Wuliangye Group

Donghong Li, Xiaohui Li, Pinglu Zhou Version Date: 2020-11-15

Product No.: 0-920-362

Wuliangye Group：Digitalization in

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Marketing

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使
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At the year-end Wuliangye Group Co. Ltd. summary meeting held on January 21 2020, Li

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Shuguang, Secretary of the Party Committee and Chairman of the Board, said that the group's
revenues had reached RMB 100 billion in 2019, and the enterprise had scaled new heights.

。 ⼈
Digitalization of the marketing systems was one of the key projects undertaken by Wuliangye
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Group in 2019, and the preliminary results were positive. Digitalization of the Group‟s marketing
was to be expanded, and then extended into other areas of activity. During this process the
Wuliangye Group considered how to replicate the digitalization of the classic Wuliangye Liquor
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into other ranges of liquor, how to extend digitalization in marketing to digitalization of the
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enterprise as a whole, and how to meet the demands of the enterprise‟s digital transformation by
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breaking through conventional thinking, building teams of talent, and creating new management
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models.
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Overview of Wuliangye Group

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Company History
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China‟s leading liquor enterprise and a classic strong liquor, Wuliangye Liquor has its
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origins in Chongbi Liquor from the flourishing period of Tang Dynasty, Yao Zixue Liquor in the
Song Dynasty, and Coarse Grain Liquor at the beginning of the Ming Dynasty. Its official name,
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taken in 1909, was inspired by the liquor‟s raw materials, which consisted of five grains (wheat,
rice, glutinous rice, sorghum and corn). Yibin Daqu Liquor Brewing Industry Association, jointly
established by Changfasheng, Lichuanyong, Quanhengchang, Tianxifu and four other ancient
distilleries, was the predecessor of Wuliangye Group, which was restructured into Sichuan Yibin
Wuliangye Group in 1998. Changfasheng‟s fermentation pits were built in the early years of the

This case was prepared by Donghong Li, Xiaohui Li and Pinglu Zhou of Tsinghua
University School of Economics and Management as the basis for class discussion rather than
to illustrate either effective or ineffective of an administrative situation.
Copyright © Tsinghua University School of Economics and Management. No part of this
publication may be duplicated, transmitted or used in any form or by any means without the
permission of Tsinghua University School of Economics and Management.
 Wuliangye Group

Ming Dynasty, and boasted a history going back more than 600 years. These pits were the only
existing crypt-type liquor fermentation pits in China, and they are still used by Wuliangye Group
to this day (see Exhibit 1).

Wuliangye Liquor has received over one hundred honours, prizes and recognitions at home
and abroad, such as China Famous Liquors, China Quality Award, and Golden Prize for Centurial

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Expo. The company‟s traditional distilling techniques were included in the National List of

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Intangible Cultural Heritage of China in 2008. The group‟s sales revenues, were RMB 108 billion
in 2019, up by 16% on a year-on-year basis, and the corresponding figures for assets were RMB

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135.9 billion, and 12% . Wuliangye ranked 79th in the “Brand Finance Global 500”, 40th in

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“Asia‟s 500 Most Influential Brands” and 3rd in the “Top 100 Most Valuable Chinese Brands”.

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Reform and opening-up gave impetus to the rapid growth of the brewing industry, triggered

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by growing public demand for liquor. At the stage when the sugar and wine industries were
state-operated in the early years of reform and opening-up, there was a shortage of supply of
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Wuliangye Liquor. To satisfy demand, the Group went through three production expansions
between 1988 and 1997. The company was listed on the Shenzhen Stock Exchange in April 1998.
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In terms of revenues Wuliangye Group was the largest liquor enterprise in the country in the
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2000s, and remained China‟s “king of liquors” for more than a decade.
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The Second Pioneering Phase

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The company‟s history has not always been smooth. Wuliangye Group previously adopted a
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multi-brand strategy, and sold certain base liquors to distributors or partners under OEM
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authorization (Original Equipment Manufacturer), which led to the establishment of Wuliangchun,

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Wuliang Pure, Jinliufu, Liuyanghe and other renowned brands. The number of liquor brands
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reached over 100 at its peak, which brought substantial revenues to the Group. However, these
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additional brands also had a negative impact on the overall image of Wuliangye Liquor, and
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ended up diluting Wuliangye‟s brand value and confusing the consumer. Moutai outperformed
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Wuliangye Group in profits for the first time in 2005, and overtook Wuliangye in operating
revenues for the first time in 2013.

