---
title: "The Game Between Distributors and Manufacturers: Who Really Dies?"
description: "In the past five years, the FMCG market has developed rapidly, and the number of distributors has multiplied, leading to market chaos, uneven quality of manufacturers' sales staff, and some distributors sacrificing long-term goals for short-term profits. A recent complaint from a Zhejiang agent revealed that his agency rights for a brand were transferred to a new agent without notice, leaving him with unsold inventory and a damaged reputation."
author: "New Distribution"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-05-22"
language: "en"
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---

# The Game Between Distributors and Manufacturers: Who Really Dies?

> In the past five years, the FMCG market has developed rapidly, and the number of distributors has multiplied, leading to market chaos, uneven quality of manufacturers' sales staff, and some distributors sacrificing long-term goals for short-term profits. A recent complaint from a Zhejiang agent revealed that his agency rights for a brand were transferred to a new agent without notice, leaving him with unsold inventory and a damaged reputation.

In the past five years, the FMCG market has developed rapidly, and the number of distributors has multiplied, leading to market chaos, uneven quality of manufacturers' sales staff, and some distributors sacrificing long-term goals for short-term profits, creating a mess in the market.
Recently, an agent from Zhejiang complained to me that after just over half a year of representing a certain brand, his agency rights were transferred to a new agent without any notice. This not only meant he had been "raising a child" for someone else, but he was also seen by retailers as a "fraud" without agency rights.
**The distributor in question, Mr. Chen, said: Recently, when his salespeople visited stores, they found that many retailers did not believe he had the agency rights, and were told that another agent was already operating the brand.**
Mr. Chen could understand that as an FMCG company grows, it needs stronger agents and may take measures to refresh its bloodline, survival of the fittest. But what made him furious was that when he called the company's head to inquire, the answer was denial. A few days later, the new agent in the region informed him to stop operating the brand immediately. When Mr. Chen called the company again, they played "Tai Chi," passing the buck, which made him suspect the company's motives.
"The company kept calling, demanding payment, and if we didn't pay, they would replace the agency rights. The intention to circle money is obvious," Mr. Chen said. Currently, the agency situation in Zhejiang and Jiangsu markets is chaotic. There are six or seven provincial and city agents in Zhejiang alone, covering Jinhua, Yiwu, Wenzhou, Taizhou, and Hangzhou, with overlapping regional markets.
His reputation was damaged, and the tens of thousands of yuan he had invested earlier went down the drain. Mr. Chen no longer wanted to represent the brand, but even so, **there was still a problem: he had tens of thousands of yuan worth of inventory, and the company told him to solve it himself.**
"This isn't food that you can eat every day." The company's attitude was truly disheartening. Even a beauty consultant from the company said, "With such a brand, I have no confidence to sell it."
**According to Mr. Chen, as early as the March recruitment meeting, there was already "under-the-table operation," signing a batch of new agents.**
For the old agents, the agency policy was very harsh. The original region had to be handed over to the new agent, and they could only operate a few areas in their city, with a monthly payment of 100,000 yuan. The new agent also had to pay 100,000 yuan for the larger region.
Why do manufacturers cut off distributors?
Based on my years of experience as a factory sales manager, I have summarized that FMCG distributors being replaced or major distributors being "trimmed" generally falls into seven types.
1. Distributor has limited strength and slow progress; the manufacturer is looking for a better partner while keeping the current one.
This is a common practice for dishonest manufacturers without long-term planning. When a product is first launched, it lacks brand awareness and is hard to attract strong, ideal customers. To quickly achieve channel layout or complete payment tasks, they accept any distributor as long as they have money, leaving hidden dangers for future cooperation.
When the manufacturer grows and the distributor can no longer meet the needs of local market development, and the manufacturer has the conditions to attract quality distributors, many dishonest companies do not support or help the lagging distributor, **but instead "stray outside the marriage."**
The mindset of such factory sales managers: "In modern society, marriage is free. Following you has no future, so I have to pursue my own happiness, even if it means being Pan Jinlian."
