China is the world's second-largest consumer market, possessing a vast and profound domestic unified market. Since the reform and opening-up, it has maintained nearly 40 years of rapid growth, with remarkable achievements. Among many reasons, the advantage of its super-large market scale is particularly prominent. The demographic dividend has stimulated market demand. While emphasizing targeted investment, the government has proposed comprehensively boosting consumption, as evidenced by the recently issued "20 Measures to Promote Consumption" and supporting policies. In fact, from historical data of the National Bureau of Statistics and the Ministry of Commerce, since 2012, consumption has surpassed investment and exports to become the strongest horse pulling economic development. Total retail sales of consumer goods doubled in eight years. In the first half of this year, consumption's contribution to GDP growth reached 77%.
The baijiu industry, as a traditional food and beverage industry centered on the domestic market, is highly dependent on domestic demand. Currently, multiple factors triggered by demand are accelerating the baijiu industry into a deep adjustment period:
● Whether for immediate drinking or gifting and collection, baijiu has strong social attributes in consumption patterns. In recent years, dramatic changes in consumption scenarios such as banquets and self-drinking have had a strong impact on the baijiu industry;
● The macroeconomic stage characteristics of the "three-phase superposition," increasingly fierce international competition and geopolitics, coupled with domestic economic transformation and slowing consumption, have inevitably led to a downturn in demand for the baijiu market; ● Total production has peaked and declined, backward production capacity is accelerating its exit, structural growth has become the main theme, and industry involution is intensifying. Any innovative marketing move is quickly imitated by competitors, and liquor companies are drawn into "meat grinder"-style competition.
Against this backdrop, high inventory, price inversion, and weakening confidence have become common difficulties facing the baijiu industry.
For high-end baijiu, inventory is backed by brand endorsement, with clear appreciation prospects and a relatively good consumer base. Dealers and terminals have relatively strong operational confidence. The biggest crisis lies in price inversion, as it greatly damages channel interests and directly weakens brand value. Brand is everything for high-end baijiu, and most actions of liquor companies are aimed at enhancing brand power.
How to manage prices well, quickly reverse inversion, and achieve smooth-price sales has become a real pain point for leading liquor companies.
On the other hand, when inversion occurs and then prices are raised, it is clearly not the optimal solution. Price management is both a science and an art; the "effort" should be made in daily work, carried out dynamically in a long-term, continuous, and scientific manner.
On this issue, I would like to put forward the following three suggestions for the reference of various market entities in the liquor industry.
Accurately diagnose the pulse and truly cure the disease, Make every effort to address the root causes
Price is a direct manifestation of trading behavior. The direct cause of price decline is low-price transactions. To manage prices well, one must first identify the source of low-price transactions, in plain terms, "where the low-price goods come from."
However, source governance does not merely mean finding the channel dealers who engage in cross-regional dumping and ordering them to repurchase or imposing penalties. Its essence is to identify the crux of price chaos and resolve it. In other words, one should not bypass the problem to solve the people who raise it.
Merchants selling products below the factory price can be divided into two situations:
One is selling at a loss, preferring to accept a certain loss rather than holding the goods, which reflects a lack of confidence in product strength and market prospects, and is also an urgent need for merchants to ensure normal capital flow and achieve their own report growth;
The other is that the merchant's purchase price is originally lower than the factory's ex-factory price.
Because large merchants are generally relatively strong, the factory, in order to stabilize large merchants and some influential channels and platforms, matches support policies such as rebates, subsidies, rewards, and acceptance bills outside the ex-factory price. Merchants enjoying these policies have a real purchase cost lower than the apparent ex-factory price. When the market situation is poor, they will adopt price reductions, bundling sales, and other promotional methods. This is actually the result of inconsistent interest equilibrium points between manufacturers and merchants, exposing loopholes in the manufacturer's price management.
Behind behaviors such as low-price dumping and cross-regional dumping are poor sales and a sluggish market.
The terminal market transmits price signals to the wholesale market. After the real transaction price declines, merchants fall into a race to the bottom in price wars, where bad money drives out good. Some manufacturers that originally sold at higher prices have to follow the market, otherwise they risk losing their customers and market.
Liquor companies obviously cannot ignore the difficulties and feelings of merchants and simply punish cooperative merchants. Instead, they should clarify their price system and help merchants clear inventory.
For high-end brands, this difficulty is not necessarily all bad. It can be used to screen out merchants with strong strength, good management, and high loyalty, deeply binding interests, and even considering equity incentives. At the same time, eliminate some merchants with weak strength, poor management, and non-compliance, turning crisis into opportunity and optimizing the merchant layout.
Strengthen organization and integration, Work together for manufacturer-dealer collaboration
The price management chain is long, with many links and complex situations. Relying solely on the manufacturer's unilateral efforts is time-consuming, laborious, and slow to yield results. It is necessary to integrate all channel resources, and even seek support from local governments and industry associations, to achieve twice the result with half the effort. The vast number of merchants is the most important link. Regarding low-price and price-chaos behaviors, from the manufacturer's perspective, merchants are not only managed objects but also partners.