Li Shuguang, a young leader born in 1960s, had professional industry training and work
experience in provincial economic management. He was appointed Secretary of the Party
Committee and Chairman of the Board of Wuliangye Group on March 24, 2017. Immediately on
taking up the post he faced the dilemma of whether to be an industry “pacesetter” or “pursuer”. At
this point he proposed his objectives for “the second pioneering phase”.

In Li Shuguang‟s view, Wuliangye Group had started its „first pioneering phase‟ in the
mid-1980s, and had created the “Wuliangye phenomenon” through more than 20 years of
incredible effort. However, he believed Wuliangye Group must not rest on its laurels and should
immediately start on a new journey, while persevering with its entrepreneurial spirit. “Wuliangye

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Group should strive to regain its leading position in branding, marketing and market value
through strategic innovation.”

1•365 Digital Transformation Strategy

China‟s economy had entered the stage of high-quality development; mass consumption had

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been growing steadily, and the government had promulgated a series of measures for restricting
the „three public expenses‟.1 Digital technologies were flourishing and being applied extensively;

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internet companies were developing at breakneck speed, and traditional liquor enterprises were in

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hot competition. According to Wuliangye Group‟s assessment, the long-term cycle of structural
prosperity in China‟s liquor industry was likely to continue in the existing climate. However, the

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trend of centralization in strong brands, enterprises, and production areas had become

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increasingly clear, and the transition in liquor consumption from government spending to

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business spending and private consumption had been established. Chairman Li Shuguang
believed that the new round of recovery for the liquor industry was structural, and that the
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industry should start the „return journey‟ to brand and rationality.

With a focus on “improving quality and reshaping the customer‟s experience”, Wuliangye
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Group began its journey to digital transformation in 2018, with the goal of utilizing the power of
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digitalization to realize “the second pioneering”.

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Li Shuguang believed that the basic driving force of digitalization was the application of
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various new digital technologies, particularly the mobile internet, big data, cloud computing, and
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AI. To the enterprise, the priority was placed on creating new value with digital technologies
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through new approaches. Based on its assessment, Wuliangye Group proposed a clear vision for
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digital transformation of the enterprise: empowering the whole process „from a grain to a drop of
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liquor‟ through digital technologies, and creating new value for customers, upstream and
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downstream partners in the industry, company employees, and management.

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Wuliangye Group initiated formal cooperation with IBM in April 2018, and started the
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planning of its „1•365‟ digital transformation strategy after more than eight months of research.
The „1•365‟ strategy refers to: „one objective, three transformations, six major capabilities and
five major projects‟.

One objective: The Second Pioneering Phase

Three Transformations:

1. business transformation

2. management transformation

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It refers to the expenses incurred by government personnel to go abroad on business, purchase and operation expenses
of official vehicles, and official entertainment expenses.

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 Wuliangye Group

3. ability transformation

Six Major Capabilities:

1. model innovation

2. market stimulation

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3. precise action

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4. agile operations

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5. organizational innovation

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6. eco-environmental coordination

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Five Major Projects:

1. mega marketing 7- 师个
2. operational excellence
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3. leading intelligence
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4. management foundation
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5. technology-oriented improvement
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Li Shuguang pointed out, “Digital transformation cannot be achieved overnight, it requires

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swift and concrete efforts.” The first step in Wuliangye Group‟s digitalization process started with
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marketing, which would drive digital transformation through the integrated value chain of the
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whole enterprise.
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Digital marketing
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As an FMCG (Fast Moving Consumer Goods) enterprise, Wuliangye must continuously

provide the market and consumers with premium products and services. Marketing is situated at
the forefront of business activity, as well as being closest to the market and consumers. It is
essential to have a clear perception of consumer needs in advance, and convey them to different
areas of the enterprise.

Pain Point of Traditional Liquor Marketing

Under its traditional marketing model, Wuliangye Group operated large distributor systems,
and had a sole distributor which served as the agent in charge of sales activities within its
geographical jurisdiction. Large distributors typically had the advantages of a complete sales
network and huge promotional influence. The company‟s top five distributors had a relatively
high proportion of total sales revenues, particularly in the period between 2005 and 2008,

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 Wuliangye Group

contributing more than half of the Group‟s gross operating revenues.