2. The manufacturer paints a pie to brainwash and circle money; the distributor is greedy and gullible, losing money!
Readers can get some insight from the above case. Borrowing Ms. Zhang from C2CC: I hope agents and distributors are cautious and rational when choosing companies and brands, avoiding falling into the "money trap" designed by companies.
The mindset of such factory sales managers: "Whoever has milk is the mother. I get commission only when there is payment. Whoever pays can be a distributor. Once the goods reach the distributor, I don't care how they sell to consumers. The company's idea is to circle money once and then switch brands, design a new recruitment policy to circle money again, and not care about the market's survival."
3. Pursuing channel flattening or deep distribution, the manufacturer implements "trimming the vassals."
The regional general distributor of X Company in Jiujiang market had monthly sales of only about 50,000 yuan, while Pengze County, a small county under Jiujiang with a population of only about 300,000 (the distributor there started early and cooperated directly with the manufacturer), had monthly sales of over 300,000 yuan. Huangmei County in Hubei, across the river from Jiujiang, had monthly sales of over 700,000 yuan. **This shows that although the Jiujiang region had been operating for two years, it was no different from a blank market.**
The Jiujiang general distributor was a relatively strong local distributor with annual shipments of tens of millions. Initially, they were optimistic about X brand, but due to some legacy issues from early cooperation, the customer refused to invest or build distribution channels. Even when the regional manager developed some sub-distributors, the general distributor's markup was high, and policies were not passed down, leaving sub-distributors with no room to operate and no motivation to work the market.
**After multiple failed communications, the regional manager got angry! - "If you don't do deep distribution, then I'll do channel flattening!" Behind the general distributor's back, he opened county-level distributors in the counties under Jiujiang one by one, and Jiujiang's sales multiplied several times in the short term.**
The regional manager said: "The manufacturer cannot give up the whole forest for one tree."
4. Not treating the factory manager as a "big shot," forcing the factory to "execute Ma Su with tears."
Many experienced and powerful distributors do not put the factory's "spokesperson" - the regional manager - on an equal footing. They think the regional manager is just a factory worker, a young lad, or a woman with long hair and short insight.
For the regional manager, the factory's policies are not implemented, they are not respected, and distributors always use payment as leverage to demand policies, threatening not to pay unless given special support.
If the distributor does not cooperate, the regional manager's work cannot proceed. When the work becomes unsustainable, the regional manager will look for backup distributors, collect evidence of the existing distributor's violations and non-cooperation, and apply to the company for a change of account.
5. Using gang rules instead of business rules - those who don't play by the rules will be defeated.
Some distributors, after becoming big, have connections in both the underworld and the business world, mingling with all sorts of people.
They don't do business by the rules, thinking the factory cannot do without them locally. They treat the factory's frontline salespeople with disdain, summoning them at will, acting like a local emperor.
Years ago in Harbin, there was a distributor who considered himself a "hero" in the Northeast. No one dared to touch the brands he took over. He demanded resources from the company, almost like a gangster collecting protection money.
Not only did he fail to meet sales targets, but he also threatened salespeople, saying they couldn't leave Harbin unless expenses were transferred to his account. This made frontline salespeople dare to show their faces in Harbin only once every two or three months.
Probably thinking the company wouldn't do anything, and that "talking without action is useless," he took the opportunity during a discussion about agency rights to actually break the office manager's head. After the office called the police, the case was dropped.
**This made the distributor even more fearless, declaring that anyone who dared to touch his Harbin agency rights would be met with force.**
For such violent distributors, removing one is like removing a tumor.
If you want to cause trouble in the Harbin market, then we'll just leave it aside for now.
China is a big market; we can concentrate resources on other markets and do them thoroughly. The company doesn't rely on any single market to survive.
If you try to source goods from other places and disrupt the market, we'll issue a notice to surrounding distributors: anyone who supplies Harbin will have their agency rights revoked.
