| Several Major Problems in China's Beer Market |
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After three months' detailed research and overall analysis, we have derived several major issues from Pricing mechanism Some beer brands do not have complete pricing mechanism. Normally, beer product prices should include ex-factory price (FOB price), wholesale prices (primary and secondary) and retail prices (recommended prices). Products should also have policies in pricing, discount, promotion and bonus activities. But we've found that many beer prices in Some beer companies are weak in controlling their own prices. They set ex-factory prices at cost plus a thin margin, leaving the bigger margins to distributors. They surrender market controls to distributors, who will be in charge of market prices, promotions and branding. For the same product, distributors in different regions will employ different sales strategies. Some products have been on the market for many years, and their price differences between various distribution levels are shrinking or next to zero, causing distributors to survive on rebates from beer producers. Channels and networks Sales channels in beer producers' home markets are relatively stable. But some distribution chains are over-extended and complex, affecting product turnover efficiency and sales speed. Distribution regions for many distributors are considered too large, affecting beer producers' control over a defined market. Some producers do not have clear market planning and channel selection criteria, making a single distributor to take care of an oversized region. This has resulted in a few large distributors controlling the whole market, further crushing profit margins of producers, some of which are even subsidising distributors. |
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Distribution region borders are blurred and distributors lack sales awareness. Due to the lack of market planning from beer producers, distribution areas often have unclear dividing lines, hence some distributors straddling between regions. On the other hand, some distributors have little sales awareness and only concern about selling out the products, rather than their focused regions. Many beer producers only monitor the behaviour of primary distributors, while leaving secondary wholesalers and retailers to the market. Advertising and promotion There are only a handful of good advertising campaigns. Some beer brands basically have no advertising, while others have unclear consumer appeals. Most promotional activities are poorly executed or executed by distributors with big variations. Some distributors are not focusing on earning product profit margins, but instead interested making money out of promotional fees. On one hand, many beer producers have given up their marketing and branding activities to distributors, while on the other hand, it is not uncommon to see distributors with no promotional knowledge and experience. These ignorant distributors simply consider price cuts as promotions, using part of the promotional fees from producers for price cutting, while keeping the rest as their own profits. Some beer promotional campaigns failed to achieve the purpose of sales promotion, but in effect disturbing its own pricing mechanism. Poor execution of promotional campaigns could lead to price volatilities within the sales process and sales disturbance to other regions. Sales Policy Market management Development of new markets In terms of developing new markets, beer companies are exhibiting the following problems: Lack of resources, lack of support, lack of uniform processes, lack of integrated operations and slow moving in new markets. Distributors making losses Sales personnel Sales teams and frontline sales representatives also need to improve their own professional qualities. Conclusion
Source: www.21food.cn |
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