Summary of Key Points
Recently, leading liquor distributors across the country (referred to as "major players" in the industry) are no longer solely focused on selling well-known brands such as Moutai and Wuliangye. Instead, they are collaborating with less prominent liquor companies and regional brands (like Fenyangwang and Baiyunbian), as well as cross-category yellow rice wine producers (such as Kuaijishan and Guyuelongshan). The approach to cooperation has shifted from a passive model where distributors simply sold whatever the manufacturers provided, to a more proactive one involving the acquisition of equity and participation in product design and brand building. The reasons behind this change are twofold: firstly, the profits from selling well-known brands have become increasingly thin, as manufacturers are moving towards direct sales and digitalization, reducing the value that distributors once held; secondly, consumer preferences have changed, with younger consumers preferring a variety of lower-alcohol-content beverages. This collective transformation by major players serves as a wake-up call for the liquor industry.
1. Why is selling well-known brands less profitable? Why do major players need to change their strategies?
In the past, major players acted more like agents for manufacturers, with manufacturers setting prices and distributors earning profits from the difference between purchase and sale prices, depending on the manufacturer's discretion. However, with manufacturers adopting digital methods to directly collect consumer data and engaging in direct sales online, the role of distributors has been significantly reduced to merely delivering products, resulting in much narrower profit margins. Some distributors have stated, "Representing well-known brands now only allows us to receive some policy subsidies; our core value has been replaced by technology, and we can't grow solely by selling these brands." Therefore, major players must find new ways to stay competitive—no longer just acting as delivery agents, but gaining more control over their business.
2. From "deliverers" to "partners": How has the cooperation model changed?
Previously, partnerships between major players and manufacturers either involved OEM production (manufacturers producing according to distributors' requirements with distributors handling sales) or agency agreements (distributors selling the products on behalf of manufacturers). Now, major players are seeking equity participation, jointly establishing companies and building brands. For example, Henan Maowujian has partnered with Kuaijishan to form a new company, with Maowujian holding 39% of the shares and sending executives to manage operations. This new model goes beyond mere sales; major players can now influence product design (such as the flavors of yellow rice wine) and brand promotion, turning their distribution networks into valuable assets. It's like transitioning from being employees to becoming shareholders, with shared profits that are both higher and more stable.
3. Why are regional brands becoming so attractive? Because of the larger profit margins!
The prices of well-known brands are highly transparent, leaving little margin for distributors. In contrast, regional brands have less developed digital systems, making their prices more flexible and providing greater profit opportunities. Additionally, these brands have a strong local consumer base (for instance, Baiyunbian is very popular in Hubei), giving manufacturers more autonomy to distributors in terms of sales strategies and pricing. For example, Shandong Xinxing and Fenyangwang have made this a key part of their strategic plans. The increased sales of Baiyunbian and Hongchuanjiuye in the first half of the year can be attributed to distributors' willingness to invest in inventory. By collaborating with regional brands, major players can offset the lower profits from selling well-known brands.
4. Not just liquor anymore: Major players are expanding into other categories
Young consumers prefer lower-alcohol-content and more diverse beverages (such as yellow rice wine, fruit wine, and sparkling wines). Recognizing this trend, major players are diversifying their offerings. For instance, Kuaijishan has partnered with several major liquor distributors within a single quarter, including Henan Maowujian and Jilin Baishanfangda; Guyuelongshan has collaborated with Jingtang to target the South China market. Why choose yellow rice wine? Because its value is on the rise, and there is potential for growth in the high-end segment. Moreover, yellow rice wine producers are more open to deep collaboration with major players compared to well-known brand manufacturers. The growing popularity of these alternative beverages among younger consumers also presents new opportunities for distributors.
5. A warning to well-known brands: The distribution channels are changing their priorities!
The collective transformation of major players indicates a shift in the liquor industry from a manufacturer-dominated era to one where channels and consumer preferences play a more decisive role. Well-known brands that fail to adapt, continuing to squeeze distributor profits and rely on direct sales, may lose the support of these key channels. After all, distributors have extensive networks and customer bases; if they switch to other brands or categories, it could significantly impact the market share of well-known brands. It's imperative for these brands to adjust their strategies and re-establish a mutually beneficial relationship with their distribution partners.
These changes signify that the liquor industry is moving from an era where manufacturers had complete control to one where channels and consumers are taking the lead. Major players' proactive efforts are both necessary for survival and in line with new consumer trends—representing the future direction of the entire industry.