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Produced by Huxiu Think Tank

Author: Yang Jun, Yu Xiangnan

Edited by Yu Xiangnan and Ji Yujie

Header Image丨Visual China

The thousand-year-old liquor industry is in a cooling-off period.

According to the analysis of the China Alcoholic Drinks Association, the liquor industry has obvious problems of overcapacity and imbalance between supply and demand, and is still in the destocking cycle. Faced with many confusions and uncertainties,The wine industry is experiencing a wave of channel digital transformation。

More and more wine companies are aware of the importance of flattening, refining and complex development of channels, thereby deepening their channel layout, accelerating the process of channel digital transformation and reaching consumer terminals directly.

There is a typical company in the liquor industry - Xiaohutuxian. This liquor company, which once revealed to the industry that it would achieve a goal of 10 billion yuan by 2027, has already rooted digitalization in its7 years in the company, and has maintained performance growth in recent years, and compared with the initialPerformance has more than quintupled.

What has Xiaohutuxian done with digitalization? Is this the secret to its performance growth? With these questions, Huxiu Think Tank had an in-depth conversation with Xiaohutuxian CIO Yu Chenghui. While Mr. Yu Chenghui shared with us the experience of Xiaohutuxian's digital construction, he also talked about some thoughts on the current liquor industry.

1. Integrate best practices with the current state of the business and strive to be “half a step ahead of the business”

Huxiu Think Tank: Please summarize the core achievements and key nodes of Xiaohutuxian’s digital construction in the past seven years.

Yu Chenghui:Xiaohutuxian’s digital construction began in September 2017. The landmark action was the establishment of a digital center to fully start the company’s digital transformation.

From the perspective of business segments, it is divided into four parts: supply chain, functional governance, marketing and consumers. Each part has its own construction plan and rhythm.Adjust the digital transformation strategy and annual OGSM based on the urgency of the issues currently facing the company.

After several years of development, the digital center has led the standardization and growth of the overall business, and the company's revenue has increased by more than five times. In the entire enterprise, the collaboration between digitalization and business departments is very close.The breadth of the business architecture is based on industry best practices introduced through digitalization, while the depth of the business is based on co-creation between business departments and digitalization.

In 2018-2019, our initial goal was to solve the problem of controlling marketing expenses. We continued to launch systems such as orders, DMS, SFA, and TPM to solve the problem of controlling marketing expenses. In addition, we introduced mini programs in the consumer sector to extend the red envelope bottle opening, and gradually realized flexible marketing activities such as one policy for each place, one policy for each activity, one policy for each box, and bC linkage.

In the financial field, the entire ERP system was replaced and divided into two parts according to the business carrying capacity of the enterprise at that time. The first part is the finance + marketing part, and the second part is the supply chain part. After the core supply chain system was connected in 2019, the detailed coverage of business areas was expanded, such as WMS, SRM, bidding, APS and other systems. Overall, ERP is taken as the core, and professional systems are introduced in professional fields to carry out all-round business and financial integration and professional coverage of the breadth and depth of the business.

From 2021 to 2022, we deepened the digital construction in the consumer field. Unfortunately, due to the limitations of internal organizational division of labor, the in-depth application of this strategy in the consumer field is still insufficient. Although the "1+N" architecture system has been built, the deepening of construction still needs to be promoted in close cooperation with the business departments.

In terms of overall digital construction, over the past seven years, Xiaohutuxian has widely absorbed best practices from various industries, streamlined and adapted them in combination with corporate strategies and actual needs, ensuring that digital applications are effectively implemented in an orderly manner within the company. There are also many highlights that can be learned from in the liquor industry and even the consumer goods industry.

Overall, weAdopt a top-down planning strategy, integrate the best practices with the current state of the enterprise, and adopt a construction strategy that is both horizontally wide and vertically deep, striving to achieve the traction advantage of "leading the business by half a step", ensuring a smooth transition and effective implementation of the change, and also avoiding the pressure on employees to digest new management concepts.

Xiaohutuxian has been continuously promoting digital construction, leading the continuous upgrading of its business in the four major areas of supply chain, functional management, marketing and consumer experience.

Huxiu Think Tank: How does Xiaohutuxian’s digital strategy support the company’s business growth goals?

Yu Chenghui:Our previous performance has grown many times compared to the initial stage. The support of digitalization is mainly to standardize and streamline the internal governance of the enterprise, reform the operating model of market expenses, and enjoy the dividends of brand return. Especially three years after the epidemic, many liquor companies have experienced a decline in sales. Our products in the channel are still profitable and the prices are rising. But when it grows to the scale of 2023, we feel that the next stage of development can no longer be driven by refined channel management. We must be consumer-centric and carry out all-round consumer cultivation, service, and conversion activities.Realize the marketing transformation from "channel price competition" to "consumer value creation".

