"You...you should support the country's price control policy. Besides, it will benefit you and significantly increase your factory's profits." Section Chief Li spoke seriously and earnestly, his tone no longer arrogant as before. He sounded righteous and concerned about Minhong's development.
“Section Chief Li, the national price policy for pharmaceuticals mainly involves setting maximum price limits. There is no regulation prohibiting pharmaceutical companies from selling below the maximum price limit. Our Minhong Pharmaceutical has not violated any national regulations,” Meng Mu explained, taking over the conversation. This master’s graduate from the School of Economics and Management at Shanghai Jiao Tong University had already thoroughly studied the relevant laws and regulations for pharmaceutical companies, and this demand for price increases was simply not within the scope of the price bureau’s management functions.
"I'm doing this for your own good. The price of special commodities affects everything. If you sell medicines at such low prices, how will other pharmaceutical companies guarantee their profits? The entire market price system will be impacted. You can't just let other pharmaceutical companies close down, can you?" Section Chief Li glared coldly at Meng Mu, then turned to look at his colleagues from the Drug Administration Bureau beside him, snorted softly, picked up his teacup, and took a big gulp of water to vent his anger.
"I heard that the Dujiangyan Pharmaceutical Factory was privatized a few years ago. The person who took over was the brother-in-law of Deputy Director Liu of the Price Bureau. They mainly produce children's cold medicine granules. This time they came to ask for a price increase, probably because of that pharmaceutical factory." Wen Youmin had a thorough understanding of the industry. There wasn't a single pharmaceutical factory in the country that he didn't know. At this moment, he whispered to Lin Yao, "I'm telling you, Yao, these people are really brainless. Even if our products are sold at the same price as theirs, no patient will choose theirs. They're just desperate and will do anything, even resorting to such tricks."
Lin Yao smiled, thinking to himself, "So that's how it is." He had always wondered why the Price Bureau didn't bother with other companies' illegal price increases, but instead cared about his own low profits. It really proved the old saying, "Those who offer help for no reason are either up to no good or are thieves."
“Well… Mr. Luo, it should be a great thing that Minhong is lowering prices for patients’ sake, but the price reduction is too much and it’s damaging the entire pharmaceutical market.” A leader who was obviously from the Provincial Drug Administration began to speak, his tone very amiable. “The Dujiangyan Pharmaceutical Factory under the Pharmaceutical Group also produces the same children’s cold medicine. Your price is putting a lot of pressure on our competitors.”
Chairman Chen, who felt like he'd been passed the buck, glanced at the people from the Drug Administration, looked at Luo Jimin's family, opened his mouth, then stopped talking, focusing intently on the cup on the table. He simply couldn't bring himself to say it. The help his old friend had asked him to give completely lacked confidence in front of Luo Jimin's family. He simply couldn't bring himself to lie.
Luo Jimin chuckled but didn't reply. That was a difficult question to answer; he couldn't very well tell those pharmaceutical factories to shut down and die.
The meeting room fell silent for a moment, the atmosphere quite awkward. The people from the functional departments who came felt embarrassed, while Minhong's side felt that the other party was meddling too much, but they didn't know what to say to offend the other party.
“Uncle, it’s normal for manufacturing companies to go out of business and close down. Competition drives progress and development. We at Minhong feel we have enough profit. We can’t just raise prices to make our competitors more money, can we? What would the people say about us then?” Lin Yao, somewhat disgusted by these people’s principles, broke the silence directly. “The price of five yuan will not increase unless raw material prices rise significantly in the future. Otherwise, Minhong will continue to make profits according to this ratio, which will not violate national price policies or relevant pharmaceutical production regulations.”
"Xiao Lin," Chairman Chen opened his mouth but finally spoke, without any condescension. He wouldn't look down on this young master of Minhong; after all, his parents had saved his life. "It's not about your profit margin, it's just that this price is really too low."
“Although Minhong’s medicine only has three small packets per box, which is less than the five or six packets of other brands, it is still considered a complete course of treatment. Your ex-factory price is not low, but you have set a retail price. This price range is not easy for distributors and retailers to operate. According to the sales rules of over-the-counter drugs, it is more reasonable to set it at eight yuan per box. This is the only way to guarantee the profits of distributors and retailers at all levels.”
