Click to read the original article for details. Recently, New Distribution learned that Uni-President China (hereafter "Uni-President China") will accelerate its vending machine business in mainland China. 2018 capital expenditure will increase nearly 90% over last year, to approximately RMB 1.3-1.5 billion, with 30% allocated to expanding vending machine operations. It is understood that as early as a year ago, in June 2017, Uni-President had already begun quietly operating vending machines, but only in a trial phase. An unnamed distributor revealed that Uni-President's vending machine business has been active since last June. Each machine charges distributors a "management fee" of RMB 2,000 per year, with independent operation and no mandatory interference. Applications are primarily from individual distributors; currently, his region has nearly 20 machines. Regarding operations, he told New Distribution, "Current vending machine placements are mainly in school cafeterias, with very obvious peak and off-peak seasons. A good location can generate monthly revenue of RMB 9,000, with an average gross margin of about 35%. Site rental and daily maintenance are handled by the distributor, and rental costs depend on negotiation." He also revealed to New Distribution, "This year, I clearly feel there are more vending machines. In a fourth- or fifth-tier city like this, Nongfu Spring already has nearly 200 machines in the urban area. Parks, underground parking garages, factories, and small shops are the main gathering points for vending machines." Subsequently, New Distribution also asked the local Uni-President person in charge, who described, "The company will invest heavily in vending machine business this year. We are currently preparing actively, and soon the specific number of vending machines for each region will be allocated." According to the latest media reports, Uni-President has partnered with Alipay to launch the "Infinite Treasure Box" vending machine, which will be placed in Tmall stores, with the number of machines expected to approach 10,000. New Distribution also found on relevant recruitment websites that related operating companies have begun hiring "vending machine market operations personnel." It appears that after a year of preparation, Uni-President seems fully ready to make a major push into the vending machine field.

1 A Battle for the Vending Machine Market Is About to Unfold As everyone knows, Uni-President is far from alone in this space: In July, C'estbon released its "2017 Social Responsibility Report," disclosing that in September 2017, C'estbon selected four key cities (Shenzhen, Shanghai, Wuhan, Chengdu) for pilot projects to explore suitable vending machine operating models. In June, media reported that "underground parking garages in Wuhan are full of Nongfu Spring's unmanned vending cabinets, with almost one between every two buildings." It is reported that by 2017, Nongfu Spring's vending machine fleet exceeded 10,000 units, and a dedicated business unit was established for operations. In May, New Distribution learned that after four months of development, Retail Link's empowerment store project, Tmall Store · Go Convenience vending machines, went live on May 3 at 18:00. Initially, the machines were piloted in over 2,000 stores in Zhengzhou and Dongguan. In March, Zong Zehou (brother of Wahaha's Zong Qinghou), chairman of Hangzhou Zongsheng Intelligent Technology Co., Ltd., revealed at a meeting that Wahaha had already deployed over 18,000 vending machines in China, with plans to complete 50,000 in 2018, focusing on fourth- and fifth-tier cities and rural markets. In January, at Bestore's 2018 New Retail Sharing Session, Vice President Zhao Gang revealed that Bestore had entered the unmanned smart cabinet field, aiming to shorten the distance between stores and customers from 300 meters to 15 meters. At the end of 2017, it was reported that Want Want had quietly established a vending machine operations center, planning to launch over 1,000 vending machines in 2018. Currently, Want Want vending machines have appeared in Beijing, Shanghai, Nanjing, Qingdao, Guangzhou, Shenzhen, Changsha, and other cities. ... In addition to the above companies with recent vending machine moves in 2018, others such as Coca-Cola, Master Kong, Jinmailang, and Wei Chuan have also been quietly piloting and exploring. Zeng Ming, Chief Strategy Officer of Alibaba Group and Dean of Hupan University, pointed out: "In the future, unmanned vending machines will become mini supermarkets that reach users within 100 meters in specific scenarios, using smart hardware + IoT to interact with users, completing a cloud + terminal reconstruction. It's a bit like the iPhone + APP explosion! This is a very exciting future!" A major vending machine war is about to begin!

2 From the Vending Machine Market Explosion to Changes in FMCG Distribution Why deploy vending machines? There's no need to elaborate on the big picture; just a set of brand manufacturer layoff data reveals the trend:

  1. A well-known food and beverage company: Employee numbers dropped from 80,541 in 2013 to 56,995 by the 2017 financial report, a reduction of 23,546 over four years, averaging nearly 6,000 per year. Sales offices also decreased from 566 to 369.
  2. Another well-known food and beverage company: At its peak in 2013, it had 38,916 employees. By 2017, it had 29,081, an average reduction of 4,000 per year.
  3. A well-known snack food company: In 2016, it had approximately 47,115 employees; in 2015, approximately 52,100, a reduction of 4,985 on average. These layoffs were not only due to the FMCG industry's growth ceiling from 2013 to 2016; even in 2017 when the industry improved, the layoff wave continued. A Master Kong distributor told New Distribution that his region's standard staffing was 15 people, but now only 5 remain. It's not that no one wants to join; the company has simply stopped hiring. With rising labor costs and declining ROI, although vending machines require significant upfront capital, they remain a relatively economical and stable growth method compared to future trends and market competition. We've always said the FMCG distribution sector is undergoing transformation. How can we tell? The explosion in vending machines, the rise of FMCG B2B platforms, convenience stores competing for locations, distributors using digital tools for transformation... and of course, internet giants like Alibaba, Tencent, and JD.com are entering offline, acquiring supermarkets and rebranding small stores.

3 A Transformation in FMCG Distribution Is Quietly Underway! In the future, with retail supported by platform companies and capital markets, chain operation, consolidation, and scale are inevitable. If the past 20 years were dominated by FMCG brands managing distributors, the next 20 years will be dominated by platform companies or retailers leading the supply chain and managing intermediaries. At the same time, distributors will no longer be the "multi-functional" distributors of the past. In the past, a regional market might have hundreds or even thousands of distributors; that won't happen again. In the "New Distribution 100 People" reports on transforming distributors, one distributor told New Distribution that in the past, liquor distributors and condiment distributors could coexist peacefully, each doing their own business, and frontline salespeople might even become friends. But in the future, as long as you're a distributor and your users are the same small store terminals, competition is possible! Whoever shares your users could be your competitor. If not now, it's only a matter of time. For example, Meituan, a company that started with group buying and has tens of thousands of restaurant users, has now extended into Kuailv (fresh food supply) to deliver to restaurants, competing with regional distributors—something no one would have imagined in the past! A transformation in FMCG distribution is quietly happening. In the planned economy era, FMCG distribution was handled by local supply and marketing cooperatives; in the industrial era, by local distributors; in the internet era, or new retail era, who will complete FMCG distribution? Whoever it is, it won't be the old, outdated distributors. How should the future FMCG distribution sector evolve? How should brand manufacturers position themselves to avoid being caught off guard? How should distributors think about transformation and upgrading to defend their existing markets? From August 22-24 in Shanghai, New Distribution will host the "2018 FDIC · China FMCG Digital Innovation Conference." At the conference, 70 FMCG industry experts and 10 high-level forums for brand manufacturers and distributors will discuss core topics on the transformation of FMCG distribution. Distributors interested in transformation are welcome to attend and discuss. -END-