Large distributor systems were a relatively extensive marketing model. Manufacturers had
relatively weak control over marketing terminals. They had no direct contact with the end
customer, had no control over customer data, and had an inadequate perception of wholesale
management, channel management, distribution processes and consumer operations. They often

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relied overmuch on distributors of different levels, failed to achieve brand building, advertising

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promotion and other activities in a timely and precise manner, and even suffered from chaotic
channels that damaged brand image due to distributors‟ cross-regional sales, unauthorized price

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reductions, and other actions. 2

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Firstly, the problem of cross-region sales had not been effectively solved. Wuliangye Group

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allocated regional markets to distributors, made them responsible for development and

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maintenance, and encouraged them to use their initiatives in cultivating them. However, some
agents could become dissatisfied and greedy, and looked to penetrate other regional markets. To
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gain revenues from other distributors‟ markets they would engage in price-cutting, which
disturbed market order, damaged product brand image, and discouraged the official distributor
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from in-depth development of its own market, among other consequences.

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Secondly, the company lacked a real and profound understanding of its customers. The
reliance on a large distributor model created a gap between Wuliangye Group and the market.
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Adopting a „manufacturer-oriented‟ method of thinking, Wuliangye Group did all its dealing with
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distributors, which resulted in a number of information gaps. The company had no idea who
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would purchase and drink Wuliangye liquor, where its customers were located are, or what their
needs were.
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Thirdly, there was enormous waste of marketing resources. According to Zhu Zhongyu,
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Deputy GM of the Group, “We didn‟t know where our customers were located, which channels
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were providing them with our information, how many consumers saw our ads, how many
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purchases were generated… So we had to question the validity, rationale and basis of our product
planning, marketing strategies, channel building, inputs, advertising communication and other
such activities... Since we didn‟t know where our customers were, we were unable to evaluate the
results of the ideas and plans we spent money on, so substantial marketing and advertising
expenses were wasted on numerous accounts.” Zhu Zhongyu also expressed the view that “The
liquor industry‟s traditional sales model making extensive use of terminal outlets that required
significant manpower had reached its ceiling. Inputs were gradually increasing while outputs
steadily decreased on a yearly basis – this sales model was in urgent need of an urgent upgrade
through digitalization.”

2
Sales by a regional agent to the territory of another agent of the same brand. Colloquially, the distribution of products
with territorial limitation to another territory is known as cross-region sales.

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Functions of Digital Marketing

Confronted with numerous pain points, the traditional liquor industry, its brands, and its
sales enterprises began to diversify industry channels with big data marketing, internet thinking
and other new marketing ideas, which allowed them to ride the wave of internet-based
development and stay closer to the consumer market. Wuliangye Group took the lead in pushing

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forward digital transformation of the company‟s marketing systems.

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Zhu Zhongyu believed that the core of digital transformation in marketing lay in „lean

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management‟, which will allow enterprises to provide the market and consumers with premium
products and services through transparent, rapid, two-way and controllable marketing information.

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The goal is to effectively scout business management issues and market changes, and

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continuously improve working methods and quality of sales services. Hence digitalization was

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believed to be the only path for the realization of lean management, and its main objectives
included:
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Comprehensive control over tracking data for the whole product cycle: procurement,
production, packaging, warehousing, delivery from company to distributors, distributors
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to terminals, and on to customer purchases. This enables practical and data-based
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evaluation of distributors‟ operating capabilities, optimization of planned deliveries,

adjustment of distributor structure, and effective assessment of the performance of
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marketing centers and provincial marketing teams as allocated by the company.

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Standardization of the whole marketing management process, synergetic interactions of

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online and offline channels, real-time insight into distributors and teams‟ execution of
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marketing processes, and an accurate perception of consumers‟ feedback on purchases.

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Comprehensive, detailed, real-time and transparent control over all forms of product
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data from distributors, sales outlet and customer databases, enabling data support for
product R&D, production and delivery planning, sales strategy, communication modes,
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service delivery, organizational structure, and team and distributor performance

assessment.

Digital Marketing Action-Plan

In 2018, based on the 1•365 strategy, Wuliangye Group developed a blueprint for digital
transformation in marketing that was consumer driven and guided by platform operation and
digital technology support. Implementation of the strategy began in 2019.

Changes in Marketing Organization Structure

The implementation started with organizational changes. After eight months of planning, the
restructuring of the Wuliangye Brand Business Department began immediately after the Spring

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Festival of 2019 (see Exhibit 2). The company modified an organizational structure that had been
in place for many years, successfully integrating a horizontal specialization of headquarters and a
flatter management of the regional hierarchical structure. Wuliangye Group originally had seven
marketing centers, which managed over 2,000 distributors throughout the country. All seven of
the marketing centers were decommissioned during this change, and were replaced by 21
marketing zones, which had 60 marketing bases under them. Zhu Zhongyu opined: “Wuliangye

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has never gone through organizational change of such scale. It‟s disruptive. Marketing centers

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have been there since the 1980s and 1990s… It‟s the biggest change we have undertaken at

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Wuliangye...”

