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Reflections:

  1. Channels, as the foundation of FMCG enterprises, can be reformed, upgraded, flattened, or weakened, but can they be "demonized"?
  2. When all enterprises regard terminal competition as the "Bible," when more and more companies engage in "intensive cultivation," and when numerous criticisms target distributors, looking back, we suddenly discover that behind some seemingly beautiful concepts lie countless tears and hardships—intensive cultivation without careful tending, abundant harvests without reaping benefits, and investments that fail to please!
  3. How did this predicament arise? Can we escape the trap?

I. Perspective In recent years, with intensifying competition, terminal grabbing has become increasingly popular in the alcoholic beverage industry. Marketing theories like "plate-in-plate" and "direct distribution" have spread across the industry, with main tactics including:

  1. Implementing "separation of promotion and distribution": companies bypass distributors to face terminals directly, using the "80/20 principle" to lock in influential terminals (hotels) with promotional contracts, while distributors handle delivery and payment collection.
  2. Leveraging hotels' influence on the consumer market to drive other channels.

Under this approach, terminal markets are bustling with "terminal sales personnel." Various promotional tactics targeting hotels have emerged (excluding entry fees), collectively referred to as "exclusive venue fees":

  1. Exclusive stores: Conditions: The terminal exclusively sells this product for a period.
  2. Agreement stores: Conditions: The terminal sells a certain quantity of this product within a period.
  3. Promotional stores: Conditions: The terminal may sell competing products but only this product can conduct in-store promotions or visual merchandising.

If terminals meet these conditions, companies provide rewards in various forms, such as:

  1. Monthly gifts of a certain quantity of alcohol.
  2. Cash or equivalent alcohol value returned after the agreement expires.
  3. Appliances or even cars provided or reimbursed upon agreement completion.
  4. Other promotional methods: travel, paying hotel staff wages, decoration fees, and various promotional personnel, all diverse and countless. Many companies rack their brains over these.

However, more headaches await. In one beverage company, the company side complained:

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

  1. Exclusive venue fees increase year by year. Since agreements are signed annually, last year 70,000-80,000 yuan sufficed for some hotels; this year, without 100,000 yuan, no deal, or the hotel signs with competitors.
  2. Exclusive venues don't guarantee exclusive sales, and companies dare not complain. Hotels have ample excuses for the presence of competing products, such as customers bringing their own drinks for gatherings or weddings, or influential figures (often government officials) demanding specific competitors, which hotels cannot refuse. Some hotels even boldly say, "We sold it, so what? If not, we'll sell competitor products." Companies can only swallow their anger.
  3. Severe imbalance between input and output. Without signing an exclusive agreement, hotels won't sell the product; every hotel demands an exclusive agreement, and refusing would offend them. Companies sign agreements to "lock in" good stores, but the practice spreads widely, even to insignificant shops.

Grievance 2: Loopholes everywhere, costs out of control.

  1. Planting without harvesting. Company sales staff make "signing stores" a daily routine, then hand over delivery to distributors. Sometimes, staff only visit the store during annual signings, disappearing otherwise, leading to situations where contracts continue even if the hotel changes management or switches to competitors. For example, a hotel signed a 100,000+ yuan exclusive fee for a year but sold fewer than 100 cases, with sales under 10,000 yuan.
  2. Multiple contracts for one store or fake contracts. Since signing is a manufacturer action, distributors exploit the manufacturer's lack of maintenance and knowledge of store locations, signing multiple contracts for one hotel or fake contracts to extract promotional funds. Even if sales staff know, they turn a blind eye.

Grievance 3: Chaotic sales, difficult promotion calculations. With "cumulative volume" and "exclusive" agreements, if the same product has volume-based, exclusive, and circulation store agreements, settlement becomes a mess, leading to duplicate promotions. Companies try to separate product variants for exclusive, volume, and circulation, but this causes brand confusion and consumers can't find the same product in circulation, embarrassing the company.

Grievance 4: Reasonable but illegal, investments don't please. Recently, national authorities banned "exclusive" promotions, classifying them as "commercial bribery" and prosecuting them as illegal. Companies must take risks, playing word games in contracts and avoiding leaving originals with hotels. Even if disputes arise, companies dare not pursue legal action.

