Click the image for details Zhang Feng Chief Consultant, Musen Management Note: This article is original by Zhang Feng, Chief Consultant of Musen Management, and was originally published in Sugar, Tobacco & Wine Weekly. A model market is not only a touchstone for food companies but also a benchmark for their external expansion and brand communication. In the process of building a model market, in addition to investing human, financial, and material resources, it is particularly important to select the right distributor as a partner to jointly develop the regional market. Given the significant role of distributors, food companies must comprehensively consider multiple factors in the early stage of partner selection, thoroughly evaluate the distributor's overall strength, and integrate regional resources to achieve a strong alliance. Although this principle has been repeated countless times, due to various reasons, some food companies still make mistakes in the early selection of distributors, leading to an unhappy parting of ways. In my view, there are three reasons for such situations: first, the decision-makers of food companies are too impatient and choose distributors that are not suitable for their products or development strategies without fully understanding the commercial landscape and ecological environment of the target market; second, there is a lack of a comprehensive evaluation system for the distributor's overall strength, making it easy to be misled by surface phenomena; third, there is insufficient understanding of the product and strategy, relying only on personal experience and connections for judgment. How can the selection of model market distributors be made more effective? Based on past market experience, I have summarized the following ten key points for evaluation. 01 ►Understand the current development of distributors, prioritizing those with full-channel coverage. After thirty years of development, Chinese food distributors have undergone qualitative changes, but there is still a coexistence of sedentary merchants, traveling merchants, and service providers. When selecting target distributors for model markets, food companies should first choose service providers, followed by traveling merchants, because they have strong brand operation capabilities, product distribution capabilities, regional market control capabilities, and resource integration capabilities. Especially distributors who can achieve full-channel coverage are conducive to the distribution work during the development of model markets. 02 ►Understand the distributor's profit model, preferring those with strong front-end gross profit. Currently, the profit models of Chinese distributors are mainly divided into two types: front-end gross profit and back-end gross profit. From a segmented perspective, they can be divided into four parts: profit from product markup, profit from earning contract rebates and sales incentives, profit from manufacturer fees, and profit from value-added services. When building a model market, food companies should choose distributors who profit from front-end gross profit, avoiding those who use the opportunity of building a model market to earn entry fees, promotional material fees, and product price differences from manufacturers, without building products, markets, outlets, and brands according to the manufacturer's requirements. 03 ►Discern the distributor's underlying intentions in cooperating with the manufacturer. Manufacturer-distributor cooperation is a two-way selection. When distributors choose food companies, some owners value the brand strength, management capability, operational capability, and growth potential of the former, while some owners, during the cooperation process, seize the opportunity of the company's eagerness to develop the market to earn start-up fees, entry fees, personnel fees, and market expenses from the food company. Therefore, during negotiations, food companies need to discern the distributor's focus: is it the growth potential of the product, the methods of market and brand operation, or how the company invests expenses and how to reimburse market expenses? If the focus is on the former, then he will be an ideal choice for the manufacturer in building a model market. 04 ►Understand the distributor's management level and marketing capability. Currently, many distributors are still in a primitive operating state, and their management level and capabilities need improvement. However, the organizational structure, talent training mechanism, and terminal and warehouse management of trading companies will have a direct impact on the distributor's own development and the building of model markets. Therefore, food companies should choose distributors with certain management and marketing capabilities. At the same time, distributors who can rely on their own team's marketing capabilities to establish good cooperative relationships with various channel levels and assist downstream customers in product sales, display, maintenance, and customer relationship work can match the manufacturer at high speed, facilitating the rapid start and standardized construction of model markets, and meeting the company's strategic needs. 05 ►Understand the distributor's strength and fully share resources. Building a model market requires intensive investment of a large amount of human, material, and other resources. From the overall strategy of the food company, it is difficult to invest all resources in a single market. If the distributor's funds, vehicles, and networks can be fully utilized, it will greatly reduce the former's costs and avoid resource waste. Therefore, food companies should be good at utilizing and sharing the distributor's high-quality resources, jointly investing in market operations with the distributor, rather than taking on everything themselves and increasing their own burden and pressure. Whether it is distribution or promotion, if distributors are unwilling to invest too much personnel and funds and always rely on food company support, such "dependent distributors" are not suitable for participating in building model markets. 06 ►Compare the overlap between the main product and the distributor's existing product structure. Before starting cooperation, food companies should first understand the distributor's existing product structure and then compare it with their own main products, especially in terms of category and specification. If there are already similar competing products among the distributor's core single products with a significant sales share, it will be difficult for the distributor to allocate more resources to build a model market with the food company. On the contrary, the distributor may hold the new product in hand and control its development to ensure the old products are not harmed. Therefore, food companies must avoid the situation where the brand is shelved by the distributor, to prevent waste of time and funds and the blocking of competitive attacks. Once the market is restarted, it will waste more time, funds, manpower, and material resources. 07 ►Evaluate the service capability of the distributor's existing team. As a distributor that conforms to the development trend of the times, one must have a professional team to maintain the market, familiar with local market consumption habits, channel structures, and local customs. When evaluating the service capability of the distributor's team, it should not be limited to the speed of product promotion, but rather whether the team can guarantee pre-sale, in-sale, and after-sale services throughout the supply chain, and whether it can maintain good communication with all members of the supply chain. At the same time, a qualified team can understand the feedback after product launch in the shortest time, helping food companies make judgments in advance and avoid resource waste. 08 ►Measure the alignment between the distributor's core channels and the model market's core channels. Every distributor has their own focus and core channels: circulation channels, modern KA channels, catering channels, special channels, etc., each showing their own strengths. Whether food companies choose full channels or a single channel, they must first match the target distributor's core channels. After positioning the channels and brand, the manufacturer and distributor should work together to build the model market around the core channels. 09 ►Examine the distributor's channel control capability. Nowadays, many distributors have loose cooperative relationships with their downstream customers, relying too much on price fluctuations to maintain relationships. In my view, truly excellent distributors can establish close relationships with downstream customers through good service, intensive communication, and product structure adjustments, without problems arising due to price, returns, or exchanges. Distributors with strong control are conducive to improving the success rate of building model markets for food companies, and also allow companies to understand real market feedback in a timely manner, and will not lose customers and markets due to interference from other competitors. 10 ►Understand other resources the distributor has locally. In addition to operational, service, warehousing, and team capabilities, distributors also need more resources to protect the manufacturer's brand, such as government resources and industry resources. Only in this way can internal and external interference factors be reduced when starting a model market, various problems be properly resolved, and the building of the model market be safeguarded. The above ten points can serve as preliminary judgment criteria for manufacturer business managers, regional managers, or higher-level decision-makers when selecting distributors. If both manufacturers and distributors show considerable sincerity and see the potential of the target market, I believe that some of these criteria will not hinder deep cooperation between the two parties. The market is constantly changing, and for manufacturers and distributors, what is suitable is the best. -END-