Based on this concept, Xiaohutuxian's digital strategy this year is also more focused on channel management and consumer cultivation. Through digital technology, collaborative marketing improves the intrinsic quality of its market plan, and the cost placement is more accurate and real, and the market will respond. For example, our Banquet 3.0 version uses information such as bottle opening GPS + bottle opening number + terminal location to automatically determine whether the banquet is real. Looking at the company from a digital perspective, we will continue to deepen channel management and make breakthrough innovations in consumer operations. At the same time, for the new brand matrix and new sales matrix in the VUCA era, digitalization needs to introduce some new business models, business scenarios, and innovative gameplay to assist marketing growth.

Huxiu Think Tank: We understand that Xiaohutuxian has greatly increased its market influence by innovating its marketing model and deepening its channel layout. Can you share some examples of the combination of marketing and big data?

Yu Chenghui:The liquor industry basically follows the distributor model.

In general, Xiaohutuxian's current channel strategy is mainly based on dealers directly reaching the terminal, supplemented by a local distribution model, and channel management is carried out through a price-following system + refined channel cost operations. In the core market, we work with the dealer team to carry out manufacturer integration. From the sales practice point of view, it not only ensures that the products are delivered to the terminal efficiently, but also helps the terminal to promote consumer sales. This move improves the execution efficiency and effectiveness of marketing policies and promotes sales growth.

Of course, we will also adjust it according to different regions. For specific regions such as Lanzhou, given its vast territory and complex market, we focus more on evaluating and relying on the dealers' own capabilities and resources to deeply develop the market. These regions are still in the market start-up stage, so the focus of our work is to recruit excellent dealers and assist with reasonable cost investment management.

Since 2019,Our business operation model always adheres to the principle of online closed-loop control, and has built a closed-loop and efficient management system from budget formulation, plan application, plan execution, indicator monitoring, plan verification to the final formation of a cost pool.This process ensures that every link can be effectively executed and supervised. Compared with most consumer goods companies that focus on a single point, the management model we adopt has the advantages of historical accumulation and implementation.

In the process of implementing SFA, we adopted a comprehensive coverage strategy and built a complete business architecture from the beginning of the project. At first, in order to adapt to the business stage at that time, we designed 4 special solutions and 1 general solution using the MVP method. Through the digital execution process, the write-off process was greatly simplified. With the expansion of the business, we have made multiple marketing expense investment behaviors into projects, and the number of plans has increased to 30 or 40, ensuring that as long as the execution data is complete, automatic write-off can be achieved. In the context of continuous business standardization, the system can directly support real-time write-off. In the case of incomplete write-off data and information, the speed can be shortened to ten days.

Since last year, we have made major adjustments to our marketing strategy, shifting from focusing on channel management to focusing on consumer operations. We have introduced a reverse incentive mechanism, which incentivizes customers in the chain based on behaviors such as consumer bottle opening and scene activities. This digital marketing transformation not only simplifies the verification process, but also eliminates the third-party review process in some scenarios, directly saving millions of dollars.

To ensure efficient operation and rapid iteration of the system, we work closely with suppliers to jointly maintain the aPaas platform. Our team has dedicated personnel responsible for business demand analysis, system design, and mission-critical system development, while suppliers are responsible for daily maintenance and development of other functions. The two sides work together to ensure that the system can keep up with the pace of marketing policies and channel promotion.

In terms of channel management, in order to achieve integrated information exchange between manufacturers, we have developed exclusive mini-programs for dealers to achieve instant information exchange. At the same time, the consumer mini-programs and terminal mini-programs are interconnected, and consumers' signing, opening bottles and other behaviors can be fed back to the terminal in real time, promoting the smooth verification process. At present, I think there is still more innovation to be done in this field, especially this year's marketing transformation. We adjusted the assessment indicators of the sales department to focus on the growth of opening bottles rather than the sales amount. This puts forward more functions, better experience, more real-time and faster requirements for digitalization. We have been adjusting our posture while running.

In addition, we also use data to drive precision marketing, collect consumer behavior data through red envelopes and bottle opening, such as GPS address when opening the bottle, and generate heat maps to assist in the formulation of marketing strategies. This year, we will implement targeted media delivery based on this data to achieve accurate reach and efficient dissemination of brand information, and further promote sales growth and brand influence.

