A single stick of double mint today – 18 billion tomorrow
Outside a corner candy stand in Shanghai 10 year old Zhang Xiaomei folds a piece of Wrigley’s double mint gum into her mouth — one of 18 million sticks. Wrigley Jr Company will sell in China this year. To reach the flimsy blue plywood stand that serves this customer in pigtails, the minty stick traveled a thousand miles by truck, rusting freighter, tricycle cart, and bicycle – and it is still freshly soft and sugar dusted at the time it is sold. That’s something of a wonder given the daunting scale and obstacles in the world’s largest developing country.
Mastering the distribution system is the single most important challenge of China’s economic revolution. The task facing every consumer products company trying to reach the giant Chinese market is how to get the product to the consumer at a convenient location, in salable condition properly displayed and aggressively sold. That, at least is the ideal.
Western goods an effectively reach only about 200 million of China’ 1.2 billion people today. But the number of accessible Chinese consumers is increasing rapidly as companies become more adept at meeting the challenges of navigating where roads are poor rivers are jammed and railways are clogged.
Finding reliable distributors usually by word of mouth is the first challenges but seldom the last. Distributors are often state owned and have little incentive to position a band, let alone an understanding of how to do so. Market coverage, maintaining product quality and effective presentation at the point of sale are Wrigley’s goals. Wrigley wants its gum consumed within eight months of manufacture; otherwise the gum dries out or sugar bleeds through the packaging.
Let’s follow the route taken by Zhang Xiaomei’s stick of Double mint from a factory in Guangzhou on the southern coast of China to a corner stand in shanghai. The gum is shipped to Shanghai form Gunagzhou on a coastal freighter. But off the coast of Zhejiang province, a marine patrol seizes the ship, along with 960,000 packs of gum; the ship is loaded with smuggled cars. The gum and other cargo are seized by customs, while Wrigley wants and frets the whole time about aging. Finally, the gum is released and loaded onto a truck at the Shanghai port, only to face a complicated bribe strewn journey through the distribution system on its way to market. Wrigley-hired trucks are often stopped not only by bandits but also by provincial gendarmes demanding exorbitant fees before they let the vehicles pass.
Once the gum gets into Shanghai, Wrigley loses control Distribution now depends on one of the firms sound off from China’s once mighty state owned trading companies Wholesalers in China do not do much delivering instead like Wrigley wholesaler Chen Tuping they wait in their warehouses for buyers to arrive.
So how does that stick of gum get Zhang Xiaomei? Wrigley’s legwork that’s how. Teams of Wrigley representatives walk the streets talking to shop owners handing out free Wrigley posters and plastic display stands. Among the targets is Xu Meili who runs a booth at the beautiful & Rich Wholesaler Market. After successful sales call, she begins to stock Wrigley’s gum, which she fetches with a tricycle cart from Mr Chen the wholesaler or one of his competitors.
Wrigley salesman continue visiting small kiosks like the blue plywood stand in Shanghai . Inside the stand a young woman who calls herself Little Yan naps on her folded arms between sales. When stocks run low, she rides her bike the few blocks to Ms Xu’s booth to buy more gun or candy. All of this just to get Zhang Xiaomei a stick of gum.
The margin isn’t great says Wrigley’s international business chief. But for now he says the company is content to build market share. He adds we’re very patient company. To quote a statement of distribution from Wrigley’s Web site the modest price of chewing gum means almost everybody can afford to buy it. The global market for gum is vast and Wrigley seeks markets in every country it can enter even where consumers don’t yet chew gum. For example Wrigley recently invested in new plants in India, where only a very small number of Indians chew gum. But with a population almost as large as China’s it means big growth if only a small percentage of the Billion people buy the product. Wrigley’s global distribution strategy is to ensure that everyone in the world can get gum wherever and whenever he or she wants.
Effort pays off – Double mint chewing gum has a 91 per cent market share in China, and that translates into sales of about 18 billion sticks per year! That’s up from 400 million sticks just a decade ago.