Product is the foundation of a distributor's survival, and product portfolio is equally important work that cannot be ignored. Successful distributors often say their secret is not making money from each product, but from each batch of products, highlighting the importance of product combination. After the Sugar and Wine Fair, facing a wide variety of products, how can distributors use the optimal combination to maximize profits and use minimal capital for fastest turnover to create greater profits? With these questions, we invited several distributors to share their insights and use concrete examples to illustrate the pros and cons of product portfolios, allowing readers to compare their own situations and see if their product combinations are reasonable and need improvement.
Hold the Foundation, Develop Profit Products
Weifang Xinquansen Trading Co., Ltd. Annual sales: approximately 6 million RMB Current products: Daliyuan beverage series, Hubei Guangyuan Xiaogui biscuit series, Yake Hongmao Lantu series, Tengzhou Lvyuan gift box series
Product status analysis: I mainly operate in the circulation channel, basically covering Weifang city and surrounding towns, so when combining products, I mainly consider products with fast turnover and high volume. In my product portfolio, Daliyuan beverage series and Hubei Guangyuan series are my main products. Among them, Daliyuan beverage series are the products with the largest volume, especially eight-treasure porridge and Youxian milk, which account for a large proportion of my sales. Compared to Daliyuan products, Hubei Guangyuan Xiaogui biscuit series and Tengzhou Lvyuan gift box series have smaller volume but higher profits, so we often need such products to make money.
Among Daliyuan products, the peak season for eight-treasure porridge series is winter; Lvyuan gift boxes and Guangyuan biscuit series are mainly sold in spring and winter; while other Daliyuan beverage products have summer as the main sales season. With the increase in its beverage series, the sales season spans from spring to autumn. This combination basically covers the peak and off-peak seasons of the year, ensuring the normal operation of my total sales and cash flow. Dali's brand awareness is relatively good in China, and representing its products can enhance our company's visibility, preparing for the next step of scale and standardized development.
Future considerations: Currently, my product portfolio is relatively stable, but in terms of channels, due to product attributes and promotion limitations, network coverage is not yet perfect, which is the next task I need to work on. Recently, I took on the distribution of Pepsi-Cola, which on one hand improves my delivery capability, and on the other hand, through delivering Pepsi, I can broaden and refine my network. After deepening the network, I plan to re-screen my products and add a few promising new products.
— Opinion provided by: Jia Hui, General Manager of Weifang Xinquansen Trading
Use Big Brands to Drive Small Ones, Balanced Development
Shandong Rizhao Shengyuan Trading Company Annual sales: approximately 20 million RMB Current products: Sanquan frozen food series, Yili liquid milk series, Master Kong biscuit series, Zhenxin melon seeds series, etc.
Product status analysis: In my company, different categories are operated by different departments. Although the cost is high, it is clear and easy to operate. When combining products, I mainly consider the following factors. First, when choosing brands, I mainly choose big brands with prospects and development potential. Big brands are standardized; small brands may disappear after a few days, and we have had lessons in this regard. Second, seasonal factors. Frozen food is in off-season in summer, so in summer we represent some ice cream brands, but only local ones. Yili and Mengniu have too high sales requirements for distributors, so we do not consider their ice cream brands for temporary representation. Considering profit maintenance, we need to ensure each department has work to do and no one is idle.
Third, the core of product portfolio is to choose the most suitable one for yourself. You need to measure yourself from multiple aspects such as personnel configuration, capital, and scale. Other companies' practices may be good, but not necessarily suitable for you. Big brands like Yili have relatively high sales requirements for distributors; one or two are enough. If you represent too many and cannot handle them, it will be bad for you and you may lose market share. But to ensure profits, you must choose one or two big brands.
Fourth, in actual operation, for one category, we adopt a model of one first-tier brand with several second- and third-tier brands, mainly to compete with other distributors. If others have a category or brand that you do not have, you have no share in that market cake, and thus lose the market. If you have the corresponding brand or category, you still have a share of the cake, meaning you need to ensure a certain market share, which also enriches your product composition. Although these second- and third-tier products have low profits, they can ensure market share.
— Opinion provided by: Hui Xikun, General Manager of Shandong Rizhao Shengyuan Trading
Everything Starts from the Channel
Guangzhou Zhanqi Trading Co., Ltd. Annual sales: approximately 50 million RMB Represented products: Hengshun vinegar series, Tao Huabi Laoganma series, Sanwu hot pot base series, Sichuan Ruonan noodles, Sichuan Huitong pickles, etc.
Product portfolio analysis: Before combining products, you need to select products. When selecting products, you should look at the manufacturer's support for the market. The greater the support, the more the enterprise requires the distributor to focus on retail terminals. Therefore, when selecting products, you should combine the manufacturer's wishes and choose products with larger profit margins for both parties to enter the terminal. In addition, you should also look at the manufacturer's market operation philosophy and strategic layout. If the manufacturer can adopt a provincial general distribution model, it is advisable to choose product combinations with lower prices and stronger circulation to ensure maximum profits for distributors at all levels and quickly enter the market.
Once you have products, you need to analyze your channel characteristics and see which channel your main direction focuses on. You should choose suitable product combinations based on your channel advantages. Our company has focused on circulation channels for many years, while also taking care of terminals. Therefore, our product portfolio mostly consists of high-volume, low-margin products, relying on large sales volume to support profits and drive sales of other products. For example: Tao Huabi Laoganma series, Sanwu hot pot base series, etc.
In product portfolio, you also need to learn to use the concept of brand crossover to create a strong product line combination. Each brand manufacturer's products have their distinct channel, quality, and price positioning. For example, Hengshun vinegar is positioned as mid-to-high-end products, entering a new market through retail terminals. Except for the East China market, Hengshun products rarely perform well in circulation channels in other markets. Therefore, for local distributors, they also need to use another low-end brand product to operate the circulation market, enrich their product line, and fill market gaps.
In addition, you should also combine products according to the company's strategic changes. Currently, our company's strategic goal is refined market operation, focusing on seeking profits from terminals, and long-term foothold in retail terminals. Under this strategic requirement, strengthening terminal management sales model becomes the main work. This work requires the manufacturer to provide necessary expense support for the distributor to enter retail terminals in the early stage of market introduction. The distributor creates space for product promotion guidance by increasing product price space. Both parties should have a high degree of recognition at this level. Companies that cooperate well with us in this regard include Sichuan Ruonan noodles and Sichuan Huitong pickles.
Future considerations: Currently, because our company has always adhered to a single-brand strategy, that is, for the same product series, we only represent one manufacturer's brand, the product line combination appears relatively monotonous, and operational risks increase accordingly. For example, in vinegar, we cooperate with Hengshun, the domestic first brand, but Hengshun's products are mostly positioned in the mid-to-high end, mainly in supermarket channels. Our company's promotion capability in wholesale and circulation channels is particularly strong, so we urgently need a mid-to-low-end brand product with reliable quality and moderate price to make up for the lack of product line. This will form a market situation with high, medium, and low-end products, and channels of wholesale circulation and retail terminals blooming everywhere.
— Opinion provided by: Kong Jianfeng, General Manager of Guangzhou Zhanqi Trading Company
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