"Grandpa Chen," Lin Yao smiled, thinking to himself, "Are you trying to sabotage us right after we just saved your life? Isn't lowering the price of medicine exactly what you've been advocating for?"
“That’s right.” Chairman Chen answered without hesitation. “The reason I advocate controlling drug sales prices is to reduce the burden on ordinary people. However, based on your ex-factory price, there is indeed not enough room for maneuver. If we don’t raise the price, the provincial medical and pharmaceutical sales company will also give up distributing this drug. You have to understand that each level of distributor needs a profit, and this room is really not enough.”
After a pause, Chairman Chen continued, "Yesterday, I signed an agreement with you on behalf of the sales company, but when I went down to the lower-level agencies, none of them were willing to sell this drug. There's simply no room for maneuver. Everyone needs to make a living, and without sufficient profit to support it, even the best product can't penetrate the market. So today, I'm here to discuss the repricing with you. I personally think eight yuan per box would be more appropriate."
"Old Chen!" Section Chief Li from the Price Bureau was somewhat surprised. Before coming, they had agreed to price this product at over twenty yuan. After all, Minhong's medicine was very effective, far surpassing similar products. Therefore, pricing it at two or even three times that of other similar products was reasonable, so that people wouldn't reject products from ordinary pharmaceutical factories when making a purchase. However, they didn't expect Old Chen to change his mind at the last minute. Eight yuan? That's worse than not saying anything. If it's priced the same as the eight to twelve yuan children's cold medicine on the market, people still won't choose other products, and the task assigned by the deputy director will be impossible to complete.
Chairman Chen ignored Section Chief Li's reminder and stared intently at Luo Jimin. In his mind, the only person who could make the final decision for Min Hong was Luo Jimin.
Hearing Chairman Chen's words, Lin Yao felt relieved, thinking that he had misunderstood the old man and thought he was an ungrateful scoundrel.
Chairman Chen's words were very good, reasonable and well-founded. Wen Youmin, who has been immersed in the pharmaceutical production industry for many years, had long ago proposed an eight-yuan pricing plan. This price, based on the ex-factory price, is the minimum standard for non-prescription drugs. Any lower and it would affect sales. After all, even if we don't want exorbitant profits, distributors and retailers at all levels still need reasonable profits.
What Chairman Chen and Wen Youmin didn't know was that Minhong was planning to break the existing distribution model and adopt a sales method with a maximum of two levels. They would ship the drugs from branches in various regions, pass them through at most one level of distributors, and deliver them directly to the final retailers. The price difference of 2.25 yuan was enough to make the operation possible. Of course, this profit margin was much smaller than that of other drugs, but distributors could increase their overall profitability by increasing sales volume.
"Mr. Chen, the price will not be adjusted for the time being. We have no objection if the Provincial Medical and Pharmaceutical Sales Company terminates the agreement. The agreement originally stipulated that the prepayment must be made within seven working days for it to take effect. Let's just pretend that agreement was never signed. Thank you for your concern. We will think of another way."
Luo Jimin gave his final, definitive answer. With the blueprint outlined by his son Lin Yao, he was not worried about Minhong's future at all. It didn't matter if it didn't sell well for the time being; it could just be stored in the warehouse. Given Minhong's production capacity, the future sales network would indeed require a large amount of inventory to support it. Just look at the buying frenzy in the Chengdu market over the past three days, and you'll know that there was no need to worry about actual product backlog.
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Chapter 193 Joint Blockade
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"This is a problem. If the provincial medical and pharmaceutical sales company won't sell our products, other major distributors won't sell them either." Wen Youmin's face was a little uneasy. Although he was only the deputy factory director in charge of production, he had already regarded Minhong as his own home. He thought Chairman Chen's opinion was very reasonable, so he was a little anxious. "Jimin, shouldn't we seriously consider Chairman Chen's opinion? What he said makes a lot of sense and has no personal feelings involved."