At present, we have built a marketing indicator system. I took the indicators to the market for repeated practice and modification. So far, I canFrom the indicator system, we look at regions, dealers, terminals, double Ks, salesmen, both result indicators and process execution indicators, as well as quality indicators, to build a root cause analysis system for the entire marketing indicator.In the most recent business analysis meeting, we used this data to hold a high-quality meeting that was completely different from the previous "knowing what happened but not why". Next, we will empower this analysis system to regions, dealers, terminals, and teams.

Huxiu Think Tank: In terms of supply chain optimization, are there some digital means to deal with fluctuations in raw materials or changes in market demand?

Yu Chenghui:In terms of market demand, since we are in the MTS model, we will use algorithms to predict sales demand, combine inventory, RCCP and completeness, and decide on the production volume for N+1 month and the packaging material preparation volume for N+3 month through S&OP meetings, and then make production schedules. We introduced the APS system at this point. We and the business department agreed to divide the overall digitalization into two stages. In the first stage, weFocus on the integration of the entire business chain including demand forecasting and planning, supply planning, production planning, material planning, equipment maintenance planning, production scheduling, and personnel planningThe second phase is being designed, considering adding MRP and RCCP to ultimately achieve agile collaboration in supply chain planning.

In terms of raw materials, our SRM system covers supplier VMI, transfer plan, purchase order, receipt, warehousing, settlement and reconciliation. However, the fluctuation of raw materials you mentioned is achieved through supplier agreement in our industry. The system is not the core means to solve this problem. If we are in the feed industry, I will use the system to connect futures data and manage hedging strategies.

Digital construction requires multi-faceted business thinking

Huxiu Think Tank: As a traditional wine manufacturing company, what impact and changes has digitalization brought to the company's organizational structure and culture?

Yu Chenghui:Let's talk about the cultural impact first. First of all, in many companies, we often see the situation of decision support data, avoiding bad data, magnifying good data, and creating a festive atmosphere. However, data is cold and the meaning behind the indicator combination is the real situation. As a manager, you should see the essence through the data and decide whether the subsequent action is SO strategy, WO strategy, ST strategy or WT strategy.A corporate culture of “telling the truth” starts with data, this is just a microcosm. Secondly, digitalization is essentially a carrier of standardization, process and model innovation. In the process of promoting digital construction, "learning and growth" is a requirement for all employees of the enterprise. After all, the enterprise survives and evolves actively.

Let's talk about the changes in the corporate organizational structure. Strictly speaking, digitalization is not the main influencing factor of the organizational structure. Mission and vision are the source, culture is the soil, strategy is the direction, and organization is the support. All organizational structures should be adjusted for the realization of strategy. I am also the head of the strategic operations center. Without data, I cannot manage operations. I am like a blind person. Digitalization is very important, but if the organizational structure cannot match the strategy, no matter how close the digital strategy is to the corporate strategy, it will not be able to find internal customers that match the strategy, and can only work hard in the field of digitalization to contribute to the company. Therefore, the impact of digitalization on the organization is a result, and the root cause is strategy, just like a certain fresh food company, which seems to be doing traditional business, but in fact its strategic design is a technology company.

Huxiu Think Tank: If you were asked to summarize in three points, what are the biggest challenges encountered in digital construction?

Yu Chenghui:First, how to put ideas into other people's heads.Because all processes are designed and executed by people. We control the entire business architecture, data architecture, application architecture, and technical architecture. Others don’t understand the latter two, and not everyone is open to the optimization of business operations. In the face of this challenge, we must build our own decision-making system, have our own persistence, and think from the perspective of the stackholder.

Second, the depth of application of digital governance in enterprises.Many companies rely on intuition for governance and management, and many companies say they use data well, but in fact, what is the definition of "good"? Dashboards, BI, and Report tools are displayed "lifelike", but they have no soul and are just a tool for visiting and displaying. If this is "digital governance of enterprises", I think this requirement is too simple. The "digital governance" stage at least goes through the steps of system construction, data governance, data processing, KimBall construction, self-service analysis, and indicator-based operation. Of course, this is also from the perspective of deep distribution. We should also learn from the excellent empowerment cases of how the fresh food industry uses data to help companies in terminal site selection, central kitchen, cold chain distribution, and C2M efficient response.

Third, explain clearly the benefits of digitalization.I think different companies and different fields have different positioning. My positioning in the supply chain is to reduce costs and increase efficiency. However, when it comes to the breadth of core system coverage, it is not a question of how much money can be saved or how much efficiency can be improved. It is also impossible to clearly explain how much the benefits of business and finance integration are. This can only be controlled or not controlled. The peripheral systems must measure the benefits. In essence, it is to judge whether the company is ahead or behind in making this system under the current scale; in channel management, it must be positioned on the efficient coordination and authenticity of the value chain, and at the consumer operation level, every innovation must be tied to relevant business indicators. But even so, explaining clearly where the benefits are is still a measurement, and no one will calculate its true cumulative benefits within five years. Therefore, solving business pain points and doing a good job of expectation management are the key.

