the top market share in packaged drinking water in China for eight consecutive years, thanks to its robust supply chain.
Starting in 1996, Nongfu Spring began a nationwide strategy to secure water sources, gradually establishing ten major supply bases, including Qiandao Lake, Danjiangkou, Emei Mountain, Tianshan, Wuling Mountain, Changbai Mountain, Wanlv Lake, and Taibai Mountain.
Image from the internet. The five major consumption hubs—Pearl River Delta, Yangtze River Delta, Chengdu-Chongqing, Beijing-Tianjin-Hebei, and Hubei—are close to five water source bases: Qiandao Lake, Wanlv Lake, Danjiangkou, Emei Mountain, and Wuling Mountain. Other sources supply local markets. In 2010, Nongfu Spring used LLamasoft (a supply network planning tool) to optimize warehouse locations and delivery routes across its network of 13 factories, 40 warehouses, 290 representative offices, and 20,000 delivery points, achieving distributed production to serve nearby regions, effectively shortening transport distances, reducing costs, and improving overall supply network efficiency.
After establishing production and logistics infrastructure, the next focus was reforming the distributor team and exploring new management models.
**Improving Distributor Team Management Models**
Before taking big steps, let's clarify two concepts.
**Direct operation (直营) means the company directly faces the market, controls channels, divides sales territories, and has sales reps visit end customers to take orders. In contrast, 'guest operation' (客营) means the company manages, while distributors handle the market.**
Most FMCG beverage companies initially adopted the guest operation model: they divided the national market into regions, appointed a general distributor for each, who then sub-distributed down the chain. This created multiple layers, typically five: headquarters, regions, offices, sales, and distributors.
Master Kong initially followed this model, but over time, regional distributors became dominant in their areas, and Master Kong's headquarters gradually lost channel influence. Regional distributors only picked mature, best-selling products to distribute down the chain, earning easy money, while showing little initiative in promoting new products or maintaining the market. This led to a growing problem of product homogeneity at Master Kong—a common ailment in the beverage industry at the time.
Later, the beverage industry underwent a reform in business models, but it swung to the opposite extreme.
During the dedicated reform period of 2014–2015, Nongfu Spring modeled its direct operation system after Coca-Cola, hiring nearly 10,000 sales reps to face the market directly, with distributors effectively acting as delivery personnel.
Image from the internet. During the reform, Nongfu Spring didn't change its overall framework; the national sales organization remained tree-shaped. To reduce dependence on distributors and regain market influence, Nongfu Spring set up dozens of regions and hundreds of offices, hiring nearly 10,000 sales reps to directly engage the end market and conduct intensive channel cultivation.
Sales reps led consumer activities, while distributors only handled product delivery. All channels were under the manufacturer's control, making the manufacturer the dominant party. In the short term, this model was effective: as sales rose, product sales channels and territory divisions became more refined, and with the company's systems, sales reps could easily control the end market.
But soon, the drawbacks of this model emerged, prompting companies to explore more scientific and efficient management models.
Although the direct operation model gave companies a short-term advantage in controlling channels, it didn't reduce overall costs. At the time, Nongfu Spring's organizational structure was bloated, with each office having a sales team of about 30 people. Labor costs were high, but the sales team was unstable; Nongfu Spring experienced high turnover among sales staff, a common issue in the FMCG industry. To address these chronic problems, a new round of model reform began.
**Exploring a 'Direct + Guest' New Model**
As early as 1998, Master Kong realized that neither pure direct nor pure guest operation was the best sales model.
To combine the strengths of both, Master Kong aggressively developed direct retail customers in key cities, directly facing the consumer market to control the end market. By the end of 2000, its direct retail customers grew from 10,923 to 20,297. In emerging regions, it gave distributors free rein, leveraging their networks and resources to expand the market, achieving simultaneous growth in big cities and rural markets.
