Nestle(US:NSRGY) 3 6 Ke·2025-07-30 04:42Core Viewpoint - Nestlé China is facing significant challenges with its distributors due to long-standing issues of unpaid market fees and a lack of trust, leading to a potential crisis in its distribution network [1][3][30]. Group 1: Unpaid Fees and Distributor Relations - Distributors have been struggling to recover long-overdue market fees from Nestlé China, with the company only willing to pay a maximum of 50% of the accumulated debts [1][3]. - This situation is not new; similar issues occurred in 2017 when the company settled debts with distributors at a 50% rate, indicating a recurring problem [3][31]. - Distributors are increasingly frustrated, feeling that their patience and trust in the company have been exhausted due to years of unmet promises and communication breakdowns [3][4][30]. Group 2: Financial Strain on Distributors - Distributors have reported significant financial losses, with some estimating that they are owed between 500,000 to 1 million yuan in unpaid fees [8][9][12]. - The practice of requiring distributors to cover promotional costs upfront, with the promise of reimbursement later, has led to substantial financial strain, with some distributors losing tens of thousands of yuan monthly [6][10][12]. - The cumulative unpaid fees across multiple distributors in the region have exceeded 10 million yuan, highlighting the widespread nature of the issue [9][12]. Group 3: Pricing and Market Dynamics - The pricing strategy employed by Nestlé has led to a situation where distributors are forced to sell products at a loss, with some reporting losses of over 10 yuan per box due to rising costs and falling retail prices [15][20]. - The company's internal channel management has been criticized for allowing low-priced products to flood the market, undermining the efforts of legitimate distributors [19][20][22]. - Distributors have expressed concerns that the company's pricing policies and lack of effective control over pricing discrepancies have created a chaotic market environment [18][22][28]. Group 4: Company Response and Future Outlook - In response to the ongoing issues, Nestlé China has announced a series of remedial measures, including a unified pricing strategy and a commitment to address historical debts [30][31]. - However, there are concerns that the proposed solutions may not adequately compensate distributors for their losses, with expectations of partial payments similar to past practices [31][34]. - The company is undergoing internal changes, including leadership shifts and a reevaluation of its channel policies, but the effectiveness of these changes remains to be seen [33][34].