---
title: "Understanding the Relationship Between Baijiu and Deep Distribution"
description: "Why do some companies succeed with deep distribution while others fail, leading to rising marketing costs and wasted distributor resources? This article explores the strategic significance and value of deep distribution, examining its two contrasting perspectives, concept, and the key factors for successful implementation."
author: "朱志明"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2015-12-12"
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# Understanding the Relationship Between Baijiu and Deep Distribution

> Why do some companies succeed with deep distribution while others fail, leading to rising marketing costs and wasted distributor resources? This article explores the strategic significance and value of deep distribution, examining its two contrasting perspectives, concept, and the key factors for successful implementation.

Why do some companies succeed with deep distribution while others fail, leading to rising marketing costs and wasted distributor resources? This article explores the strategic significance and value of deep distribution, examining its two contrasting perspectives, concept, and the key factors for successful implementation.

I. Two Voices on Deep Distribution
Proponents of deep distribution argue that it is a powerful tool for building channel barriers. Under this model, the division and collaboration between the visitation system and the ordering system enable companies to grasp market changes quickly, respond to competitors' challenges in a timely manner, and maximize the sales potential of the market.

The biggest limitation of deep distribution is that it cannot solve the problem of consumption initiation, meaning it must rely on brand pull to drive product sell-through. Once products fail to move, deep distribution can become a nightmare, leading to inventory buildup and returns of products after six months, adding wrinkles to the foreheads of corporate leaders. Therefore, deep distribution is more suitable for strong brands to defend their market and increase channel width and depth, thereby maximizing sales growth.

II. Concept of Deep Distribution
Deep distribution, also known as intensive distribution, is a sales model where manufacturers directly penetrate retail terminals, directly grasp and control the sales network and terminal resources, and achieve efficient customer management.

Research shows that companies that successfully implement deep distribution typically exhibit two notable characteristics: first, they transform distributors from a underwriting function to a delivery function, changing their profit compensation to commission; second, manufacturers expand their channel management scope, extending from merely managing distributors to managing retail terminals, taking on the responsibilities of terminal development and promotion, and fully controlling the retail network.

When implementing deep distribution, four key points must be strictly observed:
1. Closed market area division to strictly prevent cross-region selling (dumping).
2. Separation of visitation and delivery, with clear division of core channel tasks between manufacturers and distributors: manufacturers handle terminal maintenance, development, management, and activity execution, fully controlling terminals; distributors only deliver products to terminal merchants.
3. Absolutely guarantee the interests of distributors (commissions).
4. Terminal work must be meticulous and solid.

III. Adaptability and Matching of Deep Distribution
1. Brand: Research shows that baijiu companies that succeed with deep distribution often adopt a big-brand strategy, using unified and extensive marketing communication, relying on brand pull to achieve rapid product sell-through. This is manifested in brand positioning with universal values. For example, Jinliufu positions itself as "China's Lucky Wine," and Daohuaxiang as "Harvest Season, China's Harvest, Daohuaxiang." They also emphasize high-end media such as CCTV or comprehensive coverage like Jinliufu's outdoor media nationwide. Not to mention global FMCG companies like P&G and Coca-Cola, which focus on universal positioning and grand communication.

2. Product: Deep distribution is suitable for mass-market products; the product or brand must meet the needs of the vast majority of consumers. Baijiu companies implementing deep distribution often offer popular mid-to-low-end products, not pursuing significant differentiation in packaging and bottle design. Many people judge Jinliufu's packaging as ordinary, not only in outer packaging materials but also in bottle shape. If you examine closely, Jinliufu's liquor body also has little differentiation, all being strong aroma type. Similarly, Daohuaxiang, Zhijiang Daqu, and many other domestic baijiu companies' channel products lack differentiation. In fact, channel models and product characteristics have a strong correspondence.

