Introduction: The management of COFCO believes that concentrating on the market in Hunan Province is a shortcut for drunkard liquor to regain growth. There is a major divergence in direction between this and the national strategy that marketing veteran Wang Zhe has been pursuing.
01 The veteran leaves
Since Gao Feng of the "COFCO Department" took over as chairman, the drunkard has undergone a series of tests.
On July 9, the drunkard (000799. SZ) announced its earnings forecast. In the first half of this year, the net profit of alcoholic liquor was 110 million to 130 million yuan, a year-on-year decrease of 69.19%-73.93%; The net profit after deduction was 110 million to 130 million yuan, a year-on-year decrease of 68.79% to 73.59%.
It seems to be an omen, 10 days before the results were released, Drunkard Liquor had just ushered in a major personnel change.
Drunkard Liquor announced on the evening of June 30 that the board of directors had received a written resignation report from Wang Zhe. Due to personal reasons, Wang Zhe applied for resignation from the position of deputy general manager of the company. After his resignation, Mr. Wang Zhe will no longer hold any position in the Company.
What is quite surprising is that just a month ago, at the 2023 performance briefing held in May, Wang Zhe, who was in charge of marketing, also prescribed a prescription for alcoholic wine to "stabilize prices and boost sales".
It stands to reason that Wang Zhe has experienced the 2012 drunkard wine plasticizer incident, and he is an experienced and "old drunkard" minister, so he should be able to accompany the drunkard through this round of the complete liquor cycle.
However, until this resignation, as the company's vice president, Wang Zhe's tenure failed to cross the three-year mark.
Divergent internal business strategies, poor company performance, and pressure on the liquor industry as a whole. Wang Zhe's departure seems to be the embodiment of the contradiction after the combination of the three.
02 It's a disagreement but also a benefit
According to a person close to the alcoholic, the disagreement within the company over the marketing strategy was one of the important reasons for Wang Zhe's departure.
Since it was acquired by COFCO in 2015, the chairman of Jiujiu Liquor has changed three times, and the general manager has also changed three times.
In 2016, Jiang Guojin, who was the general manager of COFCO, became the chairman of Jiujiu Liquor and resigned after only two years. Wang Hao, who was the chairman of COFCO Wine, took over the baton until Gao Feng officially took over in February this year.
At the end of 2023, Gao Feng succeeded Wang Hao as chairman of COFCO Wine & Spirits. In February this year, Gao Feng took over the position of party secretary and chairman of the alcoholic liquor.
Under Gao Feng's leadership, Alcoholic Spirits is committed to the strategic transformation from expansion to "intensive growth", with recovery growth in 2024 as the primary goal.
Under the pressure of operation, the management of the "COFCO Department" represented by Gao Feng and Zheng Yi tended to shift the focus of sales to the provincial market, "focusing on the base camp of Hunan", "building a granary in the base camp of the province, and building confidence in the model city outside the province".
This is very different from the previous tone of "deep nationalization".
Outside the province, under the downgrade of consumption, almost all sub-high-end wines are under pressure. More importantly, in the past few years, drunkards have made a large amount of investment across the country, and the results have become less and less obvious.
In 2023, there will be 1,774 alcoholic liquor distributors, and as many as 1,085 in other regions outside of Central China, where the Hunan base camp is located, accounting for 61.2% of the total number.
In 2022, the sales expense ratio of alcoholic liquor will be 25.3%, ranking fifth in the country; in 2023, it will increase to 32.2%, rising to the second place in the country; In the first quarter of 2024, it will increase to 34%.
Such a large team of dealers outside the province consumes so much marketing expenses, but dealers are becoming less and less active, and the phenomenon of goods channeling has also occurred repeatedly.
The contract liabilities that reflect the willingness to distribute and purchase liquor will be 433 million yuan in 2022, a decrease of 68.63%. In the 2023 annual report, this figure is 285 million yuan, continuing to decline by 34.34%.
Perhaps the lesson is too profound, and the drunkard no longer blindly pursues the rapid improvement of the scale of the "national game of chess", but focuses on the "model market" - selecting dozens of prefecture-level cities or counties and townships as model markets, and concentrating resources on intensive cultivation.
For example, in Henan, Hebei, Shandong and other regions, drunkards rely on their own teams to develop; Other regions, such as Jiangsu and Zhejiang, rely on the layout of local platform providers.
The management of "COFCO" believes that as a local famous liquor in Hunan Province, concentrating on the provincial market is a shortcut for alcoholic liquor to quickly regain growth.
In the provincial market, drunkard liquor has geographical advantages. In Hunan Province, the market share of alcoholic liquor is only 7%-8%, and the probability of making a price of 100-300 yuan to a higher level is greater, and it can also highlight the performance of management.
Jiuguijiu Liquor has also set up a Hunan business department for this purpose, which is responsible for the operation of the market in Hunan Province. The Hunan Division has a number of secondary departments, which are responsible for the operation of each product line.