AI and digitalization are the growth drivers of the liquor industry

Huxiu Think Tank: What are the applications of AI big models within the company?

Yu Chenghui:First of all, regarding the popular large model, we have also been testing the 6B model before. We have calculated that if it is to be put into actual scene application, the cost and benefit are not quite matched. I thinkCommercial applications are a combination of public models and private data.It not only has the multi-round dialogue capabilities of the public model, but can also read our vector database according to permissions to achieve content-controlled output. Some manufacturers say that it can be achieved, but I think that at present, in the field of citing semantic large models, we should just wait and see. I also look forward to a more mature model in the future.

followed byAbility to embed applicationsFor example, through AI voice translation, it can automatically identify and determine whether the salesperson conveys the correct policy information when visiting the terminal, automatically extract the terminal store owner’s demands for our company, and automatically summarize the key points for each person, and summarize the visit summary for the day. Of course, we need to test it on the ground for a period of time to see whether this model capability is reliable.

third,Data MiningWhen we were in school, we did not call them AI models or neural networks, we called them algorithms. We hoped to use algorithms to solve the problem of data fitting. By fitting a large amount of data and adding parameter adjustments, we could make the so-called cross-regional goods index have a more reasonable range depending on the person and the place, as well as inventory forecasts for deep distribution systems, etc.

Fourth, other applications, such asImage IdentificationAt present, the company also has some image recognition applications. For example, for the monitoring of some major assets, we have implemented a set of video face recognition applications. In this way, specific areas of major assets are monitored in real time, black and white list face recognition is performed in video surveillance, and the 10 seconds before and after video are intercepted and stored for a long time, and early warning information is generated and pushed to corporate WeChat, thereby achieving a monitoring effect that cannot be achieved by adding manpower. There are also small applications such as SFA store sign recognition and image anomaly recognition.

Huxiu Think Tank: How do you view the future trend of digital transformation in the liquor industry?

Yu Chenghui:There is a lot of communication within the liquor industry. In the past two years, we have been increasing our investment in digital transformation and learning from outstanding fast-moving consumer goods companies. I think the digital level of some liquor companies is remarkable. In the future, mutual learning will improve the digital level of the entire liquor industry.I believe that the digital promotion speed of the liquor industry will increase significantly in the next few years., because there are actually many successful cases to refer to.

First, at the supply chain level, I don’t think that intelligent construction in packaging, whether it is an automated production line or a dark factory, is a difficult problem for the liquor industry. Just invest money to build it. In terms of brewing, some flavors are already trying to make brewing smart. The digital department should consider the current scale and development stage of the company, and at the right time, with the purpose of reducing costs and increasing efficiency, introduce intelligent equipment together with the production department to improve production efficiency. As for the upstream and downstream businesses around production, digitalization needs to be continuously deepened and thoroughly implemented, and thenA root cause analysis system based on business indicators is used to form data applications such as supply chain performance analysis, process monitoring, risk control, and comprehensive cost analysis.

Second, at the channel management level, the cost structure and deep distribution system of the liquor industry determine that market costs are the core of construction. It must be continuously iterated in line with the adjustment of business policies under a relatively stable business structure.We strive to make the entire life cycle of expenses fast, convenient and monitorableOn this basis, we build an indicator-based operation system to look at the results, actions, and quality, compare year-on-year, and compare with the industry. Based on the configuration of the rule engine, we can find abnormal points in a large amount of data.I think the difficulty lies not in process construction, but in the fact that the CIO must be "half a step ahead". He must be proficient in business architecture and business analysis capabilities, and lead the team to help the company establish an indicator analysis system.

Third, at the consumer operations level, the profit structure of the liquor industry determines that a lot can be done in terms of consumption scenarios, especially in terms of red envelopes for opening bottles, which is indeed advantageous compared to the beverage industry. Most of the industry innovation cases we refer to are concentrated on social products with higher gross margins, which are then tailor-made to generate unlimited creativity in new products, new channels, and new models.

Fourth, to achieve benefits from digitalization, CIOs cannot stay in their own small field.The transformation of business department’s mindset is the bottleneck of digital transformationIn addition to reducing costs and increasing efficiency through system construction and achieving marketing growth through technological innovation, the key is to output the value of data assets through business architecture, BPR, and indicator-based operations, generate data in the process, extract indicators from the data, and find growth points and improvement points in the indicators to help the business grow and help decision-makers understand the business and make decisions.

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