3. Price: Deep distribution selects price ranges based on ordinary consumers' daily purchasing power, focusing on price bands that are most acceptable to the general consumer group, where promotional activities or advertising can stimulate consumption without requiring a long education cycle. Therefore, products suitable for deep distribution must be concentrated in the mid-to-low-end range: between 5 yuan and 30 yuan per bottle (retail price). It is hard to imagine urban workers choosing 60-100 yuan baijiu as their daily consumption staple.

4. Terminal: Terminal forms are diverse, including hotel terminals, supermarket terminals, and small retail outlets. In these terminals, companies with strong deep distribution often have powerful visual merchandising, such as store signs, displays, stack displays, and posters, to create a thriving sales atmosphere, maintain brand vitality and long-term sales power; or use terminal visual merchandising to stimulate impulse purchases and boost terminal sales; or disseminate promotional information to guide consumption; or even seize advantageous display positions to intercept competitors.

5. Promotion: Whether channel or consumer promotions, deep distribution companies are active and aggressive. They use frequent, rhythmic channel promotions to push inventory to terminals, reasonably occupying terminal stock; and through wave after wave of consumer promotions, they stimulate purchase rates, increase terminal sales volume, and enhance terminal sales enthusiasm. Especially during holidays, consumer promotions are indispensable for deep distribution companies, as this period often sees the highest sales volume.

6. Cost: The costs of deep distribution mainly manifest in human resources and logistics. Due to terminal diversity, human-centric costs tend to increase, which must be mitigated by sales scale and per-store contribution. Companies that can adopt deep distribution are often those with mature brands or ample marketing budgets, making success more likely. For mature brands, the issue of product sell-through is often not the main problem, but rather how to increase terminal depth and width. By expanding product coverage and improving terminal service quality, they solve sales growth. For companies with ample marketing budgets, even if the product is in the introduction stage, they can support promotion, human resource allocation, and logistics costs; otherwise, if the product has not yet become a bestseller and cannot rely on scale to reduce marketing costs, the company cannot bear the huge costs of deep distribution, causing the model to fail midway. This is one of the main reasons why many small companies fail with deep distribution.

7. Organization: Deep distribution requires companies to establish regional functional organizations, with significant organizational changes, especially during new product launches and new market development, often resulting in many regional functional departments. For example, customer service departments, hotel departments, KA departments, and circulation departments are located in regional markets. For manufacturers, deep distribution requires a large number of tactical execution talents.

8. Market: Deep distribution is generally suitable for markets with mature modern commerce, such as Shanghai, Guangzhou, and other developed core markets. The more standardized the terminal forms, the lower the system cost of establishing a deep distribution system. Therefore, baijiu brands like Jinliufu, Liuyanghe, Daohuaxiang, and Zhijiang often prefer to build channel networks through major media operations to reduce terminal resistance in implementing deep distribution.

Similarly, deep distribution is mainly applicable to urban areas, where terminal outlets are densely distributed, resulting in lower operational costs. It is not suitable for suburbs or areas with scattered outlets. In summary, deep distribution is about concentrating efforts on intensive cultivation of regional markets.

Since deep distribution is a human-resource-intensive channel strategy, if sales do not achieve scale, marginal costs cannot be reduced, and the system benefits of deep distribution cannot be guaranteed. Therefore, deep distribution advocates regional focus, rolling development, steady progress, and gradually building large regional markets.

9. Management: Only through standardized management can marketing processes be executed smoothly, sales management be implemented effectively, and marketing costs be reduced through process management. Thus, we see that deep distribution often involves standardized service and management for all outlets in the channel, including fixed areas, fixed points, fixed personnel, fixed times, fixed routes, and fixed quantities, to achieve comprehensive control over product sales, competitive conditions, and personnel work, giving the company's products a competitive advantage in the sales channel.

Therefore, before any company adopts a deep distribution marketing model, it must deeply assess whether its product, brand, financial resources, and market are suitable for this model; otherwise, it may face dire consequences.

This article is excerpted from Mr. Zhu Zhiming's book "Kingly Marketing."

**-END-**

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