Introduction: Go out, abandon illusions, and prepare for "battle."

Author | Chen Siting Review | Gou Gou Layout | Zhang Yuwei

Mr. Zhou flew 60,000 kilometers in half a year

In April this year, at the Chengdu conference, I met a distributor friend from Shandong, Mr. Zhou. From January to April, Mr. Zhou visited more than ten cities across the country. What for? To observe, learn, and exchange ideas with other distributors. Sometimes he contacted them himself, and sometimes he joined New Distribution's study tours. What did he observe, learn, and exchange? He said the biggest problem now is not knowing where his company should go. He must quickly visit distributors with various development models across the country and find a direction truly suitable for his company's transformation. "Our company has a team of over 200 people. Where to go and how to get there are the most important matters that override everything else now." The company's traditional business generates about 300 million yuan annually. On the issue of transformation, Mr. Zhou is both urgent and cautious, forcing himself to be patient.

This afternoon, I called Mr. Zhou. He said his flight mileage in the first half of the year had exceeded 60,000 kilometers, covering 27 cities. "Have you chosen a direction for the company? When will you start the transformation?" "I have some sense of direction, but before making the final choice, I want to wait until after your October FMCG conference to make the final decision."

I fully understand Mr. Zhou's situation, because in our market visits in the first half of the year, we heard more than once about distributors' intense anxiety about direction.

It's not just distributor "Mr. Zhou" who is anxious; this year, brand-side "Mr. Zhou"s are also unusually anxious. Brand leaders are busier than usual, paying more attention to performance progress, going deeper into the front lines, and researching and trying new channels and models more than before. New Distribution has received more inquiries about "direction" and "transformation" than in previous years.

All anxiety stems from growth problems. When performance growth is weak or even declines, all kinds of problems begin to plague the enterprise. Only growth can cure all ills. But today, the usual methods simply cannot solve the problem of sustained growth. Only by solving the two strategic questions of "Where should I go?" and "How should I get there?" can the growth worries be resolved.

Why has growth disappeared?

Many distributor bosses and brand managers do not clearly understand how our past high-speed growth came about, and of course, they are now puzzled about why growth has disappeared. Over the past 30 years, why did we grow? There are roughly four core drivers.

1. The ever-increasing total population means an ever-increasing market capacity.

How many people there are, how many stomachs there are. The essence of the FMCG economy is the population economy; the total stomach capacity of the national population is the total market capacity of our FMCG products. In 1980, China's population was only 987 million; in 2021, it was 1.413 billion. Over the past forty years, the population has increased by a full 426 million. This is the "first nuclear power" supporting forty years of high-speed growth. However, since 2013, our birth rate has slowed significantly; in 2023, China's population experienced a historic negative growth of 1 million, bringing the number to 1.412 billion. The "nuclear power" of population growth has disappeared. This means that the incremental growth in FMCG products based on continuous population growth has vanished, and all manufacturers and distributors must compete in the existing market. For a long time, we should not expect the "power" of population growth to recover.

2. Economic development and continuously rising individual disposable income.

In 1980, China's per capita GDP was 500 yuan; in 2022, it was 85,700 yuan, a 170-fold increase in forty years. In 1980, per capita disposable income was 200 yuan; in 2022, it was 36,900 yuan, an increase of more than 180 times. An increase in disposable income means an increase in purchasing power. An increase in purchasing power means growth in total social consumption and total market capacity. The continuous increase in per capita purchasing power over forty years is the "second nuclear power" that created the high-speed growth of the FMCG market. Unfortunately, the power of this "second nuclear power" has also weakened. In 2022, China's per capita GDP growth rate was only 3%, half the average growth rate of the past forty years. Per capita disposable income grew by 5%, close to the lowest level in the past forty years. We certainly hope and have confidence that the "second nuclear power" will regain strong momentum, but for now, this driver clearly cannot bring much increment to the market.

3. The penetration rate of various FMCG products continues to rise.

The people's aspiration for a better life is the "third nuclear power" of market growth. From having only heard of, never seen, never used, to using and using frequently, the innovation and penetration rate of FMCG products have continued to rise. This is the third major "nuclear power" of high-speed growth over the past forty years. From not drinking milk once a year to "a cup of milk a day, strengthening the Chinese people," one can imagine the huge growth space it brought. In the past, whenever consumption encountered bottlenecks, growth was driven by improving product innovation and product penetration. With the continuous improvement of various infrastructures, the deep distribution model of FMCG products expanded from first- and second-tier cities to third- and fourth-tier cities, and finally deep into rural areas. Every market sinking and every channel flattening is an overall improvement in penetration. Today, although there is still some space for product penetration, the ceiling is in sight, and the market increment it can provide is limited. Crucially, the threshold for urban markets is getting higher and higher. Although low-tier markets have space, the operational and long-distance management costs are also very high. A few years ago, when the internet dividend was just right and traffic costs were not expensive, it gave many new consumer brands space and soil for rapid growth. That dividend has now disappeared. Innovative brands need to raise more funds on one hand, and on the other hand, they need to find growth models that effectively improve ROI under high costs.

