---
title: "The FMCG Rollercoaster: From Birth to Death in Ten Steps"
description: "An analysis of the rise and fall of well-known Chinese FMCG brands such as Sofe, Haodi, Xurisheng, Taizinai, Tianqi, Piaoying, Dihua Zhixiu, and Diao Pai reveals a ten-stage pattern from success to collapse. The stages include initial success, expansion, promotion-dependent sales, price erosion, hiring external experts, channel conflicts, and eventual failure, often leading to the demise of traditional Chinese FMCG companies."
author: "彭成京"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2014-10-04"
language: "en"
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# The FMCG Rollercoaster: From Birth to Death in Ten Steps

> An analysis of the rise and fall of well-known Chinese FMCG brands such as Sofe, Haodi, Xurisheng, Taizinai, Tianqi, Piaoying, Dihua Zhixiu, and Diao Pai reveals a ten-stage pattern from success to collapse. The stages include initial success, expansion, promotion-dependent sales, price erosion, hiring external experts, channel conflicts, and eventual failure, often leading to the demise of traditional Chinese FMCG companies.

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Sofe, Haodi, Xurisheng, Taizinai, Tianqi, Piaoying, Dihua Zhixiu, Diao Pai... Analyzing the rise and fall of these well-known FMCG companies one by one, we discover a ten-stage pattern from "starting up" to "falling."

**Stage 1: Starting Up**
Through luck or courage, they hit upon a product that sells well, and sales grow rapidly, experiencing a period of supply shortage. The distribution channel composed of agents and wholesalers is easy to operate, with low entry barriers, making it the first choice for corporate channels. However, the company does not focus on building modern marketing channel control capabilities, but continues to ship goods through regional agents. They have no idea where the goods are sold, to which consumers, or what feedback consumers have.

**Stage 2: Expansion**
With the initial capital accumulation, they have funds for advertising. The advertising lacks a clear benefit appeal, only building awareness without reputation. In the market before 2011, such operations could greatly stimulate the enthusiasm of agents and wholesalers. Combined with simple channel promotions like "buy 10 get 1 free," a large number of wholesalers would stock up.

At this point, such companies reach their peak.

**Stage 3: No Promotion, No Sales**
Having tasted success in the distribution channel, the company has no motivation to do the hard work of terminal control and direct retail chain management. Sales work mainly involves continuing to push goods to wholesalers through channel promotions. The "10+1" policy gradually loses appeal, becoming "10+2," "10+3," etc. Wholesalers refuse to order steadily, waiting for bigger promotions; after getting cheap goods, they hoard them and sell them when the market retail price recovers to make a profit. This state seriously damages the price system, causing distributors who directly control terminals to lose confidence. Thus, bad money drives out good, the channel deteriorates, and the company enters the stage of "no promotion, no sales."

**Stage 4: Price Erosion**
In the vicious cycle of "no promotion, no sales," when the company lacks the ability to launch new products and sustain high-margin products, the actual selling price gradually decreases, profit margins narrow, and eventually the retail price and factory price become inverted.

At this point, the company's first survival crisis appears.

**Stage 5: Hiring External Experts**
At the end of Stage 4, the entrepreneur hires senior professional managers to solve the problem, replacing the old marketing head. Often, they think it's a sales or channel problem, so they hire a sales director. The sales director will point out that it's a channel structure problem, caused by a lack of direct terminal control capability. They need to do channel sinking, direct terminal control, and deep distribution. This is also the sales magic weapon of many foreign and Taiwanese FMCG companies (like Master Kong, Uni-President, Want Want) in the mainland Chinese market.

So, the entrepreneur decides to make channel changes.

**Stage 6: First Rift**
Due to the severe channel stocking pressure and "uncontrollable stocking," the price system is chaotic. So the external expert will first "clear channel inventory." This measure is reasonable, but it hurts the boss a lot—there will be no shipments for a long time, putting enormous pressure on the company's cash flow.

At this point, the boss feels the pain deeply.

**Stage 7: Second Rift**
After clearing inventory, the external expert will build a deep distribution system, such as street sweeping, vehicle sales, positioning, store visits, tidying, merchandising, restocking, etc. Although these tasks enhance control over channel outlets, they also greatly increase distribution costs. This cost is first borne by the company, so the boss feels "goods aren't selling, but money is being spent a lot—is there leakage?" Secondly, distributors will be burdened with such finely operated distribution costs, leading to complaints. As old friends of the boss, they will complain: "The new guy doesn't understand the situation and is messing around. We're not Master Kong; it's thankless and won't work."

The boss begins to doubt.

**Stage 8: Third Rift**
Since channel costs cannot be covered and manufacturing profit margins are too narrow to support distribution costs, the external expert decides to raise prices to provide distributors with a more generous channel profit margin. However, the sales director never has professional brand management skills; while raising prices, they cannot use scientific product positioning and sales promotion methods to ensure that the product still appeals to consumers at a higher price. Therefore, for distributors, the original volume-driving product becomes a high-margin product, and they change strategy to "sell alongside," where low volume is fine as long as the margin is high, but for the manufacturer, this is a disaster. The boss will be very angry, having made huge sacrifices in various expenses, only to see sales shrink.

**Stage 9: Cooperation Breakdown**
The conflict between the boss and the external expert intensifies. The boss asks why products aren't selling and whether the high channel expenses are leaking; the external expert retorts that the product's poor sales are a quality or manufacturing issue, not a sales problem: "I've placed the product in the best position on the shelf; if it doesn't move, who's to blame? Blame R&D, design, production. It's not my responsibility." Under such conflict, cooperation inevitably fails.

**Stage 10: Last Gasp**
The external expert is driven away, and the old marketing head returns. Various policies and practices revert to the old ways. At this point, channel inventory has been cleared, there is room for price reductions, and returning to the wholesale channel will release the sales dividend accumulated from previous efforts. There will be a rapid sales growth for 3 to 6 months (though it's fake, just refilling wholesaler channel inventory). At this time, the boss concludes: "The old ways are reliable; I was fooled by those so-called experts." But little do they know this is the final flash of light. Once the channel is filled again and blockage reappears, the price system will collapse. Thus, the company will lose all distributor credibility, and the channel network will shift to competing brands. Once this stage is reached, the company is not far from business stagnation, and market confidence will take a long time (more than 5 years) to repair. At this point, the vast majority of traditional Chinese FMCG companies fall.

Sofe is like this, Haodi is like this, Tianqi is like this, Xurisheng is like this, Piaoying is like this, Dihua Zhixiu is like this, Taizinai is like this... Too many FMCG companies rely on the distribution wholesale channel to start quickly, get rich by luckily selecting a product that sells well once, and then fail to find a second hot-selling high-margin product. The easily obtained channel becomes a trap that poisons them.

In the FMCG industry, how many so-called national brands rise suddenly and then disappear quickly. The ten-stage journey is like a curse, becoming the typical "Chinese-style death" for Chinese FMCG companies. Quick success leads to quick decay, alas!

Saving such FMCG companies requires an overall plan and systematic problem-solving. Starting with new products, create high-margin, healthy products, paired with volume-driving distribution products, to develop channel control capabilities; then build new product launch processes and brand communication capabilities, improving integrated marketing capabilities. Only then can the business trend be changed and enter an upward trajectory. Otherwise, even if they don't fall this time, they will go bankrupt in the next vicious cycle.

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