Covid-19 Coping Strategies for Beverage Companies in China

As the coronavirus pandemic continues to spread, the lockdowns imposed to contain the disease are creating supply chain challenges in production and distribution barriers in reaching the consumer. Beverage companies in China began facing these production and distribution challenges in January 2020, with other parts of the world facing these challenges from mid-March. To deal with these supply chain and distribution challenges, beverage companies in China adopted and applied several tactics, with varying degrees of success. In this article, we share our insight into one successful strategy used to overcome the distribution challenges.

Responding to the virus’s impact on retail and on-premise sales, Tsingtao beer launched a community marketing digital sales program. Under this program, consumers could register to become ‘distributor’ for the brand. These ‘distributors’ share customized posters and promotions with their WeChat social groups and circle of friends, and receive a predetermined commission on the actual purchase. The physical delivery would happen through the local distributor or community distribution point created by Tsingtao. This tactic, called community commerce, was developed amid the Covid-19 lockdown and travel restrictions, and it saw tremendous results. While the company aspired to sign up 10,000 ‘Be a distributor’ community agents, it received 40,000 applications in the first week of the campaign.

Extending the digital sales initiative, Tsingtao offered community group purchase options, as well as ‘contactless’ delivery. The service covered 324 cities, and consumers could order via app or mobile and receive their beers within 30 minutes. The company set up self-service points of sale outside many residential communities, each with the ability to pay for and pick up their beers on-site using a QR code.

Community Commerce to the Rescue

The digital adoption rate is a critical success factor for community commerce. In Southeast Asia, social media app usage for messaging, entertainment, and shopping is above the global average. A report called ‘Digital 2020’, produced by We Are Social, highlights that the social media active user population in Southeast Asia is similar to its user population in China. Also, social media, especially messaging apps, has high double-digit user growth in Southeast Asia. Despite this high user base, most consumers report television and search engines as the primary source of brand discovery. This is an underutilized opportunity for marketers and distributors.

As we go through a phased lockdown in the rest of the world (outside of China), we see that social media app usage (entertainment, messaging, shopping) has substantially increased. For companies, there is an opportunity to work with social media to rapidly deploy a working distribution strategy. The existing e-commerce and food delivery infrastructure is stretched and unable to take up the slack from other channels. We have seen some innovative partnerships to create a new distribution system. For instance, the Indian Tobacco Company (ITC) has partnered with Domino’s India to deliver groceries using the Domino’s pizza delivery infrastructure.

Companies struggling with severe public movement restrictions and point of sale closures are seeking alternative ways to reach the consumer. A community-based approach to delivery will reduce last-mile travel and build a direct brand connection with consumers. This may well bring last-mile distribution into the gig-economy and provide income in these difficult times.

Given the high social media usage, beverage players in Indonesia, the Philippines, and Vietnam could lead the adoption of these tactics in their own markets.

Blurring Lines: Developing Own Route to Consumer

Community commerce is an opportunity to bring agility and to simplify the distribution system. For companies, this offers greater visibility to off-trade consumption, improves production planning, and reduces inventory pressure for distributors. The short-term advantages are obvious, but it pays to look into making this a part of a long-term route to market strategy. Benefits of community commerce include:
● Low customer acquisition cost
● Inherently agile, allowing rapid trial and error
● Live access to consumer activity
● Potential to develop a direct route to consumer