In the FMCG industry, the distribution network is like the body's vascular system, and its smooth operation directly determines market vitality. How manufacturers and distributors build an efficient and collaborative distribution model is key to whether a brand can establish a firm foothold in regional markets. This article, based on the author's past experience, analyzes the core logic and practical strategies of distribution design to help manufacturers and distributors achieve win-win cooperation. The FMCG market shows significant regional differentiation The competitive landscape of the FMCG market is not monolithic; even first-tier brands exhibit obvious regional differentiation nationwide. Strong markets: High brand awareness and strong channel penetration (e.g., Coca-Cola in East China). Weak markets: Squeezed share and sluggish growth (e.g., a dairy company suppressed by local brands in the Southwest). Collapsed markets: Due to management errors or improper competitive strategies, customer loyalty collapses, and local brands "counterattack" (e.g., a juice beverage completely replaced by local brands in northern counties due to price system collapse). This difference generally stems from three core factors: brand awareness gradient, channel structure differences, and market operation methods. The nationwide layout of FMCG brands must abandon the "one-size-fits-all" approach and achieve sustainable growth through tiered governance and dynamic adjustment. This is also an important principle in distribution model design. Its core essence is to differentiate and deploy strategies based on the characteristics of regional markets. For example, according to city type, markets can generally be divided into central cities, urban-rural fringes, and county and township markets. This is just one classification. It can be further refined under administrative divisions, combined with product market share and sales volume, to subdivide into core markets, potential markets, blank markets, and so on. But regardless of the classification, the natural characteristics, outlet attributes, and consumption habits of markets in the same category should be roughly similar. Many manufacturers are too general in model building; a one-size-fits-all model is no longer applicable. Excellent enterprises must differentiate their layout based on actual market conditions and continuously optimize with the times. For example: Nongfu Spring early on learned from Wahaha's joint sales system, after 2010 began learning from Master Kong's channel intensive cultivation model, and finally in 2016 carried out a distributor exclusive reform, transforming into an exclusive large distributor system. Channel model length: Balancing efficiency and control As is well known, Wahaha's joint sales system is a long-channel type, penetrating through second-tier and third-tier distributors to rapidly distribute products over a wider area. Relying on this model, Wahaha returned to a scale of 70 billion yuan in 2024. The longer the channel, the more conducive it is to quickly improving product distribution coverage, and also the more beneficial it is for brand manufacturers to enhance their competitive advantage and reduce cost pressure by controlling intermediaries. The downside is that the longer the channel, the higher the requirements for the manufacturer's price control ability, product circulation, and service capabilities. Short-channel models have shorter product turnover time and higher distribution efficiency, but also require manufacturers to have stronger resource strength, the ability to hold large inventories, and complete warehousing and retail platforms. Especially, the short-channel model of e-commerce platforms is highly prone to conflict with offline price systems. Most first-tier manufacturers choose to combine the two models, leveraging the strengths of each. They fully consider the product scale of the regional market and their own strengths and weaknesses. In markets with basic sales volume but needing further cultivation, they adopt a multi-tier model to leverage expansion and dig deeper for incremental growth. In regions with unstable sales and price systems, or in pilot markets for new products with insufficient brand power, adopting a short-channel model can gradually promote stable price recovery. The high gross margins that new products bring to the channel, coupled with the relationship influence of upstream key accounts, will help achieve a win-win for manufacturers and distributors. Channel models also have a width dimension. Most manufacturers already have a consensus to adopt selective distribution models, selecting intermediaries with service advantages and consistent philosophy with the manufacturer, building advantageous combinations with distributors, establishing stable market and competitive advantages, and more effectively maintaining brand reputation. I won't elaborate further here. Five principles for manufacturer-distributor cooperation models There is no best channel model; only what suits the current development stage of the enterprise or the actual situation of the regional market. If it is a new enterprise with insufficient strength, it can learn from Wahaha's joint sales system, maximizing the use of distributor resources and capabilities to complete market coverage, with the manufacturer providing quality products, market development plans, and promotion strategies. Or, like Genki Forest's initial "online short channel + offline core convenience system" model, focusing on chain convenience stores and e-commerce channels in first- and second-tier central cities, saving intermediate channel costs, and interacting and communicating directly and quickly with consumers through these new channels, first amplifying brand voice. If the enterprise already has strength and can have strong advantages in personnel, funds, publicity, and distributor resources, it can carry out deep distribution and strengthen terminal control like Master Kong and JDB. But regarding whether all expenses, customer visits, etc., should be directly managed by the brand manufacturer's own sales staff, the author suggests that under the current internal and external environment, a reasonable scale must be controlled to avoid getting involved in large operational management costs, as mentioned in the previous article. Under various models, there are several important principles that brand manufacturers should keep in mind.
Minimize resource investment. Achieve the least input of people, money, and materials in various types of markets, with the greatest output, including brand voice, market share, and channel competition.
Maximize customer benefits. Customers at all levels of the channel have sufficient profit advantages, occupy a relatively high proportion of business, and can attract enough attention.
Maximize channel penetration. Fully leverage existing customer strength to promote rapid product distribution and penetration in various types of channels in regional markets.
Optimize terminal service. According to manufacturer standards, fully mobilize the enthusiasm of customers at all levels to provide terminals with fast delivery, marketable essential products, and advantageous displays.
