Changyu tightens sales control by introducing quota system

Starting from the third quarter of 2020, Noble Dragon, the flagship label of China’s oldest winery Changyu, will begin to implement a quota system for the first time.

At the same time, the brand will carry out a series of measures to combat unproductive sales activities, such as channeling goods beyond agreed areas and lower priced rivals.

In the past two years, despite the fact the market share of Changyu’s Noble Dragon has been rising, the company has streamlined the number of domestic distributors it deals with. In 2017, it reduced the number from 3,000 distributors to 1,730; and for the ninth edition, the number of distributors further reduced to 507.

In addition, the company will introduce a quota system in order to stablise its pricing model and market order with distributors.

Starting from the third quarter of 2020, company headquarters will verify the number of Noble Dragon quotas for each provincial branch, which will be responsible for the quotas of each distributor. Once the quota is confirmed, it will be entered into a quota management system – this is said to eliminate “guanxi” (relationship marketing).

The quota given to a distributor is determined by two factors: the actual sales volume in the previous quarter; and the planned volume for the quarter agreed at the beginning of the year, each accounting for 50% of the final judgment.

The company employs strict control over quota management. Unsold Noble Dragon for a quarter is not transferable to the next quarter.

Dishonest business activities will lead to a punishment in form of quota reduction. For instance, if a distributor has channeled 20 boxes or more beyond the agreed area in a quarter, 20% of the quota for the same quarter will be deducted; the deduction will carry forward to the next quarter if they run out of quota in that quarter. For online illegal sales, 10% of the quarter quota will be deducted.

When a distributor is found to breach the above-mentioned activities three or more times, their licence will be withdrawn and they will not be granted a quota.

The introduction of the quota system will undoubtedly promote the geographic distribution and licence system, at the same time increase and protect the sales volume and profitability of authorised distributors. The measures also reflect the determination of the company to develop a sustainable future of the flagship brand and enhance the label value.