Friendly reminder: Click the blue text above to follow "FMCG Distributor Professional Consulting" for more insights on marketing and distributor internal management.
As the cold winter sets in, liquor companies are in full swing with their market operations. The Spring Festival peak season is a tempting prize that major companies have long coveted, and year-end inventory loading has become the most critical part of their peak-season marketing. Companies are quietly sharpening their knives, eager to make their move.
Inventory loading serves as both the "glorious cup" of the year-end summary and the "opening act" and "good start" for the new year. Companies rack their brains to formulate inventory loading strategies. Despite the endless stream of new tactics each year, the results often leave companies with empty showrooms and disappointing outcomes. As the year-end approaches, with distributors raising the banner of "rebellion," companies hesitate and waver. Is inventory loading really a mistake for liquor companies?
Facing inventory loading, liquor companies are equally cautious and treading on thin ice. Many have paid a heavy "growth price" for it, and distributors are thoroughly disgusted. Why do companies persist in this thankless task?
The Bittersweet Experience of Company Inventory Loading
Liquor companies have their own unspoken difficulties and pains when it comes to inventory loading. Recently, I spoke with the heads of a beer company and a baijiu company, and both poured out their grievances:
1. Striving for "Targets." As the year-end approaches, it's time for annual summaries. Companies are desperate to meet their sales targets set at the beginning of the year, sparing no effort, or they won't be able to answer to the board. Not to mention the year-end bonuses that may not be paid, even their positions for the coming year are at stake. So, inventory loading becomes an arrow that must be shot.
2. Pressing for "Real Money." The marketing director of a baijiu company knows well: products sitting in the company warehouse are "hazardous goods." Once the peak season passes, they might end up "lying" in the warehouse forever. The reality that a brand can be drunk out of existence in a year still haunts companies. To turn products into "real money," it's understandable that they need to load inventory before the holiday.
3. Fighting the "Rival." For distributors, secondary distributors, and terminal retailers, competitors' products are the "rivals." To effectively curb competitors' channel stocking and squeezing, companies must devise attractive policies to load inventory. Otherwise, once competitors take over, it's hard to make a comeback.
Inventory Loading or Loading Trouble?
Although many liquor manufacturers have long "plotted" their inventory loading strategies, distributors are seasoned players and not easily fooled. Like the veteran advisor "Old Fan" in the skits who learned from being cheated multiple times, distributors have "self-educated" through repeated losses. Therefore, ordinary inventory loading tactics no longer excite them.
Are distributors numb? Clearly not.
1. The Pain and Sorrow in Distributors' Hearts.
"Cash flow breaks, urgent." At year-end, companies are scrambling to collect funds, and distributors are also stocking up in advance. Like the Yellow River's winter dry-up, year-end is when distributors face the tightest cash flow. It's not that distributors are heartless; they have loans to repay, and competitors' loading policies keep escalating, raising the bar. So, ordinary policies are nothing new to them.
"Inventory pile-up, risk remains." No matter how attractive the company's policies or how eloquent the boss, distributors understand a simple truth: products only make money when sold. Otherwise, if inventory piles up, it's hard to move, and the good intention can turn into a tragedy of "losing both the wife and the soldiers." Such tragedies are not uncommon.
2. Inventory Loading Is Not Inherently Evil.
Despite the risks and problems, inventory loading is not a scourge for either companies or distributors. Handled reasonably, it can turn harm into benefit.
Reasonable inventory loading benefits both companies and distributors:
Stockouts are worse than tigers. The Spring Festival is the peak season for liquor companies, with demand sometimes ten times higher than usual. A slight misstep can lead to stockouts at distributor terminals. To prevent channel stockouts, necessary inventory loading is essential.
Channel competition. Loading inventory to distributors and downstream channel members during the peak season is necessary because only by loading can competitors' products be squeezed out. The essence of competition in the liquor market is channel competition. Inventory loading is a competitive necessity.
3. Loading Is Justified, but Overloading Is a Crime.
Reasonable inventory is necessary, but overloading can lead to the "overflow" effect:
Severe cross-regional dumping. Distributors won't watch products rot or expire in their hands; they'll find ways to sell to other regions, causing significant market damage.
Soaring marketing costs. Overloading inevitably requires hefty promotional expenses, increasing marketing costs and making it hard to allocate unit costs.
Disrupting marketing plans. After the Spring Festival, new marketing plans are set to roll out, but some distributors will delay restocking to clear inventory.
From Resistance to Initiative
Inventory loading is a natural part of sales; as long as sales exist, loading is inevitable. How can liquor companies make distributors willingly accept their loading tactics?
1. Define the Channel: Who to Load? If companies stick to the traditional path, distributors will go their own way and not follow the company's marketing loading plan. So, companies should explore new channel loading models:
Assist distributors in developing strategies to load inventory to secondary wholesalers.
Assist distributors and sub-distributors in strategically loading inventory directly to terminals. This diverts distributor inventory and transfers risk. Distributors will be more than willing to actively help companies load inventory.
2. Define the Strategy: Rethink Loading Strategies. Searching through all the "loading secrets" in liquor marketing is disappointing; they're still just one-off "tricks." In fact, "loading" is a strategy that requires a systematic approach and innovation.
Liquor companies rarely innovate in loading; they stick to the "three axes":
Emotional loading; fancy reward-based loading: such as rebates, trips, display and stacking bonuses; policy constraints: threatening to cut off less loyal distributors after the Spring Festival if they don't load before the holiday; "honor" loading: dividing customers into "diamond, gold, silver, copper" tiers based on projected monthly sales, motivating them to load inventory themselves to earn tier rewards.
1. Scientific Loading
Loading techniques aimed solely at boosting sales are mere tricks; understanding the essence, loading scientifically and moderately, and innovating marketing thinking are the keys to escaping the loading quagmire:
Timing: Generally, the best times for loading are:
Before holiday activities. Since company shipping and logistics often lag, ensuring distributors have adequate inventory is wise.
Before large-scale advertising campaigns or major promotional activities.
When squeezing competitors. By loading inventory to distributors or agents, you occupy their funds, warehouse space, and distribution capacity, squeezing competitors' sales networks.
When urging distributors to intensify marketing efforts. Companies should offer appropriate loading policies and sales incentives, along with marketing support like advertising.
2. Product Considerations: Not all liquor products are suitable for loading. Generally, companies should follow these criteria:
Best-selling products.
Main products.
Products with the latest production dates. Details are omitted here.
3. Distributor Considerations: (Secondary) If your distributor is a hopeless case, even the best ideas and resources are wasted. Loading must be done with the right distributors:
- Those with strong network coverage, distribution, and marketing capabilities.
- Those with high local sales volume and minimal cross-regional sales.
- Those with a solid team and strong financial resources.
- Those who cooperate well with the company, are willing to collaborate, and are easy to manage.
4. Strategy Considerations:
First, loading policies must be reasonable. The loading volume and reward policies should be well-calibrated; otherwise, they won't motivate sales staff and distributors. If rewards are too high, salespeople may resort to bad loading practices to hit targets and earn bonuses; if cash rewards are given to distributors, price undercutting and cross-regional dumping are likely.
Second, promotional policies should not be too large to prevent cross-regional dumping among distributors.
Third, promotional items should not be discounted during loading to avoid disrupting the market price system.
Finally, loading policies should consider downstream channel members' policies and help distributors build the market.
"Flowers are similar year after year, but tactics change year by year." The marketing environment has changed, and everything is changing. Only by emphasizing systematic success and marketing innovation can companies navigate inventory loading smoothly and achieve true brilliance!
--------------------------------------------