Merchants are usually locals, deeply cultivating the local market, with rich channel networks and social resources. For manufacturers to manage prices well, they cannot rely solely on post-event handling, but also on pre-event cooperation with merchants and timely intervention during the process.
Manufacturers should shift from a transaction mindset to an empowerment mindset, from a stocking mindset to a sell-through mindset, and from a channel mindset to a user mindset. Adhere to serving, supporting, and enriching merchants. Serving merchants well is to support them in becoming stronger and bigger, and ultimately to let merchants make money. Only with stable interests can there be a stable manufacturer-dealer relationship, and only then can there be a foundation for a "manufacturer-dealer community of shared destiny."
Once merchants can obtain appropriate profits from operating the brand, they naturally lack the impulse to dump goods and smash the market, because everyone eats from the same pot and sits on the same boat, so they must work together and not burn their bridges.
To achieve manufacturer-dealer collaboration in price management, both loose and tight organizational forms are needed.
Loose organizations include dealer associations, second-generation merchant clubs, regional and inter-regional marketing joint meetings, etc. Their characteristic is that there is no strong legal binding relationship such as equity or property rights between manufacturers and merchants, and they adhere to the concept of joint consultation, joint construction, and shared benefits to achieve co-governance of local markets;
Tight organizations include joint ventures, LPs, GPs, etc. These organizations usually adopt modern corporate governance and fund management forms, with strong ties such as equity, debt, and capital between manufacturers and merchants, making them veritable communities of shared interests.
The choice of organizational form for the price management platform depends on the manufacturer's ownership form, market conditions, and legal environment. Generally, state-controlled enterprises tend to choose loose organizational forms, while private enterprises tend to choose tight organizational forms.
Sink channels and do market work, Connect the upper and lower levels to implement BC integrated marketing
For a period, manufacturers often neglected both B and C ends. When the market was good, they basically only managed the B-end sales, selling goods to dealers; when the market was bad, they felt the B-end was a drag, focusing on advertising, service improvement, and promotions, trying every means to please consumers.
The great changes of the times are a silent revolution.
With the rapid development of information technologies such as big data, cloud computing, and artificial intelligence, human society has quietly shifted from the IT era to the DT era. The relationship between "people, goods, and places" has been rapidly reconstructed. Ma Yun's concept of "new retail" has become a new consensus.
Looking at the baijiu industry, the market pattern is also continuously transitioning from "channel is king" and "terminal is king" to "consumer is king." A typical example is the in-depth exploration of direct sales, new retail, and private domains by leading liquor companies represented by Moutai and Wuliangye.
Whether it is the birth of i-Moutai or strategic cooperation with platform merchants such as JD.com and Douyin, whether it is the accelerated rollout of specialty stores and experience stores or direct supply to star-rated hotels, whether it is the hot topic fission of sauce-flavored latte and light-flavored lemonade or traffic activities such as light shows and concerts, major manufacturers are trying every means to accelerate the creation, adaptation, and transformation of new retail models.
History always repeats the story of yesterday, and we always go from one extreme to another.
The strategy of betting on the C-end has increased the profit margins of liquor companies, enhanced brand image, improved consumer experience and user stickiness, and helped listed liquor companies maintain their glamorous indicators during the economic transformation stage. It seems like a win-win situation, but only channel merchants are left dejected. Some merchants exclaim that they have become the "abandoned children" of the times and manufacturers, cursing the manufacturers for crossing the river and burning the bridge, and for being treacherous.
Relying on the loyal customer base that the B-end has cultivated over the years in local markets is the only way for manufacturers to achieve localized channel sinking.
In fact, new retail in baijiu is by no means the F-end simply abandoning the B-end to engage in "disintermediation." Instead, it is about using marketing digital tools and building digital platforms to include the B-end as a market operation target, considering it as a whole, empowering the B-end, linking the C-end, and ultimately achieving FBC linkage.
In market control, at this stage, the main data units are "one bottle, one code" and "one box, one code." Through scanning codes and giving benefits, it links merchants, terminals, and consumers, accumulates digital assets, prevents cross-regional dumping, and achieves product circulation management across the entire chain, large market, and upstream and downstream.
In summary, the core benefit of BC integrated marketing for price management is to boost channel confidence, increase brand-directed purchase rates, maximize sales potential, promote product sell-through, achieve healthy inventory management, and avoid a collapse of the price system through a soft landing during market adjustment periods.
Solving the inversion is only an urgent task for liquor companies at present, an extraordinary measure for extraordinary times, and not sustainable. It is like discovering a fire and quickly extinguishing it, but after the fire is out, the focus should be on daily fire prevention measures.
The price management of liquor products has benefits for a thousand years, and the "effort" also lasts a thousand years.
In addition to the above measures, building the aged liquor market, using time to exchange for space, expanding the international market, using space to exchange for time, constructing a healthy and clear product system, and continuously enhancing brand awareness and reputation all help manufacturers achieve price management goals. However, not every liquor company is suitable for these measures. Liquor companies should still implement comprehensive policies based on their own strength and product positioning.
Currently, the baijiu industry has entered a new cycle of inventory digestion. Whoever can first emerge from the price quagmire will be the first to seize market initiative and welcome the arrival of the next "golden age."
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