**And so, the Harbin market was left alone for three years.**
This distributor, relying on muddling through, struggled for over a year. Without market planning or policy support, how could he make money? Even the biggest distributor needs to earn a living. Gangster tactics that don't make money can work short-term, but no one can endure them for long.
6. Channel optimization and integration, cutting off the distributor's weak channels.
Mr. Wei is the general agent for G brand in Q region and has a good relationship with the factory's top management. Mr. Wei is optimistic about G brand and wants to make it the number one local brand, also using it to expand his distribution channels.
Mr. Wei's main strength is in supermarkets, but G brand is a mass-market FMCG, and wholesale distribution is its main channel.
**Since Mr. Wei took over G brand, all local supermarkets have been entered, but the distribution rate in the wholesale channel is less than 10%. The high costs of supermarkets have become an unbearable pain for G brand.**
To fully occupy the Q market, achieve deep distribution, and lower market costs, the G brand regional manager had no choice but to find another strong wholesale distributor, Mr. Li, and authorize him the wholesale distribution rights for the Q market.
Feeling deceived about his affection for G brand, Mr. Wei was furious. To appease him, the factory transferred the regional manager (who had achieved rapid improvement after the channel split) and issued a public criticism.
**The regional manager said: "If I let the customer continue in distribution, I'm waiting to die; cutting off the customer's weak channel is my chance to survive."**
7. The pitiful must have something hateful - disrupting the market means "cutting you off without discussion."
QZ Trading is a relatively strong company locally, representing strong brands like Johnson & Johnson and Shanghai Jahwa, and is also a terminal channel agent for BW Company.
**However, after the new BW regional manager inspected the market, he revoked QZ's agency rights.**
After visiting terminals, the regional manager found that QZ Trading had reported 17 salespeople to the company, but only 10 actually existed. Of these 10 promoters, 7 were also working part-time for other brands. Moreover, the monthly salary reported for promoters was an average of over 1,000 yuan each, but the promoters actually received only about 600 yuan.
Many stores had applied for N-shelf and TG display fees, but the regional manager found only one store with a TG display, and according to the promoter, it had just been set up.
The regional manager also checked sales data at some stores and found that actual sales were only one-third of what the distributor reported, and the market was declining sharply. The regional manager wondered where the goods the distributor bought each month were going.
**Only after calling the inspection department did he learn that the distributor had been frequently complained about for dumping goods into other regions and had been punished multiple times by the company for this.**
The regional manager said: "Smart distributors know how to fight for more factory resources to do the market, but those who ignore the factory's interests and sustainable market development, killing the goose that lays the golden eggs to earn fees, can only be 'smart for a moment.'"
Ending cooperation with a manufacturer is not unfamiliar to any distributor.
As long as you are in the distribution business, "no one is good for a thousand days, and no flower is red for a hundred days." Even the closest cooperation will eventually come to an end.
When saying goodbye to small or unknown brands, the decision may be more in the hands of the distributor, because small brands have fewer options. A distributor's volume might be 10%, 20%, or even 30% of the company's sales, so the company has to some extent to look at the distributor's face.
Cooperating with brand companies is quite different.
**First,** brands don't worry about customers; there are plenty of backup customers waiting in line. You are like the crow; as soon as you open your mouth, the meat falls into the fox's mouth under the tree.
**Second,** brands basically operate nationwide. At most, you are a provincial customer. Without you, they can still shine elsewhere; without them, you have to wonder if you'll have cash flow tomorrow.
**In the FMCG industry, it is increasingly recognized that channels are king and terminals win!**
Distributors are strategic partners of manufacturers, and quality distributors are a scarce resource. Developing and replacing a distributor incurs extremely high costs.
No legitimate manufacturer doesn't want to create a win-win with distributors, and no legitimate manufacturer would lightly cut off a distributor. It can only be said that business is like a battlefield - there are no eternal friends, only eternal interests.
Source: FMCG Distributor Exchange Forum
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