At this time of year, many in the milk powder industry are making year-end summaries. In 2015, everyone was entangled; in 2016, they are no longer entangled but 'anxious'. This year, products are the most anxious

  1. Brand owners are speculating: the registration system document says one factory can have three brands, but rumors suggest it might be stricter, only one. How many will it actually be?
  2. Channel partners are analyzing: which brands will be retained? How many series will the retained brands have? Which SKUs will be kept?
  3. Stores are thinking: which product should we promote? The manufacturer's sales reps say Brand A will be retained, then say Brand B will be retained. Which one should we push?
  4. Consumers are also puzzled: today they go to the store to buy milk powder, but it's out of stock. The salesperson says it sold well and is out of stock. Outside, they meet a neighbor who says the milk powder their child drinks isn't selling well; the state has stopped production, not due to quality issues. But if it's not a quality issue, why stop production? Should I take my child for a check-up? I'll have to pay attention to my child's growth for a while. Forget it, I'll buy a big brand, or go to a big place to buy it. But regardless of the anxiety, significant changes have occurred in the milk powder industry this year, with gratifying achievements:
  • Milk powder factories are shifting from quantity to scale;
  • Milk powder products are shifting from quantity to quality;
  • Consumption trends are shifting from formula advantages to origin advantages;
  • Consumer demand is shifting from formula milk powder to organic milk powder;
  • Consumer concepts are shifting from formula cow milk powder to whole goat/camel/buffalo/fruit milk powder. The resulting changes: First, for the industry, the new policy has arrived, with strong national support for domestic powder, making it easier for compliant companies. Second, batch-by-batch testing means products with any non-compliance cannot leave the factory, giving a chance to regain consumer trust. Third, for channel partners, fewer brand choices may lead to lower profits. Fourth, for consumers, they pay more, but quality is more stable (no longer troubled by quality issues).

This year, channels are also anxious 1. Infant and child KA (Key Accounts) are taking shape: This year, the milk powder channel underwent qualitative changes. In the offline channel, infant and child chains have evolved from loose alliances to corporate operations, such as Tongmenghui, Zhonghua Yinglian, and Muying Tianxia, which through various forms of alliances have gathered strong regional infant chains under one banner, cooperating with first-tier brands in the name of a single company. "We directly purchase from factories, cooperate directly with manufacturers, directly lower purchase prices, directly set prices and products. We tell the industry what it means to be 'channel/terminal is king'. This is true control of offline channels, making us the Carrefour of China." As a result, traditional distributors are abandoned, and even cross-regional traders in wholesale markets have no basis for survival. This strong alliance directly bypasses levels, from manufacturers to customers—where is the channel partner? 2. Foreign brands go down-market, borrowing boats to go to sea: This year, the milk powder channel shows more integration. Foreign brands are borrowing boats to sail into inland rivers, such as the combination of Xpei and Xyou. It is said that Xshi is also actively contacting domestic exclusive distributors with national channel systems. Rather than wading into the muddy third- and fourth-tier markets themselves, they give some bait to channel partners who better understand China's third- and fourth-tier markets to help them go down-market. After three to five years, when the channel is established, they will dismantle and adjust the national exclusive distributors, strengthen the parent brand, and drive out domestic brands from first- and second-tier to third- and fourth-tier markets, attacking regional brands. 3. Offline sales volume/amount double decline / online e-commerce growth: This year, the milk powder channel underwent qualitative changes. Offline overall channel sales volume and sales amount both showed rare declines in history, at least according to AC data. For online channels, let me share a voice: AC data shows offline milk powder channel sales volume/amount double decline. For online, this is good news because AC currently cannot monitor daigou (overseas purchasing agents), and the number of Chinese elite immigrants is increasing each year. So asking relatives and friends to buy milk powder is no longer as difficult as in previous years; it's actually simple. The trend of overall milk powder shifting from offline to online is obvious, and with the hidden growth of cross-border e-commerce, the share will be even larger. 4. VR emerges, redefining new e-commerce: Online will be redefined with the emergence of new Taobao VR shopping. Traditional flat shopping will be replaced by VR. So the saying "believe in the power of technology" is very true. VR redefines new e-commerce: online becomes scenario-based, physical stores become experiential, truly integrating online and offline, with no boundaries for stores and no limits for shopping. Alibaba's redefinition of new e-commerce brings a real revolution to channels. This channel revolution has a huge impact on the industry. First, for factories/brands, it's a transformation: channel partners no longer ask manufacturers for fees; they give fees—processing fees. Second, for channel partners, it's a revolution: they are being left out, terminals go directly to manufacturers, where is the middleman? Third, for consumers, they pay more because terminal operators are motivated by huge profits, maintaining stable, relatively high retail prices to ensure their operating profits. Imagine the transformation from competitors in the store across the street to infant chains, from offline to e-commerce to VR shopping. How long is the iteration time? How anxious will channel partners at all levels be due to these channel changes? This year, milk powder prices are no longer anxious

