How Can Traditional Veterinary Drug Distributors Find a New Way Out in Transformation?
At the recently concluded Fifth China Veterinary Drug Conference, Ma Hui, general manager of Hebei Shijiazhuang Zhengxinyuan Animal Pharmaceutical Co., Ltd., stated that given changes in the current industry landscape, the traditional veterinary drug marketing model no longer holds an advantage, and veterinary drug companies should “re-understand the market and fully focus on the use value of products.” He said Zhengxinyuan had long since begun establishing a factory-to-farm sales model, reducing intermediary links as much as possible and paying close attention to the use value for end users.
According to the reporter, quite a few veterinary drug companies share this idea. With the penetration of the internet into the livestock industry and intensifying industry competition, many veterinary drug companies have begun to lay out terminal markets. However, in this process, one group seems to have been overlooked, namely the “intermediaries to be reduced as much as possible” mentioned by Ma Hui. How can their interests be guaranteed? In the process of veterinary drug companies seeking transformation, where is the future of veterinary drug distributors? Everything remains to be clarified……
Current Situation: The Number of Traditional Veterinary Drug Distributors Keeps Declining
Ge Junzhen, founder of the veterinary drug industry's technical marketing model and general manager of Shijiazhuang Huajun Animal Pharmaceutical, divides traditional veterinary drug distributors into three major types. The first is wholesale-oriented distributors, who mainly conduct veterinary drug sales through secondary downstream outlets; the second is retail-oriented distributors, whose customers are mostly small and medium-sized backyard farmers; the third is specialized distributors, who drive veterinary drug sales through technical output, and most of these people are veterinarians. In addition, there is another rather special type of distributor, such as leading poultry enterprises, which provide a one-stop service from chick placement to feed, veterinary drugs and broiler buyback: “You must use my drugs for me to buy back your chickens, and the price is set by me.” This belongs to the monopolistic type of distributor.
Ge Junzhen said: “In the livestock industry, traditional veterinary drug distributors are still a huge group. They once played an indispensable role in promoting the development of the farming industry, but now the farming structure has changed, the market landscape has changed, and competitive pressure has increased. Under the effect and influence of various factors, their situation has become increasingly awkward.”
Lu Qibiao, a veterinary drug distributor from Henan who works markets in Fujian, Guangdong and Guangxi, is a typical example. He told the reporter that he has been struggling in this market for nearly twenty years, has represented all kinds of products, understands the hardships of veterinary drug distributors very well, and has also experienced the glorious era of veterinary drug distributors. However, in his view, veterinary drug distributors are indeed not doing well at present. He told the reporter: “Most veterinary drug distributors are now in a very confused state, and everyone feels very helpless. To cite a visible fact, in recent years the number of veterinary drug companies has been growing steadily, but the number of veterinary drug distributors has been declining year by year. For our group, this is not a good signal.” And he himself, in order not to sit and wait for doom, has begun to pay attention to other ways out while doing his own job well.
Causes: Three Major “Threats” Are Pushing Traditional Veterinary Drug Distributors Toward a Dead End
Chen Jiangfeng, a veterinary drug distributor who also has nearly twenty years of marketing experience, analyzed that the current predicament of veterinary drug distributors is inextricably linked to the overall development trend of the livestock industry in the future. In the future, there will be more and more large farming groups and fewer and fewer free-range farmers. Under such circumstances, large farming groups will establish their own veterinary drug plants and feed plants in order to reduce costs, while small farming enterprises will choose to cooperate directly with veterinary drug manufacturers. “This is also the result that veterinary drug manufacturers are happy to see. In the past, the era of free-range farmers was characterized by ‘small scale, large group,’ and direct supply from manufacturers was unrealistic; traditional distributors were needed for distribution, credit and logistics. But now, as farming scale grows larger and larger, direct supply from manufacturers has become possible.” Although he has a clear judgment of reality, Chen Jiangfeng's tone still revealed a bit of helplessness.
“To sum it up in one sentence, it is the two-way squeeze of continuously sinking manufacturer channels and increasingly powerful farmers that has severely compressed the survival space of traditional veterinary drug distributors.” Ge Junzhen concluded.
Related articles online also clearly point out that, judging from the current landscape and future trends, distributors as a group still face three major “threats,” namely cooperatives, e-commerce and direct supply from manufacturers. This is because the establishment of cooperatives has increased farmers' voice and choice, and combined with proper operating mechanisms, many traditional distributors are at a loss. In addition, how great will e-commerce's impact on traditional veterinary drug distributors be in the future? It is not yet known, but at present, the psychological impact has already become increasingly prominent; after all, the internet has indeed brought unprecedented changes to the world. The threat of direct supply from manufacturers coincides with the views of Lu Qibiao and Ge Junzhen. The article said: “If they cannot adapt to the new demands brought by future changes in farming structure, the three major ‘threats’ may push distributors toward a dead end.”
Countermeasure One: They Need to Reshape Their Own Value
Ge Junzhen said: “Whether traditional veterinary drug distributors have survival space in the future no longer depends on whether they are distributors, but on whether they can still play their due value in the future farming landscape.”
Then, in the future farming landscape, what due value should traditional veterinary drug distributors play?
Lu Qibiao believes: “In the future, if veterinary drug distributors do not have solid strength, cannot establish their own technical service teams, cannot integrate strong comprehensive resources, have no product brand effect, and have no support from advantageous products, it will be very difficult for them to survive. Providing professional management and talent supply for large farming enterprises is also a good path.”
Ge Junzhen also gave three suggestions: First, become a regional specialized service provider. It is best for the service function of the manufacturer in a certain place to be undertaken by the local distributor. But it needs to be emphasized that this specialization does not mean simply dividing into swine drugs and poultry drugs, but rather clearly choosing one type of customer, understanding their key needs, and providing targeted and complete services. Second, become a regional logistics and distribution provider. That is, the logistics and distribution function of the last stop. Compared with other goods, veterinary drugs have their particularities, so for last-stop delivery, distributors have more advantages. Third, there is still the issue of credit sales. At present, credit sales by large farms are very serious, and for manufacturers, collecting payment is a rather troublesome matter. Distributors have always lived locally, so they have a relative advantage.
Countermeasure Two: Cooperate with Large Veterinary Drug Enterprises to Seek a Win-Win Path
In addition to the above transformation plans, Liang Ce, general manager of Hebei Xinhua Keji Veterinary Drug Co., Ltd., offered another path——cooperating with large veterinary drug enterprises to seek a win-win outcome. He told the reporter that Xinhua Keji is exploring a method, namely transforming former distributors into the company's own employees, called localization specialists. In this way, the interests of distributors are completely tied to the interests of the enterprise, and the enterprise can also use the strength of distributors to do more things, for mutual benefit. Coincidentally, in the brochure of Xi'an Kangle Animal Pharmaceutical Co., Ltd., the reporter saw that the company is also vigorously promoting the marketing model of turning distributors into employees.
The biological veterinary drug division of Zhongnong Yingtai Group also proposed a model of establishing provincial-level veterinary drug branch companies, and one of its cooperation targets is operating teams that have encountered development bottlenecks and lack development resources such as brands, capital and advantageous products. Guo Wenjiang, chairman of the group, introduced: “This model is not a new model; we have merely transferred a model long used in other industries to the veterinary drug industry. This model is a systematic project, and whether it can succeed still depends on many decisive factors, such as products and services, and also resource integration and market control. For this reason, in the process of cooperation between the two sides, Zhongnong Yingtai Group will provide cooperators with support in technology, products, brands, capital and other aspects, so that cooperators have no worries.”