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In addition, Marketing Headquarters (HQ) added 15 specialized departments, which
improved the marketing planning of HQ functional departments and the rapid response of

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marketing zones and marketing bases. Meanwhile, around 400 marketing personnel and 500

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promotional sales staff were recruited through internal transfer and general and campus

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recruitment. Promotion channels and incentive system reform were also implemented. Through
these measures, a cohort of senior leaders and young middle managers were promoted, and more
people were encouraged to break from tradition and become advocates and practitioners of
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innovation.
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Wuliangye Group selected the best stores and outlets in local markets into its system,
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encouraged bonding between sales outlets and distributors, then allocated distributors to
corresponding marketing bases and zones. Outlets within the system would have priority access
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to guaranteed supply, logistics and distribution, financial support, rights to sell exclusive high-end
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profitable products and other value added services. Wuliangye Group took outlets as core
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windows for interaction with customers, and attacked the consumer market through integrated
online and offline marketing. After five months of operation, Wuliangye Group had built up a
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base of 65,000 outlet store members, laying a solid foundation for subsequent in-depth
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development of core stores.

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Operation Control and Profit Distribution Model – Code Scanning Layer by Layer

Wuliangye chose to introduce a digital operations control and profit sharing model together
with the launch of its 8th generation of Classic Wuliangye Liquor products in May 2019. Within
the 8th generation product series, an intelligent code management system was added composed of
three associated codes (bottle code, box code and case code). The code scanning process included
manufacturer scanning on exit from finished goods warehouse, distributor scanning on entry into
their warehouse, store scanning on distribution to different stores, and scanning of sales to
end-customers. (see Exhibit 3). This code scanning data chain helped significantly in realizing the
accurate traceability of product production, logistics, storage and sales.

The company realized closed-loop management of the 8th generation of Classic Wuliangye
Liquor products from factory to consumption through the construction of intelligent code systems

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 Wuliangye Group

and omni-channel layer by layer code scanning. This provided data support for the distributors
and enabled them to further optimize their planning, manage ther markets and orders. It also
allowed the company to evaluate the work quality of marketing teams and distributors and
monitor real-time errors in channels. The company moved from an experience-based to a
data-based decision making process, and took the first steps in achieving the goals of stabilizing
the channel network, stimulating sales, improving channel profits, and promoting distributor

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transformation.

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Consumer Driven

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With the new listing of the 8th generation of Classic Wuliangye Liquor, the Wuliangye

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Consumer Club was launched, designed to closely monitor the individual demands of every

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customer. Based on the number of scanned codes on bottles, customers could enjoy membership

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benefits such as invitations to high-end tasting parties, high-end finance courses, exclusive
medical consultations, and access to lounges and fast track security channels at high-speed train
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stations and airports. This increased customer loyalty to the brand. Since the launch of the club
the number of fans following the brand has reached 105,000, and the number of members
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scanning opened bottles has reached 43,900.

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E-commerce and New Retail

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Wuliangye Group has established strategic partnerships with Jingdong, Jiuxian, Suning, VIP,
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Fresh Hema, 1919 and other mainstream e-commerce platforms. By the end of 2019 direct supply
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systems for major e-commerce platforms and new retail chains were in place, along with
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marketing process management systems, both of which led to steady increases in both sales
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volume and price, and effective control of the marketing process of online platforms,
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Digitalization of Wuliangye’s Marketing Business

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Wuliangye Group comprehensively planned and built information and operating systems
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together with SAP, IBM, Alibaba and other leading IT enterprises and internet technology
companies at home and abroad. The guideline was to build a diversified and open front platform,
a flexible and free middle platform, and a stable and reliable backend platform, equipped with
overall top-level big data analysis and decision-making capacity. With iterative processes
available through the internet, the company has been able to identify problems during use, and
refine the system by means of rapid problem identification and resolution, development and
updates. IBM was responsible for Wuliangye Group‟s overall strategic planning, marketing
design, and organizational changes, and the implementation of IT systems based on SAPs
proprietary platform.

