Distributors' business is peculiar: upstream brand owners can cover the whole country, and downstream retailers can expand across regions if successful locally. However, 90% of distributors operate locally within a single city. Why? The main reason is still the brand owners' authorization management. Many distributors, representing several first-tier brands, have grown their business to 30-40 million, with the best reaching 70-80 million or even over 100 million, and believe that this business essentially has no room for growth. In this context, where should distributors' future business go? How should they achieve 100 million, 500 million, or even 1 billion? What is the path? The Evolution of China's FMCG Distributors Over the past 20 years, what has been the development path and background of distributors? We have divided it according to time nodes. Phase 1: Stall-ism. From the 1990s to 2000, with the reform of the commercial circulation system, wholesale markets emerged. Opening a stall in a wholesale market, selling goods relied entirely on customers coming to you. In an era of supply less than demand, distributors were generally sedentary merchants. Phase 2: Warehouse-Distribution-ism. From 2000 to 2010, brand owners designated a region for distributors to operate a single brand, covering 200-300 outlets, and required continuous growth. FMCG companies represented by Master Kong implemented a channel refinement strategy in 1998, dividing the country into 1,500 districts, each with its own salespeople. Distributors who originally ran stall businesses transformed from sedentary merchants to itinerant merchants. Distributors began to deliver to stores, more precisely becoming warehouse-distribution merchants. Phase 3: Brand-ism. From 2010 to 2015, represented by Nongfu and Jinmailang. Nongfu from 2013 to 2015 returned the market to distributors, placing distribution rights, dominance, and business advice at the distributor level, shifting from traditional distribution to exclusive distributor models. From 2015 to 2017, Jinmailang reformed the four-in-one model. This promoted distributors' independent distribution capabilities. Around 2010, it was evident that manufacturers began requiring distributors to have distribution and promotion capabilities, and distributors' salespeople started taking orders. Phase 4: Category-ism. From 2015 to 2020, typical representatives were snack food, seasoning, and daily chemical distributors. Due to low category turnover and limited market capacity, manufacturers would not deeply distribute and directly control terminals as they do with beverages. At most, they would assign two people to support and pay basic salaries, with distributors responsible for commissions and managing personnel, while manufacturers conducted regular checks. During this phase, some distributors began to focus on a specific category, setting their own budgets and goals. It was also from this time that more and more large distributors rose, representing a dozen first-tier brands plus a dozen second- and third-tier brands, and could scale their business to 100 million. Phase 5: Channel-ism. From 2020 to 2025, with a specific channel as the core business objective, distributors in provincial capitals or first-tier cities primarily operated modern KA stores and CVS convenience stores; those in second-tier and below focused on small and medium stores, or were regional B2B platform operators. During this phase, distributors changed their mindset, reducing attention to upstream brand agency business and increasing attention to downstream stores. Phase 6: Consumerism. After 2025, as China's supermarket retail enters a period of format differentiation, with discount supermarkets and snack food bulk stores emerging, supply is becoming more concentrated. Previously, a supermarket needed 100 distributors to supply; in the future, it will only need 50. Distributors will face price shocks, and the number of stores they can supply will decrease. At this point, some distributors begin to try close franchising and deep binding with small and medium stores, providing one-stop product supply chains to build their own moats. Why Is Distributor Business Difficult? In the past, distributor business was resource-based, relationship-based, and individual-based. If you had good relationships with upstream brands and downstream supermarket buyers, you could do business. But today, we find this business increasingly difficult. Why? Economic downturn is one aspect, but more brutal is the competition from local peers. Distributors with core competitiveness are growing larger, and the trading business is shifting towards professional and corporate models. In earlier years, distributors were mostly husband-wife or brother partnerships, representing two or three brands, with a warehouse of 400-500 square meters, and the business basically operated. They didn't need to consider labor costs or warehouse-distribution costs, nor did they need to rely on reducing configuration to achieve low cost and high efficiency. Because costs were already low enough, with four or five employees, when the boss spoke, information could basically reach 100%. But today, costs are rising and profits are falling, forcing distributors to continuously evolve. Based on such costs and efficiency, there is a core viewpoint: Distributors do not create value; they only transfer value. There is no small and beautiful; only scale effects! The larger you become, the lower the costs and the higher the efficiency! Speaking of scale, how to define the size? Based on the 500+ distributors visited by New Distribution over the past few years, we have summarized and set a threshold for reference:
