Warm reminder: Click the blue text above “FMCG Distributor Professional Consulting” to learn more about marketing and distributor internal management.

Channels are the foundation of FMCG companies. They can be reformed, upgraded, flattened, or weakened, but can they be "demonized"? How does this predicament arise? Can we escape the trap?

Analysis

In recent years, as competition intensifies, terminal grabbing has become increasingly common in the FMCG industry. Companies bypass distributors to deal directly with terminals, locking in "influential" outlets with promotional agreements. Distributors are only responsible for delivery and payment collection, leveraging the terminal's influence on the consumer market to drive other channels.

  • Exclusive shops: Terminals sell only the company's product for a period.
  • Contract shops: Terminals agree to sell a certain quantity of the product within a period.
  • Promotion-exclusive shops: Terminals may sell competing products, but only the company's product can conduct promotions or visual merchandising in-store.

If terminals meet these conditions, the company provides rewards. However, companies face even more headaches, as they lament:

Headache 1: High costs, difficult management, and being stuck in a dilemma.

Exclusive event costs increase year by year. Since agreements are signed annually, last year some hotels cost 70,000–80,000 RMB, but this year, without 100,000 RMB, they won't sign; otherwise, they'll sign with competitors.

Exclusive shops aren't truly exclusive, and companies dare not complain. Hotels have ample excuses for the "legality" of competing products, such as customers bringing their own drinks for gatherings or weddings, or a powerful figure specifically requesting a competitor's product, which the hotel cannot refuse. Companies can only swallow their anger.

The input-output ratio is severely imbalanced. If they don't sign exclusive agreements, they won't sell. Companies sign shops to "lock in" the "good shops" in the market, but the practice spreads widely, even to "fleabag hotels."

Headache 2: Loopholes everywhere, costs out of control.

Sowing without reaping. Company salespeople make "signing shops" a daily routine, but after signing, they hand over delivery to distributors. Sometimes salespeople only visit the shop once a year during signing, and otherwise disappear. Even if the hotel changes management or switches to competitors mid-contract, the contract still executes.

One shop signed multiple times or fake shops. Since signing is a manufacturer action with little distributor involvement, distributors exploit the manufacturer's "sign but not maintain" weakness, even not knowing where the signed shops are. They sign multiple contracts for one hotel or fake contracts to siphon promotional fees.

Headache 3: Sales confusion, difficult promotion calculations.

Since signed shops include "cumulative volume" and "exclusive" types, if the same product line has volume-based, exclusive, and circulation small shops, promotional settlements become a "mess," leading to duplicate promotions. Companies try to separate by product line, but this causes brand confusion: products consumed in hotels cannot be bought in circulation.

Headache 4: Reasonable but illegal, "profit" without gratitude.

Recently, national authorities have banned "exclusive" promotions, classifying them as "commercial bribery" and prosecuting them as illegal. Companies can only take risks, playing word games in contracts while avoiding giving hotels originals. Even if disputes arise, they dare not pursue legal action.

So, exclusive promotions have become a hot potato. Has terminal exclusive promotion truly hit a dead end? Before answering, let's explore: What causes these headaches?

Incomplete functions, imitating blindly.

The market demands companies abandon the extensive approach of relying solely on channel warfare, and instead cultivate and refine the market. To achieve this, merely emphasizing strategy or imitating techniques won't solve problems because structure determines function. Without introducing a deep distribution system, forcing "intensive cultivation" may look beautiful but results in only cultivating without harvesting, lacking market maintenance capability, and even making a fool of oneself.

Unlimited desires, unlimited dangers.

Terms like "intensive cultivation" and "direct terminal access" are very "Chinese" in marketing circles. But can every company attempt them?

Companies suitable for intensive cultivation must meet these conditions: mature management foundation, strong execution capability, having passed the "product manufacturing stage," and possessing brand strength with significant say in channel reform.

Exclusive and volume contracts are incompatible.

During the agreement period, only two people know the hotel's sales volume: the deliverer and the hotel owner. If there's muddy water, it's not the company that benefits. Thus, exclusive and volume contracts cannot coexist in the same market. If they do, the company only ties its own hands, creating a popular brand at the terminal but afraid to distribute it in circulation. Creating popularity but not exploiting it is tragic because once full-channel operation is opened, the "high price, high promotion" at terminals becomes self-deception and leads to failure.

Solutions

Promotion traps in the liquor industry are largely self-inflicted. Therefore, liquor companies, especially weak ones, should follow these principles in market operations:

  • Be down-to-earth; don't do things that look beautiful. Many marketing executives love "innovation," grabbing terminals and cutting big distributors to refine markets, but the market doesn't develop, and their own brothers (distributors) fight each other. In the end, they see only a mess.
  • When capabilities are insufficient, be cautious about "intensive cultivation," especially when the "market" property rights are not in your hands.
  • Marketing is not built on "cleverness" but on management. Marketing without management is "suicidal" marketing. Fully understand the ancient adage "uphold integrity and surprise the enemy."
  • For mature companies, brand is momentum, marketing is energy, and promotion is only a lubricant.
  • Weak companies must rely on channel warfare. During this period, building a suitable marketing platform based on channels is the best strategy.
  • Overall weakness doesn't mean no local advantages. Use regional advantages to build a base market.
  • A market without brand assurance is "renting" others' land (paying); a market with strong brand assurance is "leasing" to others (charging).
  • Strong brands lease the market to "distributors" and collect rent, weakening distributor status. Weak brands rent the distributor's land, giving distributors an active role. Thus, labor-capital contradictions emerge, and in some companies or industries, the "host-guest" relationship constantly shifts, making it nearly irreconcilable.

With these principles, companies can begin to crack the terminal promotion trap:

  • The trap's essence lies not in promotion itself but in the company. In martial arts novels, a "move" has different power when used by different people. The fundamental difference is the user's internal strength—that is, management capability, capital strength, and brand height.
  • Focus resources to build a base market, aim for "rule-making power" in regional markets, and seize market "discourse power." For peripheral penetration, rely on channels, adopt a "predatory" strategy, and avoid scattering resources like beans.
  • Use tactical means to break exclusive or monopoly blocks: use self-brought drinks, consumption leaders, "under-the-table promotions," or even gift liquor to create conflicts. But any tactic must be based on "execution capability."
  • Don't "pull up seedlings to help them grow." Weak liquor companies, especially in new market development, must follow the natural law of "brand growth." Without strong advertising support and brand accumulation, a "rookie" product entering the market must follow growth rules. Starting with exclusive volume contracts from the beginning is like "pulling up seedlings," undermining your own foundation.
  • Beautiful promotional tactics may look nice, but they require market management basics, especially sound financial management. Without accurate promotion planning and a complete execution system, decisions made by "patting the head" will make even the best promotions "look good but not work."

Conclusion

Weak liquor companies should base marketing on management, rely on channels for survival, ensure survival, and focus on defense. First-class companies do "momentum," second-class do "market," and third-class do "tasks." Though some temptations are charming, they are also dangerous. Any promotional tactic or marketing model has its advanced aspects in certain periods. What exists is reasonable, but not necessarily suitable. This is what companies must note in fierce market competition.

Like this article? Click the top right corner to share to your Moments.

About us: WeChat name: FMCG Distributor Professional Consulting Management Account intro: 20 years of FMCG distributor operation and management experience, professionally targeting distributor internal affairs.

Click "Read the original text" below to enter our micro-community for interaction and Q&A.

Learning and exchange QQ group: 344257092

Reply 1 to enter the micro-official website to view historical messages.