Maximize sales volume carrying capacity. Help the manufacturer's performance grow steadily according to the established rhythm, with customers having confidence in the product and strong willingness to stock up. Discussion on distribution layout in three types of markets (1) Central city markets Market characteristics: Rich channel formats, dense outlets, high output per point, fierce competition, consumers with strong brand awareness, and high costs in marketing resource investment. Model suggestion: In central city channel layout, distributors should adopt a hybrid model of "core terminal direct operation + second-tier customer coverage." Leverage customer network advantages to ensure strong channel penetration and timely distribution services. At the same time, second-tier customers act as a sales reservoir, effectively alleviating the pressure of payment collection and stockpiling for distributors. Distributors directly serve high-output outlets such as KA, convenience systems, and special channels, ensuring brand image and service standards. In building the second-tier customer network, prioritize high-quality wholesalers dealing in short-shelf-life products (such as dairy products, ham sausages, etc.), as they have relatively efficient terminal distribution experience. Divide service areas by geographic blocks, preserve the original network areas of customers as much as possible, and each second-tier customer is responsible for outlet coverage within a 3-5 km radius. It is not recommended to introduce longer levels to ensure effective management radius and profit space for second-tier distribution customers. Division of labor: The manufacturer and distributor jointly formulate service standards for second-tier customers, and on the basis of appropriate price differences, provide relatively high distribution service assessment rewards. The distributor is responsible for price system management and monitoring within the region. The manufacturer provides resources and manpower support to core outlets with high output per point. At the same time, the manufacturer and distributor jointly inspect terminal execution and evaluate the performance of second-tier customers. This model ensures channel coverage density and maintains service quality and price stability through a limited management radius. As sales grow, it can be addressed by increasing distribution frequency or subdividing blocks, rather than blindly adding customer levels, which would cause cargo flow disorder. In actual execution, pay attention to controlling the number of second-tier customers to ensure management efficiency; also conduct dynamic evaluation of customer service capabilities to ensure customer gross margin space. (2) Urban-rural fringe and suburban markets Market characteristics: The urban-rural fringe serves as a transition zone connecting cities and rural areas, with lower population density, scattered outlets, insufficient road network, channel formats mostly traditional mom-and-pop stores, more factories and mines, lower market resource investment costs, and some high-sales outlets on major traffic routes or inside factories. Consumers have lower brand loyalty and are more price-sensitive, and this is also a market that many manufacturers easily overlook. Channel model: It is advisable to adopt an efficient coverage model with direct operation as the mainstay and second-tier as a supplement. Distributors directly serve quality terminals within a 3-5 km radius (such as community supermarkets, factory convenience stores), maintaining weekly service frequency, and enhancing terminal stickiness through high display rewards and purchase packages. For remote outlets (such as construction site kiosks, rural markets), authorize local second-tier customers to assist in distribution, but limit their service scope to avoid channel overlap. The urban-rural fringe has a high risk of cross-region dumping; the direct supply model can track terminal inventory and price systems in real time, avoiding cross-region dumping. Division of labor: The manufacturer can give distributors certain subsidies for quality outlets with high distribution costs. In terms of market promotion support, there should also be a focus. Distributors must ensure timely distribution, cooperate with the manufacturer to leverage relationship advantages, and cover as many blank outlets as possible. In the urban-rural fringe market, attention should be paid to balancing coverage density and control intensity. Through direct operation control, data empowerment, and interest binding, transform the "marginal market" into an incremental engine. (3) County and township markets Market characteristics: County and township markets have population and regional advantages, and in the current economic downturn, they still show considerable consumption growth space. However, the problem of large service spans also limits the enthusiasm of many manufacturers to expand. But compared with the first two markets, county and township markets have lower market operation costs, more folk customs, stronger interpersonal relationships, and consumption habits that pursue value and fashion. It can be said that they have more long-term significance for the future development of manufacturers and distributors. Channel model: Channel intensive cultivation is an effective model for building an efficient sinking distribution network in county-level markets. Distributors directly manage core townships, ensuring the strongest control over key areas. Second-tier customers cover ordinary townships, undertaking distribution and terminal maintenance functions. Third-tier customers (village-level wholesalers) penetrate remote villages, filling the last-mile gap. Higher distribution costs require ensuring higher per-case gross margins for second- and third-tier customers. To avoid low-price dumping, distribution assessment rewards can be paid through quarterly rebates. Prioritize selecting local grain, oil, and daily chemical wholesalers, utilizing their existing distribution networks. For service outlets, evaluate sell-through data monthly and eliminate inefficient outlets. In the early stage, avoid blindly pursuing sales targets and creating "small and scattered" chicken-rib customer layouts that affect market reputation and healthy development. After sales growth, split the service scope of large customers to avoid excessive management radius. Division of labor: As the management superior of sub-customers, the distributor must comprehensively coordinate market coverage, distribution services, and resource inspection. The manufacturer sends dedicated personnel to station locally to assist in training second-tier customers to develop markets, cultivate people, and expand channels. In county-level market management, brand manufacturers need to lead in summarizing market expansion experience, regularly hold communication meetings with customers for training and guidance, and help customers improve their professional market management capabilities. County-level markets need to replace broad casting with intensive cultivation. Through tiered management, data empowerment, and profit guarantees, transform "inefficient markets" into stable incremental sources. In this era of channel transformation and shrinking competition, the relationship between manufacturers and distributors has been upgraded to an ecological collaboration of shared destiny. Only when manufacturers and all channel intermediaries each perform their own duties and complement each other's strengths can they build an unshakable strong barrier in fierce market competition. Xing Renbao, with 18 years of marketing management experience, has served in Coca-Cola, Yili, Red Bull, and other well-known FMCG companies. Currently, he serves as Assistant to the Executive President of Marketing at Huabin FMCG Group, focusing on corporate marketing diagnosis, manufacturer-distributor relationships, channel operations, and digital transformation.