Wuliangye Group and its partners developed and adopted a variety of digital tools for
employees, distributors, store terminals and consumers appropriate to different user groups and

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needs. The application platform established direct connections with customers, core stores,
dealers and partners, providing them with data and services accessible anytime and anywhere,
enabling distributors to better serve their terminal stores, and stores to better serve customers. A
digital closed-loop management process was created out of this which was a great help in terms
of target setting, task management, information exchanges, process execution, and performance
measurement between headquarters and regions. It supported the autonomy of marketing

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management, and improved the overall coordination between headquarters and marketing

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regions.

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Wuliangye Group launched the construction of this digital marketing platform, and the

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phased construction of eight business centers and one data center. This solved previous problems
associated with information gaps, breakpoints between main business processes, and unified data

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specifications and standards, and laid new foundations for continuous optimization, agile

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innovation, and digital transformation in marketing.

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A Marketing Decision Making Command Center held integrated multidimensional data on
products, orders, channels, finance and logistics, and produced data modelling and analysis on 15
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fields and 385 indicators. Related data covered marketing, production, finance, warehousing,
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logistics and other sectors, which provided support for headquarters‟ decision making and
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command, as well as mobile and PC-end data support for marketing zones and bases. It was
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driven by data-based decision making and management mechanisms, and contributed to the
effective accumulation and mining of data assets.
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After the establishment of the command center, a rational distributor quota could be set
through the close tracking of sales outlet demand, so as to reduce cross-region selling and prevent
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disorderly pricing. The tracking cycle of marketing data was shortened to a "minute level", and
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the response speed to the market was greatly accelerated.

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Overall Digitalization
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Wuliangye was a leading traditional liquor manufacturer; it had been a hot selling product
for a long time. The company‟s enormous revenues were generated by a production-based sales
model, which resulted in neglect to improve work efficiency and reduce operating costs through
IT. Although the Group was an industry leader in terms of informatization, it was still very weak
in comparison to many enterprises outside the liquor industry. This being the case, it was difficult
to transition into full digital management. Wuliangye Group chose to start with the digitalization
of marketing and an overall transformation of their marketing model, which led to further changes
and optimization in production, research and development, packaging, logistics and finance
associated with 13 departments and subsidiaries and more than 40 procedures.

“Digital transformation is not simply informatization,” said Li Shuguang. “It‟s the

re-engineering of systems and processes, it is the creation of innovative new models, and it is a

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revolution for traditional enterprises. In the course of this transformation, there will be integration
of departments, and restructuring of roles and responsibilities. There will be problems to address
in matching the digital transformation organizationally and ideologically, as well as factors such
as talent, capital and time and the links between them.” Li insisted on leading from the front,
promoting the transformation by setting deadlines on tasks with strict follow-up, and emphasizing
the idea that „If the person can‟t change then we‟ll change the person‟.

，
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Wuliangye Group‟s digitalization was designed based on platform-sharing rather than “one
man is an island”. Upstream and downstream suppliers, stores and other partners were able to

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gain access to shared resources and information. The Group would control procurement quality,

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build transparent procurement processes, and ensure quality from suppliers, through building
digital procurement and supply chain platforms and seamless cooperation with upstream raw

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material suppliers. They would provide suppliers with operational support, improve operating

。 ⼈
efficiency and create a win-win relationship through data analysis and process interfacing.

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The Chinese liquor industry has a long history and a worldwide profile. Together with the
China Alcoholic Drinks Association, Wuliangye Group has established the „China Liquor
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Business Big Data Center‟ – the first digital think tank in the industry. It focuses on the
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construction of industry think tanks employing data, and with improving the quality of data
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through industry knowledge. The establishment of a new credibility evaluation system based on
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digitalization is an important task for the center.

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“We have made progress in digital transformation – but it is just the beginning, with new
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challenges and problems constantly arising,” Zhu Zhongyu insists. “It is our responsibility to
ensure that Wuliangye‟s digitalization lives up to its name and possesses substance and spirit. We
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need to build and strengthen our digital management capacity in 2020 – the whole digitalization
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framework has to be implemented, and continued careful execution is vital.”

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Exhibit 1: Changfasheng’s Fermentation Pits

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Source: Volume 40 of The Spirit of Orient, journal of brand culture of Wuliangye Group
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Wuliangye
Wuliangye Group
Group

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Exhibit 2: Structure Changes in Marketing Organization

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Before Change

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使
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Wuliangye
Wuliangye Group
Group

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7- 师个
After Change

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Source: Wuliangye Group

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Wuliangye
Wuliangye Group
Group

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Exhibit 3: Real-time Updates of Stores and Consumer Code Scanning

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Source: Wuliangye Group

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