4. Enterprise strategic innovation and marketing innovation.

Objectively speaking, the first three drivers are macro-environmental factors, the "fate" that enterprises and distributors cannot choose or escape. They are fair to all manufacturers and distributors; we can only compete in the same macro environment. The purpose of effective operation for a brand and distributor is to occupy the market through unique strategies, brand positioning, product organization, team organization, and market operations, seizing others' markets and shares. What can help us win the competition is only our own unique strategy, products, marketing, and team. These are also the options we can control and that can determine our destiny. Over the past forty years, the core reason most manufacturers and distributors could sustain growth was the macro environment. Population continued to grow, purchasing power and demand continued to rise, and as long as the market was carefully cultivated, it would yield high returns. In other words, in the "old world," manufacturers, especially distributors, often did not need to spend much thought on direction to succeed. Many distributors even succeeded by "accidentally" choosing the right brand, following instructions, and persisting, thus achieving success.

But the era of endless increments is over. When the major nuclear powers of population, purchasing power, and demand are no longer strong, when the market cake no longer grows in a simple way, and when the growth methods we are familiar with are gone forever, what should we do?

Go out, abandon illusions, and prepare for "battle."

A well-known snack food brand recently held its semi-annual distributor conference. At the meeting, the vast majority of distributors said this year is difficult, especially difficult. Sales are difficult, team management is difficult, completing tasks is difficult. Although the company is still operating, they feel that everything is not going smoothly and not meeting expectations. The enterprise leader poured cold water on the attending distributors: "This year is difficult, but not the most difficult; next year will be even more difficult, and not the most difficult either. Now there are only two choices: either liquidate inventory and transfer the business, retire with the money you've earned; or abandon illusions and prepare for battle."

This battle is not against others, but against ourselves. The growth methods and paths we are familiar with were built based on the environment of the previous era; in the "new world," the environment has changed dramatically, and the soil on which past growth methods depended has changed. If we do not change our direction and methods, we are like carving a mark on a moving boat, and there is no way out.

As mentioned earlier, the two strategic propositions of "Where to go" and "How to get there" are the most "critical" issues for manufacturers and distributors today. "Where to go" is a direction problem, requiring finding our own path under the new climate and soil of the "new world." "How to get there" is a method problem, requiring learning, exchange, practice, and exploration to find our way to grow under the new climate and soil.

Seeing this, we can finally truly understand why distributor boss "Mr. Zhou" flew 60,000 kilometers in half a year to find the answer to "Where to go." But it must be reminded that the two questions of "Where to go" and "How to get there" cannot be answered in one's own office. Since the environment, climate, and soil we live in have changed, how can we find direction and answers by staying in our familiar homes and companies? The only way that may help us find answers to these two questions is to go out!

In early July this year, New Distribution established the "New Distribution Member Club," and within just one month, hundreds of distributors joined. In the July Xi'an Jiaping Yunshi study tour, more than 150 distributors from across the country participated in the visit and learning at one time.

Why is this October's FMCG Conference worth your attendance?

Why must distributors go out? A member of New Distribution put it thoroughly: Going out may not necessarily find the right answer, but staying at home will definitely not find the answer!

To help brand owners and distributors who are seeking answers to the two strategic propositions of "Where to go" and "How to get there," New Distribution will hold the "5th China FMCG Conference and 1st China FMCG Distributor Conference" in Shenzhen from October 9-11, 2023.

Why do we believe this conference will definitely help brand owners and distributors seeking direction and methods for change?

First, the annual China FMCG Conference has more than 100 sharing guests, including well-known experts in the marketing field, leaders of frontline FMCG enterprises, and representatives of outstanding national distributors who have successfully transformed and achieved sustained high growth. The sharing of these guests is nothing less than their profound insights into the industry and transformation, and many come with successful cases and experiences of corporate transformation. They have successfully answered the questions of "Where to go" and "How to get there," bringing their companies back on track for high growth. Can these valuable cases and experiences not help you?

Second, the theme of this conference is "New Era · Reforging." "New Era" is the direction we need to "go to," and "Reforging" refers to "reforging enterprise capabilities," which is the answer we need to explore for "How to get there." From October 9 to 11, for a full three days, there will be nearly a dozen forums, all closely centered on the direction question of "Where to go" and the path question of "How to get there."

Third, it is the first time to hold a national, industry-wide FMCG distributor conference. The 1st China FMCG Distributor Conference will be held on October 11 during the conference. Since its establishment, New Distribution has held distributor forums and distributor study tours, but this is the first time to hold a national, industry-wide FMCG distributor conference. At that time, more than a thousand outstanding distributors from across the country will attend. This is not only an opportunity for excellent brand owners and excellent distributors to understand and connect with each other, but also an opportunity for the best group of FMCG distributors to have in-depth exchanges, learn from each other, and promote each other.

In addition, this conference also provides an opportunity to deeply understand the latest, hottest, and fastest-growing innovative models, such as discount retail stores, O2O, digital marketing, and distributor platformization.

The best opportunity for change and action was ten years ago, and the second best is now! See you in Shenzhen in October!

All manufacturer and distributor friends who aspire to growth and seek answers to "Where to go" and "How to get there" are welcome to scan the QR code now to grab early bird tickets for the "5th China FMCG Conference and 1st China FMCG Distributor Conference"!