After being exposed by CCTV's '3·15' gala, the spicy strip market is undergoing a reshuffle: some companies seize the opportunity to enter, while incumbents try to maintain their positions. On March 31, it was reported that Weilong had issued a notice to distributors requiring them to choose one: if they distribute Weilong products, they cannot distribute other brands. The specifics are as follows:
Do not distribute competing products or brands;
Choose one among existing competing products before April 15;
Not allowed to operate simultaneously with large circulation customers;
Company audit on competing products on April 15;
After reading the above, distributors must provide a receipt. If the above situations occur, cooperation with the customer will be stopped, and the responsible city manager will be dismissed for negligence.
In response, New Distribution also interviewed several Weilong distributors, and most of them said they "didn't feel much" about this policy, with the majority reacting as "normal, many do this, we're used to it". Some distributors felt that as long as they were big and strong enough, the manufacturer couldn't do anything to them. "Signing is one thing, but we still weigh it ourselves." It seems that the unwritten policy had long been an unspoken rule, and now it's been put into written terms, indicating that Weilong has made a firm decision this time.
Industry insiders speculate that Weilong's aggressive 'high-handed clause' may be closely related to the increasingly competitive environment in the spicy strip market.
Big Players Enter, Competition Intensifies
It is understood that spicy strips appeared in 1998, and Weilong was founded in 1999, quietly making money from spicy strips. However, in 2005 and 2007, the spicy strip industry experienced two food safety crises, and the state gradually implemented stricter management systems for cooked food, requiring such enterprises to obtain QS certification.
In the second half of 2010, supply exceeded demand for spicy strips. Although there were many enterprises, only about 10% were profitable. Weilong founder Liu Weiping saw an opportunity, and Weilong began reforms and upgrades, building new factories, and in 2014 achieved production upgrades, consolidating its leading position in the industry. In addition to product line and production line upgrades, Weilong has also made a splash in marketing in recent years, repeatedly launching minimalist copy and fun packaging to cater to the tastes of the new generation of consumers, even creating a brand image of spicy strips "playing high-end and fashionable" online.
Currently, the spicy strip industry market size has reached nearly 60 billion yuan. In the past two years, with the entry of larger food companies, Weilong's advantages are no longer distinct. New entrants with "money and power" have adopted similar approaches.
For example, Three Squirrels may not have a strong supply chain, but its core advantages are channels and marketing. Recently, Three Squirrels developed a spicy strip called "Yue La" (About Spicy), but differentiated it in packaging, imitating Durex's packaging. After its launch, it ranked among the top in online spicy strip sales. Additionally, Yanjinpu Food started a spicy strip R&D project as early as the second half of 2017, hiring spicy strip professionals at high salaries, investing heavily in R&D and equipment, and launching a new brand "Xiao Xin Wangzi" (Little Prince) spicy strips. In terms of promotion, they spared no expense, inviting Lin Gengxin as spokesperson. This shows that Yanjinpu Food is also eyeing the spicy strip category.
Furthermore, after the '3·15' exposure of hygiene issues in several spicy strip manufacturers, Golden Monkey launched its "Spicy Strange Space" series of spicy strip products on March 16. A Golden Monkey spokesperson said that the '3·15' exposure of the spicy strip industry would push the industry into an adjustment period, and some enterprises would be reshuffled. According to the law of duality in the market, Weilong dominates, but in the South China, Southwest, and East China markets, there is room for Golden Monkey to develop. Distributors at the Golden Monkey launch event also said that as a legitimate brand, launching spicy strips at this time could meet market demand, and "Golden Monkey's spicy strips have a purer taste than other brands' products." Golden Monkey's entry is also a significant challenge to the spicy strip market landscape.
Advantages Gone, How to Solve the Dilemma?
In 2018, the spicy strip market reached an industry scale of nearly 60 billion yuan, but concentration is low. Even as the leading enterprise, Weilong's performance is only over 2 billion yuan, accounting for less than 5% of the market. The market is still filled with various brands of spicy strips.
"Such a big cake cannot be monopolized by one company." Major enterprises are entering one after another, challenging Weilong. In the fierce market competition, Weilong has begun to seek greater development. At the national distributor conference at the end of 2018, Weilong proposed achieving annual sales of 10 billion yuan within three years. To achieve this goal, Weilong has already ventured into the instant food sector, stocking items like hot and sour noodles and self-heating spicy strip hot pot in its newly opened Weilong Food specialty stores, as well as offering konjac, instant noodles, and dried vegetable products for consumers to choose from.
This time, forcing distributors to choose one is a direct and effective way to attack competitors and stifle their market coverage, but in the long run, distributors will choose brands based on interests, and Weilong's approach may not be sustainable.
Why Do Distributors Distribute Other Competing Products?
Not only Weilong's distributors, but other brands face similar issues. Most distributors, for the sake of profit, commonly distribute multiple products in the same category. Products from big brands often have high prices and low gross margins. Although first-tier brands have strong sales-driving ability, for distributors, second- and third-tier brands with higher gross margins seem like better choices. Especially in some township cities, consumers have low brand awareness, and some lower-priced products sell better at the terminal than big brand products. Where there is demand, there is sales. In the spicy strip industry, product quality varies, and consumers focus more on taste and price, which prompts distributors to often distribute multiple brands to meet different needs.
For some large local distributors, because they have a sound network system and influence locally, whatever they sell can boost sales. So in an interview with New Distribution, a distributor mentioned, "The key is whether you are strong enough. If you are strong enough, the manufacturer can't control you." However, some distributors said they only distribute Weilong products. "We care more about doing a good job with one brand and providing good service. We don't do second- and third-tier brands. We are selective about products. Some small brands have no future in the long run." Under the increasingly strict national control over food safety, spicy strips have long been criticized as "junk food," and the survival environment for some small manufacturers is becoming increasingly difficult.
Why Do Manufacturers Take a One-Size-Fits-All Approach?
From the manufacturer's perspective, distributors distributing competing products is a blatant "betrayal." The manufacturer-distributor relationship is inherently cooperative; both sides must work together hand in hand to achieve a win-win situation. From the manufacturer's standpoint, if distributors distribute competing products, they will inevitably divert their energy and fail to fully devote themselves to brand promotion. Other brands distributed by distributors will also take away a large portion of the brand's original market. Selling more competing products will inevitably have a significant impact on the sales of their own products. So Weilong's move is understandable. Not only Weilong, but first-tier brand manufacturers also have zero tolerance for distributors distributing competing products. It's just that Weilong's issuance of a document this time, forcing a "choose one" approach, is somewhat tough, making some distributors call it "high-handed."
In fact, this move is only a temporary solution, not a fundamental one. Facing an increasingly competitive market, Weilong still needs to work on product innovation and channel innovation, continuously iterating and upgrading, to maintain its advantages and secure its position as the industry leader.
This article is compiled and edited by
-END-