Thus, exclusive venue promotions become a hot potato, making companies uneasy and stuck.

So, has terminal exclusive promotion truly hit a dead end?

Before answering, let's explore the following questions:

What causes the above grievances?

  1. Incomplete functions, imitating without understanding. Both "plate-in-plate" and "direct distribution" require companies to bypass distributors, get closer to the market, abandon crude channel warfare, and cultivate intensively. To achieve this, strategic emphasis or technical imitation alone won't work because structure determines function. Without implementing a deep distribution system, forcing "intensive cultivation" may look good but results in no harvest, insufficient market maintenance, and losses.

  2. Unlimited desires, unlimited dangers. Terms like "intensive cultivation" and "facing terminals" are very "Chinese" in marketing. But can every company attempt them?

Companies suitable for intensive cultivation must have: A. Mature management capabilities and strong execution, having moved beyond the "product manufacturing stage." B. Certain brand strength and strong bargaining power in channel reform.

If a company lacks these conditions, forcing intensive cultivation not only fails to overcome the challenges of managing field staff (including high personnel costs and recruitment) but also creates problems in distributor reform. Companies seeking deeper market participation often conflict with channel members. Due to weak brand and insufficient bargaining power, they fall into a passive dilemma. If mishandled, they face both competitor pressure and low distributor cooperation, creating risks. Such companies typically rely on "promotions" to sustain market operations, lacking market pull, and must "bend low" in the market, unable to hold their heads high.

  1. Exclusive and volume contracts are incompatible. Not every tactic works against enemies; some may backfire. Exclusive policies don't count sales, while volume contracts do. During the agreement, only two people know actual hotel sales: the deliverer and the hotel owner. If there's muddled water, the company doesn't benefit; when challenged, the company must concede to the distributor. Thus, exclusive and volume contracts cannot coexist in the same market. If they do, the company ties its own hands, creating a popular brand at the terminal but afraid to distribute through circulation. Creating popularity without leveraging it is tragic: once full-channel operations are allowed, the "high price, high promotion" at the terminal becomes self-deception and failure.

For example: A beer company's X product terminal promotion policy:

  • Entry price: 36 yuan/case.
  • Hotel A: Exclusive fee 50,000 yuan/year.
  • Hotel B: Volume 600 cases, receive 5,000 yuan worth of X beer.
  • Circulation stores: Buy 10 cases, get 1 free.
  • Deliverer C: Annual sales 50,000 cases.
  • Promotion settlement: C receives 10+1 policy for 30,000 cases.
  • C complains: Hotel A only sold 5,000 cases! He has to cover 10,000 cases with the 10+1 policy.

Since actual sales at Hotel A can't be verified (C and the hotel prepared in advance), the company complies with C's demands.

Meanwhile, Hotel B, to meet its target, diverts goods to circulation stores at low prices.

To change this, the beer company creates X for exclusive venues, Y for volume stores, and Z for circulation stores.

Thus, three product variants flood the market, confusing consumers.

The three variants are independent; consumers used to X and Y can't find them in circulation. Result: buying stores only for sales volume, self-deception, and self-entrapment!

The cost of buying stores is absurdly high. The original intention was to build image and drive circulation, but they end up "dying on the high ground" (as a company executive put it), stuck!

II. Solutions

In this regard, the promotion traps in the beverage industry are largely self-dug. Therefore, beverage companies, especially weaker ones, should follow these principles in market operations:

  1. Be down-to-earth; don't do things that look good but are exhausting. Many marketing executives love "innovation," grabbing terminals, cutting large accounts, refining markets, boldly advancing... but the market doesn't develop, and internal conflicts arise. The result is embarrassment and a mess.

  2. Be cautious about "intensive cultivation" without sufficient strength, especially when "land" (market) ownership isn't in your hands. For example, farmers' intensive cultivation requires two prerequisites: A. Land ownership or long-term use guarantees. B. The purpose is careful tending, planting high-yield, high-profit crops to offset costs.

If a company still competes on low price and quality, "channel intensive cultivation" will yield nothing—not even the vines!

