Yihai Kerry: Building a Business Alliance in the Era of Shrinking Volume to Create a New Growth Engine

A new era requires new manufacturer-dealer relationships, and new production relations release new productive forces. In the era of shrinking volume, Yihai Kerry has rebuilt a new type of manufacturer-dealer relationship, traversing the era through two paths: business expansion and organizational empowerment. From August 20 to 22, the 6th China FMCG Conference, themed 'Traversing the Era of Shrinking Volume', was held in Shanghai. During the conference, over 100 sharing guests and more than 2,000 manufacturer and dealer representatives from across the country explored how dealers and brand owners can seek growth in the current environment. Among them, Mr. Li Yenan, Director of Traditional Channels for the Consumer Products Division of Yihai Kerry Group, mentioned in his sharing topic——"Building a Business Alliance, Creating a New Growth Engine" that "Great victories are often born in 'winter', and great enterprises often rise from economic crises." The following is Mr. Li Yenan's sharing content, and New Distribution has specially reported the essence of his speech for readers. In the Era of Slowing Growth It's Not About Dividing the Cake But Grabbing the Cake After the pandemic, China's economy has slowed down. Is business growth really poor? Actually, it's not. We need to clarify a few basic concepts:

First, the global economy faces the risk of recession, but it does not mean the global economy is in recession. Second, China's consumer market total volume shows a trend of slowing growth, but it does not mean the pie is shrinking. So what we need to do is how to find new business opportunities and development paths in the existing market with slowing growth.