County-level cities with a population under 1 million: annual sales of 50 million; Prefecture-level urban areas with a population under 2 million: annual sales of 80 million;
Prefecture-level urban areas with a population over 5 million: annual sales of 100 million. If you can't achieve 100 million, can you not survive? No! This standard is only for reference. How to achieve this 100 million? There are also prerequisites and background, namely the distributor's independent and autonomous distribution capability! It also needs to be emphasized that this is not a cross-regional integrated scale business, but a local operational scale business. Five Development Paths for Distributors Based on past visits and exchanges with distributors, New Distribution has summarized and sorted out the development paths, which are divided into five categories overall. Category 1: Warehouse-Distribution Distributors. Distributors reach regional distribution cooperation with several brands, providing warehousing, distribution, and financial support. Limited by the manufacturer's model or personal capabilities, they lack independent distribution capabilities. Typical brands include Mars Wrigley, Coca-Cola, and Master Kong, which only require core warehousing, distribution, and capital advances. Category 2: Brand Distributors. 70-80% are brand-type distributors, with deep cooperation with 1-2 brands, such as Arawana, Yili, Mengniu, Nongfu Spring, etc. Distributors regard these as core brands, with one brand accounting for more than 50% of the distributor's business, while other represented brands are auxiliary and not the focus of daily operations. Category 3: Category Distributors. Organize brands based on a category, including first-tier and second/third-tier brands, combining multiple brands to form category distribution agency. Combine multiple brands under the same category to form a brand matrix, maximizing the occupation of shelf space, display resources, promotion slots, and floor stack resources in stores. To form a category distribution logic, you must have at least three of the top five brands in the same category! This is also the direction that most distributor businesses should develop. Category 4: Channel Distributors. Do not focus on categories or brands, but concentrate on a specific type of channel, with more than 80% of business coming from that channel. Build their own organizational structure and management concepts around the channel's operational characteristics and models, providing product services. Category 5: Platform Distributors. Focus on small and medium stores, providing them with all categories of FMCG products (excluding tobacco and alcohol) that account for 60-70% of business volume, with the store's product needs as the core business starting point, designing internal organizational management systems, i.e., the so-called B2b. The above five development paths are the five categories of distributors we have observed. As a third-party observer, New Distribution hopes to help everyone find their positioning and understand the development status of distributor business from a national perspective. Here we also provide a relatively simple classification: Brand-oriented distributors and Retail-oriented distributors. Brand-oriented distributors complete the brand owner's targets, focusing on new product distribution tasks, including hanging strips, displays, tastings, and other activities. Essentially, they earn the gross profit allocated by the brand design, with core capabilities in marketing and promotion, seizing corresponding promotion slots in stores. In the past commercial circulation system, most business models were brand-oriented. Not because the brand scale is large, but because in the era of supply less than demand, focusing on one brand made it more efficient to reach stores, and all directions were aimed at seizing more shelf space and more promotion slots for that brand in stores. With evolution and changes, some brand-oriented distributors will remain, while others will evolve towards retail orientation. Retail-oriented distributors put their business perspective on stores and shelves, providing product supply to downstream stores. For example, in the seasoning category, soy sauce: deeply research the price band, function band, and scenarios of soy sauce to match products. Essentially, they are the procurement managers for category management under the retail store system. The Future of Trading Business: Outcompete Yourself, Eliminate Competitors Recently, in a certain city, I met two distributor bosses, one doing 300 million and the other 400 million, both in the snack food category. After the two major distributors divided the snack food category capacity, the 300 million distributor found no room for growth, so he had to do some low-end liquor, and after liquor, some daily chemicals. In a city, the snack food business is basically divided up. Where is the opportunity for local snack food distributors? In the past, when distributors had 10-20 million business, choosing a good brand and growing slowly with it to 30-40 million was entirely possible. But today, for distributors, a city's distributors are already saturated, and the next step is local competition for business. The development path for a regional distributor is to seize the business of local peers and become TOP1 in the category or channel! Final Words Epistemology determines methodology. Doing any business or industry is like a traveler walking in a forest, not knowing where they are or where they should go. When feeling lost, you can choose to look down from a higher dimension to clearly understand your current position and environment, which helps formulate the next action plan and find the correct direction forward.