At the same time, to reduce the power of regional distributors, Master Kong directly divided sales territories into smaller areas, recruiting more small distributors to serve retail outlets directly. This greatly solved industry problems like regional monopolies, excessive layers, and price markups. By the end of 2000, Master Kong's distributor count was adjusted from 14,075 (end of 1998) to 4,500.
Image from the internet. Coca-Cola's distribution system is essentially the same as Master Kong's. A former Coca-Cola employee told reporters: "Coca-Cola follows the '28 rule'—it keeps the top 20% of outlets with the best sales in its own hands, and leaves the rest to distributors and wholesalers. For those 20% outlets, the company knows exactly which building they're in and the owner's name." Coca-Cola only needs sales personnel to connect with channels, while distributors are more responsible for picking up and delivering goods from their own warehouses.
Wahaha adopted a 'joint sales' model, incorporating distributors, wholesalers, and retailers at all levels into its marketing network, forming a nationwide sales network. This approach significantly reduced labor costs and improved headquarters' control over channels.
After its previous reform, Nongfu Spring decided to build regional teams centered on distributors, dubbed the 'big distributor strategy.' It has two main components: first, at the regional level, each prefecture-level city retains only one distributor, eliminating county-level distributors and consolidating the market under the prefecture-level distributor. Second, the company's frontline sales reps are assigned to distributor teams, with distributors receiving 8 points, and salaries split into base and commission, with distributors responsible for paying sales commissions.
By the end of 2022, Nongfu Spring had about 4,500 distributors and 2.37 million terminal retail outlets nationwide, forming a national distributor neural network. Learning from the first reform's lessons, Nongfu Spring now treats distributors as an internal functional segment, changing its previous attitude and truly considering distributors as 'insiders.'
Today, Genki Forest is actively learning from Nongfu Spring's distributor model.
Image from the internet.
In November 2022, Fan Jun, Genki Forest's current sales head who took over during a crisis, launched the 'Ark Co-construction' project: in Beijing, Shanghai, Guangzhou, Shenzhen, and other provincial capitals, Genki Forest does intensive channel cultivation; in second-, third-, and fourth-tier cities, the headquarters subsidizes distributors to recruit frontline sales reps; in fifth-tier and below cities, distributors operate entirely independently. Reporters learned that starting from the second week after the Spring Festival this year, Tang Binsen began frequently visiting distributors, declaring that 2023 would be a year of great attention to distributors, promising heavy subsidies and lower sales targets in future cooperation, seeking steady progress.
This year, Genki Forest has invested more in distributor subsidies than in previous years, to help distributors expand markets, train sales staff, and conduct market promotion. With a continuously iterating organizational management model, it aims to build an inclusive and creative distributor organization, actively seeking win-win cooperation between manufacturers and distributors. A Genki Forest distributor revealed to reporters: "In June this year, national inventory levels decreased by more than 40% year-on-year, and distributors' shipment speed noticeably accelerated. At the end of June, inventory days were 21, a healthy level. Because end-product sell-through accelerated, overall inventory days decreased, making it easier for distributors to sell goods."
After the 'golden age' of distributors and the shift toward de-distributorization, 'those who control the supply chain win' has become a consensus in the FMCG industry. Building a strong supply chain system to support brand distribution and market expansion is a challenge.
It's difficult in channel strategy, difficult in team collaboration, and even more difficult in distributor management and maintenance.
**But there's no doubt that when a brand builds a supply chain moat, it can unlock the key shelf link of 'people-goods-place,' opening up more development possibilities for de-distributorization.**


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## Citation metadata

- Publisher: New Distribution
- Author: 新商业价值媒体
- Published: 2023-11-08
- Canonical: https://xinjignxiao.com/en/articles/surviving-and-thriving-with-distributors-how-nongfu-spring-genki-forest-c25a5662/
- Original source: https://mp.weixin.qq.com/s/Oojjam45V3pRqLqLXUjrOg

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