  1. Marketing isn't built on "cleverness and tricks" but on management. Marketing without management is "suicidal." Understand the ancient adage "守正出奇" (hold the orthodox and surprise the enemy).

  2. For mature companies, brand is momentum, marketing is capability, and promotion is just a lubricant.

  3. Weaker companies must rely on channel warfare; during this period, building a marketing platform suited to themselves through channels is the best strategy.

  4. Overall weakness doesn't mean no local advantages. Use regional advantages to build base markets.

  5. "Bargaining power" is always the theme in market competition. Whether exclusive or volume, it must be based on the company having some bargaining power.

  6. A market without brand assurance is "renting" others' land (paying); a market with strong brand assurance is "renting out" land (charging).

Strong brands rent out the market to distributors and charge rent, weakening distributor status. Weak brands rent distributors' land, giving distributors the upper hand. Thus, manufacturer-distributor "labor-capital" conflicts arise. Either "the customer bullies the store" or "the store bullies the customer." In some companies or industries, distributors and channel members are demonized. The manufacturer and distributor constantly switch roles in the "host-guest" relationship, making it nearly irreconcilable.

With these principles in mind, companies can start solving the terminal promotion trap:

  1. The trap's essence isn't promotion itself but the company. In martial arts novels, any "move" has different power depending on who uses it. The difference lies in the user's internal strength—management capability, capital strength, and brand height.

  2. Dig one inch wide, one mile deep. Focus resources, build base markets, aim for "leading brand" status, and seize "rule-making power" in regional markets. Basic steps: A. Establish a base market, leverage regional advantages, build a harmonious channel team, and achieve seamless coverage. B. Defend fiercely, not yielding an inch; attack with overwhelming force. For example, form professional mobile units for local market battles, concentrating resources to crush opponents. C. Penetrate peripheries, establish a "predatory" strategy, avoid scattering forces. D. Opportunities and traps coexist; you must give to receive.

  3. There are hundreds of ways to break terminal exclusive or monopoly locks. For example, use bring-your-own drinks, consumption leaders, "under-the-table promotions," or even create conflicts with free alcohol... But any method must be based on "execution." Thus, when a brand is weak, using execution to compensate for brand shortcomings is feasible.

  4. "守正出奇" (hold the orthodox and surprise). Philosophically, all things are mutually reinforcing and restraining. Similarly, in marketing, no tactic is unbreakable. Cleverness, tricks, and gimmicks are not orthodox but "surprises," and "surprises cannot last." That is, they treat symptoms, not root causes. Marketing must be based on management, "governing with orthodoxy." Chasing "tricks" leads to flashiness and falling into self-dug traps.

  5. Don't "pull up seedlings to help them grow." Weak beverage companies, especially in new market development, must follow the natural laws of "brand growth." Without strong advertising support and brand accumulation, a "rookie" product entering the market must follow growth stages. Starting with exclusive or volume contracts is like pulling up seedlings, undermining the foundation. Market development has rules; any attempt to break them will be punished. Every brand must go through stages: display, awareness, purchase, and acceptance. No product can jump from display to acceptance. When managing a brand, companies must advance step by step. During the display stage (launch), expand points of sale with channel assurance, use POP displays and other tools to stimulate consumer senses, repeat stimulation, and use appropriate terminal promotions to encourage first trials, gather feedback, and improve products. These steps are complex and hard to execute perfectly, so companies may skip steps and take shortcuts, often ending up unable to manage both ends.

  6. Beautiful promotional tactics may look good but require market management foundations, especially sound financial management. The "separation of promotion and distribution" in channel intensive cultivation seems simple but has stumped many big brands. Without accurate promotion planning and a solid execution system, decisions made "by the seat of the pants" make even the best promotions "good to look at but hard to use," or even unusable.

III. Summary

Weak beverage companies should base marketing on management, rely on channels as their foundation, ensure survival, and focus on defense, being down-to-earth and steady. First-class companies do "momentum," second-class do "market," third-class do "tasks." Some temptations are alluring but dangerous. Any promotional tactic or marketing model has its advanced aspects in certain periods. What exists has its reasons, but it may not be suitable. This is what companies must note in fierce market competition.

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