  1. The market proves that ultra-low prices of 99 yuan per can don't work; 150-200 yuan per can remains the mainstream price in third- and fourth-tier markets. The low-end sales share of southwestern and northern enterprises that tried to lower prices last year is not large; the actual retail price for products sold to customers is around 200 yuan per can.
  2. The mainstream price band remains 200-300 yuan. After the second-child policy, the middle class is the main force for second children; they are not short of money, at least not for milk powder. The consumption demand of second-child parents is still there. Price is face; high price is good—this concept still dominates among the 70-85 generation. Not for other reasons, mainly because they have bought too many counterfeit goods and feel uneasy. They prefer to use money to verify quality rather than believe that high quality can be low priced.
  3. Ultra-high-end products at 500 yuan per can have very small sales. So second children are different from first children: second children have an economic foundation, and the consumption price increase is inevitable. But products over 300 yuan per can exceed the purchasing power of most families, becoming a very small share.
  4. Niche categories lead in price, such as Xfu (focusing on formula nutrients), Xzhi (focusing on organic and natural), Xte (focusing on whole goat milk), Xbao (focusing on plateau), and Qizhi milk powder (focusing on integrated 2-hour, the only one that marks milking time and production time as the same). Milk powder prices are currently on the rise. First, this is due to the increase in overall resident income. Second, it's due to currency depreciation. Third, it's due to rising costs. Fourth, it's driven by consumer demand. Catering to consumer needs, following consumer demand trends, and tapping consumer demand potential are the continuous pursuits and motivations of milk powder marketers.

This year, milk powder promotions have been anxious all along 1. Same-product buy-one-get-one promotions for consumers have become normalized: Before the registration system is implemented, competition intensifies, and brands being replaced enter a period of heavier promotions to clear stock. On the other hand, first-tier brands want more share and increase promotions; second-tier brands see this as an opportunity to overtake on the curve and also increase promotions; third- and fourth-tier and regional brands, which have already become processing plants, have received venture capital and see this as a growth opportunity, so they also increase promotions. 2. Consumer promotions shift to channel promotions: Every brand is thinking: I am a registered retained brand; I need to occupy the channel resources vacated by brands being replaced. So I must increase promotions to occupy channels and terminals, press your inventory and cash, so you have to sell. 3. From no promotion no sales, to small promotion no sales: No promotion, no movement; small promotion, no movement either. Why? Because all brands are in a bloody battle. Big brands want to squeeze out OEM brands with their strength. Small brands want to use big promotions to carve out a regional market, establish a base, and build a national brand. OEM brands think: if I can sell more during this transition period, I can earn more; if I sell well, I can raise funds to acquire small or big brands. So I also have to fight, big promotions, fight to the death. Facing this situation, first, channel partners/terminals will think: I dare not stock up; I buy as much as I sell. Anyway, I don't hold inventory here. I'll see the size of your promotions and who survives, and I'll sell that. Second, consumers will think: I'll wait for you to change from buy-three-get-one to buy-two-get-one, and from buy-two-get-one to buy-one-get-one, and then buy half a year's supply at once. Anyway, if you don't promote, I won't buy; I'll buy the one with bigger promotions. This is the current situation. Whether you agree or not, the market is like this, channels are like this, consumers are like this. It won't change because of your agreement. Unless you abandon product promotions and switch to services and promotions for differentiation, there will be no major breakthrough. As milk powder marketers, we believe the essence of marketing is not same-product buy-one-get-one, not low-price dumping, not deceptive pyramid selling. Marketing should be value recognition and quality recognition. But in the 2016 milk powder market, where is the shadow of marketing? As milk powder marketers, we must have a reverent heart, praying that the brand we serve or operate can be successfully registered in the first batch, so we can participate in the decisive battle. Indeed, 2017 will be the most exciting, brutal, and fierce battle in milk powder marketing history. The turning point will surely appear after the decisive battle. First, see who can survive this turbulence, then see who can last long. The historic turning point of milk powder will surely appear at the end of the year. Let's wait and see which brand we serve can become the flag of milk powder! -END- The best FMCG distributor learning platform in China Focusing on providing professional, practical, and applicable tutorials for enterprises and distributors Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get the corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent article selection | 002 Distributor market operation | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales improvement techniques | 006 Channel expansion | 007 Managing distributors | 008 Distributor development | 009 Distributor internal operations management | 010 Team management | 011 Efficient distribution techniques | 012 Sales manager's eighteen skills | 013 KA operation methods and strategies | 014 First lesson for new salespeople | 015 Internet, brand | 016 Distributor B2B transformation | [Long press QR code to follow]