However, there is a major difference in direction between this and the national strategy pursued by Wang Zhe, who has been in charge of the market outside the province.
Since joining Alcoholic Liquor in 2011, Wang Zhe has been engaged in marketing. In 2020, Wang Zhe began to be responsible for the market outside the province and national sales.
He has successively served as the manager of the northern Hebei region, the manager of the southern Hebei region, the deputy general manager of the northern marketing center, the regional manager of Hebei Province and the sales director of the Beijing-Tianjin-Hebei region of Jiujiu Liquor Supply and Marketing Co., Ltd.
After 13 years of marketing experience, in October 2021, Wang Zhe was promoted to deputy general manager of Alcoholic Liquor Company.
In the past, Wang Zhe has always focused on the nationalization of alcoholic liquor. In 2021, Wang Zhe mentioned in an interview that he hopes to use the most expensive 54-degree fragrant in China in the coming days to lead the development of alcoholic liquor to the whole country.
He believes that from the perspective of the national market, compared with Moutai and Wuliangye, the sales gap of alcoholic liquor is relatively large, but the brand gap is not large.
A high degree of confidence in his own products and his commitment to promoting alcoholic liquor to the national market are the foundation of Wang Zhe. But continuing to build such a large-scale stall, as mentioned earlier, is undoubtedly a stumbling favor for the current drunkards.
In the past two years, the inventory in the province has basically returned to normal, maintaining a turnover level of two months; The turnover cycle of inventory outside the province is still as long as four to five months.
This wave of adjustment process in which the strategic focus has been withdrawn from the whole country to the province is bound to experience drastic fluctuations.
So far, the overall performance of the Hunan base camp and even the alcoholic liquor has not improved significantly.
Since Zheng Yi's deep reflection at the end of last year at the alcoholic liquor distributor conference (especially mentioning that "the Hunan base camp is not dominant"), the province that senior leaders attach importance to has not made much progress in the past six months, which is easily reminiscent of the lack of promotion by the sales leader.
Taking the new products promoted by drunkard liquor as an example, after the Jiachen version of the Changsha press conference on October 21 last year, drunkard liquor has been intensively promoted in Loudi, Yueyang, Yongzhou and other places, and the sales are still unsatisfactory.
Since the establishment of Hunan Internal Ginseng Liquor Sales Company, Wang Zhe has been the general manager, and can be said to be the most familiar with internal ginseng liquor and channels in the management of alcoholic liquor. Wang Zhe is to blame for failing to effectively motivate and urge the distributors of ginseng liquor to respond to the company's new strategy.
All of the above, Wang Zhe's departure, is very linear.
03 The aftermath of the adjustment is still there
Most of the management changes have the business consideration of "abandoning the old and making the new". However, the adjustment of strategy and direction also affect the trust and loyalty of external dealers to a certain extent.
This is because the adjustment of marketing strategy also means the adjustment of marketing expenses. In addition to the launch region, it also involves new products and launch strategies.
Before the semi-annual report, this year's quarterly report has been reflected. In the first quarter, the revenue of alcoholic liquor was 494 million yuan, a year-on-year decrease of 48.8%; The net profit attributable to the parent company was only 73.38 million yuan, a year-on-year plunge of 75.56%.
The reasons for the overall decline in the first half of the year may be the same as in the first quarter. In a public survey on June 6, Jiujiu Liquor explained the decline in the first quarter performance as "sales fluctuations caused by short-term expense adjustments and new product launches".
As early as the fourth quarter of 2022, the revenue of alcoholic liquor declined year-on-year, and the channel inventory urgently needed to be sorted out. According to common sense, drunkard liquor should have entered the adjustment period first, injecting more support into the channel to speed up inventory digestion.
But the strategy of drunkard liquor is: to launch new products. The specific performance is to make efforts to promote the upgrading of internal reference wine.
With the current deterioration of the living environment of liquor, it is obviously not enough to rely on the conventional action of launching new products. In addition, the sales of new products were less than expected, and the channel collection was cautious, resulting in the company's sales revenue in the first half of the year still under pressure.
There is not much difference between the new Jiachen version of the internal reference and the old version of the internal ginseng. It's just that the new version of the market is more intensive, with higher cashback and incentives, such as "buy a box and win a bottle".
The cost of cutting the B-end is put on the C-side, which is good for the end consumer. But at the same time, it also moved the "cheese" of the channel. After all, high-end wine is particularly "eating channels", and the channels have no incentive to promote. This is also another reason why Wang Zhe is not effective in promoting the new version of the ginseng wine in addition to his own responsibility.
"In 2024, we aim to achieve restorative growth for alcoholics." Gao Feng set the tone for drunkards at the beginning of the year, aiming to halt the decline and achieve a strong rebound. Now, half a year is coming to an end, and it is imminent to achieve the goal.
Wang Zhe's resignation may help unify the strategic direction and reassure the market.
Neither investors nor consumers need explanations and reassurance. When will the drunkards be able to reverse the current unfavorable situation and stop the decline, this is the answer they desperately want to get.