Third, regarding China's macro and world economic conditions, the World Monetary and Economic Organization used the phrase 'stagnant' to describe the current actual economic development. This year, 60% of economies will grow at a rate lower than in 2010. Looking at domestic data, GDP growth in the first half of the year was 5 points, with Q2 at 4.7 and Q1 at 5.3. The growth rate looks okay, but the social consumer goods retail data released in August shows a growth rate of 3.7% from January to June. June was very poor, only 2 points, and July increased by 0.7, with July's social consumer goods retail data at 2.7. People will panic, with growth only 2 points, while in the previous decade, China's consumer goods average annual growth was 8 to 9. But it's okay. Looking at the changes in this year's data compared to last year, the curve is not that different. So the entire market is still showing a growth trend, just with slowing growth. Now look at the employment environment. The current employment environment is not good. Just released data shows that for ages 16-24, excluding students, the unemployment rate is 17.1%. This is a bad phenomenon. The consequence of this phenomenon indicates that future household income will show a downward trend, which is an important factor affecting consumption. So, we have now stepped from the era of dividing the cake into an era of grabbing the cake. Why? China's economy is currently in a state of overcapacity. The pie is this big, the venue is this big, and more and more people are entering the game. Everyone wants a piece. What to do? When the pie expands quickly, everyone is happy. When the expansion speed slows down, it becomes mutual fighting and involution. The era of grabbing the cake has arrived. In this situation, how to act? As mentioned earlier, under the trend of declining growth in total consumption, if household income expectations are not good, if the country does not introduce major investment stimulus policies, and if the environment does not undergo major changes, enterprises can only achieve business growth through cost reduction, efficiency improvement, and deleveraging. Building a New Type of Manufacturer-Dealer Relationship Cost Reduction and Efficiency Improvement How to reduce costs and improve efficiency? China's channels are gradually fragmenting. Yihai Kerry's system currently has nearly 1.2 million terminals. We are also confused, especially in traditional channels. Many of you are in traditional channels, serving small stores and selling via vehicle sales. There is a contradiction here: how to sell more goods and distribute to more outlets. But in the current environment, if you want to distribute to the whole country and numerous outlets, it requires a lot of cost and affects efficiency, but these actions cannot be avoided. If we still need to serve township markets, especially remote mountainous areas, the cost is enormous. Looking at consumers, they have become more rational after the pandemic. There is a term in the industry now: extreme cost-performance ratio. Why do consumers have higher requirements for product quality? Because there are more and more homogeneous products. But 67% of consumers resist product price increases, and in the current environment, all costs, including labor costs, are rising. This is another contradiction. So how to reduce costs and improve efficiency? How to improve service while ensuring product quality? Yihai Kerry's solution is as follows. Since 2017, we have spent 7 years carrying out a project called "Excellent Dealer Operations" internally. The core of this project is to change our relationship with dealers, transforming the relationship between the manufacturer and dealers from the traditional type into a community of shared destiny, with the core value of improving the return on investment for dealers and ourselves, building a business alliance, and thus achieving growth drivers. What was the traditional manufacturer-dealer relationship? Previously, when recruiting city managers and provincial managers, we would ask a question: Please briefly describe your job content. Basically, the answers would be: I need to break down the manufacturer's tasks into regions, seasons, and months, and do indicator decomposition; the second task is to follow up on dealers' payments and orders. These sentences are a true reflection of the original manufacturer-dealer relationship. What is the new type of manufacturer-dealer relationship? From the original opposition and game-playing to win-win. Discuss business together, discuss goals together, from original instructions to current co-creation, jointly discovering market opportunities and seeking solutions. Originally, city managers would go to dealers, drink tea and smoke, and the real work was done by the dealers. This was a common problem. Now it's not like that. Yihai Kerry has a "training" culture. Regional general managers and provincial general managers lead by example, going to the front line to distribute goods with dealers. Only in this way can problems be discovered. From "life and death are determined by fate" to "sharing weal and woe", from fighting separately to joint operations, such a transformation has occurred. The core purpose is to improve dealers' return on investment. Specific Implementation Paths and Methods Within Yihai Kerry, we emphasize two capabilities: one is business capability, the other is organizational capability. Yihai Kerry places great importance on driving business growth through the building and improvement of organizational capabilities. Organizational capability is divided into two dimensions: on one hand, the manufacturer's capability, and on the other, the dealer's capability. The building of dealer capability is a very important part of this process. I once asked Mr. Chen Siting a question: Is it very difficult for dealers to operate multiple product lines now? Mr. Chen said: The boundaries of a trading company are not limited by category, but by organizational capability. This view coincides with ours. What is return on investment? In basic logic, return on investment is profit margin x capital turnover times. Profit margin = revenue - cost. Gross profit minus expenses is net profit. So how to expand revenue is the first step. Cost is constant. How to control expenses? If increased expenses can bring increased business, it's fine. But if they cannot bring increased business, it means the expense investment is ineffective. Among existing investments, which ones should not be invested? We need to increase revenue and reduce expenditure. There are several key points in this process. First, the manufacturer must have accurate business insight into customers and find opportunity points. Because often regional strategies are chaotic. Dealers don't know what to sell. The manufacturer has too many products, all are priorities, and all need various indicators. At this time, we need to find from the market what consumers truly need, what the market and terminals truly need as bestsellers, and concentrate firepower to promote them. How to plan? To achieve sales targets and performance indicators, each business format must have corresponding operational strategies, and finally, implementation. In this process, the manufacturer's product team, financial leaders, channel operations, etc., review the key points of the project from start to finish in monthly meetings, then review, until the end of the year to form a final summary. Dealer planning is like this: Yihai Kerry values the cultivation of dealers' operational capabilities, as well as the training of dealers' business teams and grassroots personnel. This project is led by the provincial general manager as the first leader, bringing together internal teams and dealer teams. Through related links such as channels, products, finance, and personnel, we help dealers sort out product pricing systems, clarify what products dealers need to sell, sales commissions, route design, and a series of other links. The ultimate core point is the integration of manufacturer and dealer, finally achieving an increase in return on investment. These are the four specific implementation paths. Finally, let me summarize: First, precise diagnosis of market business. Be sure to adjust market strategies to the most reasonable and correct ones. Second, absolutely do not use a one-size-fits-all approach. Because many manufacturers like one-size-fits-all. China is vast and each place has a different environment. Yihai Kerry advocates one policy per place. The same product in different places has different promotion strategies and tactics, achieving and building localized profitability. Third, intensive terminal and channel cultivation. This is the most basic work. Fourth, manufacturer-dealer collaboration is very important. Yihai Kerry's any training session, city managers must participate. For national training initiated by headquarters, we go deep into the front line, whether it's a weekend in 40-degree summer or a winter of minus ten degrees, the team is at the terminal and on the front line. This is a way to bring effective confidence to both sides. Here are a few cases. Customer A in the region had a good growth rate of 9%, but the proportion of new products was very low. We helped them select a peanut oil. Through the creation of a big single product and bestseller, we doubled their inventory turnover rate and increased return on investment by 16%. Customer B in the region had poor inventory turnover and low outlet activity. Through outlet focus, we made a diagnosis and the market grew by 80%. Customer C in the region had capital turnover problems, high losses, and receivables turnover of only 10 times a year. By controlling losses to 0.04, we helped them control bad debts in supermarkets, bringing them 2 million in net profit. Customer D in the region also, by finding products suitable for local development and through manufacturer-dealer collaborative training, increased the rice product line by 35%. Other regional cases focus on channel format. For supermarkets, focus on core stores, one store one policy, and refine route design. The case of customer E in the region better reflects manufacturer-dealer collaboration. In Hunan, over the past year to a year and a half, they have been doing manufacturer-dealer collaborative training. Through closed-loop management of excellent operations, precise diagnosis, and team activation, they achieved manufacturer-dealer collaboration. Even if they are not the most profitable dealers, at least they are profitable dealers. So objectively speaking, the profitability of Yihai Kerry's dealers can affect the performance and career development of manufacturer personnel. We will make the dealer channel team the most professional team, bringing better products, faster service, and faster response to the consumer market. Yihai Kerry started developing in the 1990s, expanding from rice and flour to diversified development. Now entering the 21st century, the so-called era of shrinking volume is actually an era of economic slowdown and grabbing the cake. With Yihai Kerry's listing in China, we believe that through manufacturer-dealer win-win, we can achieve high-quality growth. Because growth is still the first strategy for all enterprises. Heaven and earth are big, but growth is the biggest; everything is good, but making money is the best. ____PS: Friends interested in the live speech content can follow the recent push of the New Distribution WeChat official account. We will organize and publish the guests' speeches for readers._ Click Read the original text to view _more of the 6th China FMCG Conference and the 3rd China FMCG Hard Discount Conference & the 3rd China FMCG Dealer Conference...