The people from the Price Bureau and the Drug Administration left Minhong with grim expressions. One of the clerks who came with Section Chief Li from the Price Bureau even subtly asked Meng Mu, who had the lowest rank, for a few bottles of drinks, but was politely refused by the young planning department manager.
After learning about Minhong Pharmaceutical's corporate culture, Meng Mu confidently rejected this unethical practice, feeling quite pleased with himself. Having several years of work experience, he found a different feeling at Minhong—a refreshing and invigorating experience that made him particularly motivated at work. He wanted to grow together with this vibrant and passionate company.
“It’s alright, we’ll do direct sales.” Luo Jimin’s hearty laughter eased some of the pressure in Wen Youmin’s heart. “It’s okay not to recruit general distributors. This is no longer the planned economy era. No one can truly dominate the market. The market is decided by the people.”
“But…” Wen Youmin was still a little anxious. Even Wu Jianwei, who was standing next to him, frowned and remained silent. There were many intricacies in the pharmaceutical sales business. It was precisely because of these troublesome matters that he had not let Kangqi Pharmaceutical Factory manufacture and sell pharmaceuticals in the past, but only chose to assist in processing.
In today's society, distribution channels are paramount. Even the best products will fail to gain traction without successful channel management. This is the real reason why advertising is so rampant and ubiquitous.
In fact, the ultimate goal of many product advertisements is not to attract consumers, but to attract distributors, give distributors confidence, and enable manufacturers to use advertising investment to have greater capital to develop the best distributor channels.
Of course, ordinary consumer goods serve both purposes, such as cooking oil, salt, soy sauce, vinegar, and detergents and cosmetics. These products are highly substitutable, with many competing products. The purpose of advertising is not only to attract channel distributors, but more importantly, to give consumers an impression so that they will naturally choose to buy their products when they are in supermarkets.
"Don't worry, nothing will happen. As long as you manage production well, that will be a great achievement." Luo Jimin patted Wen Youmin on the shoulder, silently apologizing to himself.
The matter of opening hospitals and clinics across the country is currently classified and cannot be disclosed to the public to avoid affecting progress. This is something Lin Yao has repeatedly emphasized and demanded. Even the security guards dispatched to various locations were not allowed to contact the hospitals and clinics; they were only temporarily placed in temporary locations to carry out related intelligence work.
The branches currently affiliated with Yijia will be uniformly incorporated into Minhong when conditions are ripe. This buffer period is a good opportunity for Minhong to find and test ambitious business partners. The problems encountered by Minhong headquarters will also be encountered by the branches in the future. It is good to use the headquarters as a pilot project to summarize some experiences so that the work can be carried out more smoothly in the future.
Lin Yao didn't stay with his parents any longer. He rushed off to arrange for Ge Yong to investigate the Price Bureau and the Drug Administration, so he could better prepare for potential obstacles in the future. Having adjusted his mindset, Lin Yao was no longer afraid of difficulties, but responding without preparation was clearly not something a wise person should do. The importance of intelligence in modern society is self-evident; sometimes it's even a powerful weapon.
Just as Wen Youmin, who had been relieved, was about to leave the meeting room to manage his production, his plans were interrupted by the market manager and purchasing manager who rushed into the room. He sat back down in his chair to observe how things would unfold. He knew that Luo Jimin wouldn't reprimand him for this overstepping of authority, after all, he was someone who genuinely worked for Minhong.
"Mr. Luo, all the pharmacies in Chengdu that cooperate with us are demanding to terminate the agreement, remove the products from their shelves, and even request refunds." Ding Ruonu, the marketing manager who had just rushed in, didn't even have time to catch her breath before reporting the situation.
"General Manager Luo, Chuanlong Pharmaceutical has requested a price increase for medicinal herbs, with the increase reaching 13%. Their reason is that the drought in the west has caused a nationwide surge in medicinal herb prices. However, our purchasing department has verified this, and the national market for medicinal herbs has been very stable recently, with even a downward trend in prices," the purchasing manager reported immediately.
Luo Jimin frowned, his face turning grim. The successive attacks made him want to smash things. The pharmacies in Chengdu that were selling Minhong's products had only been operating for less than a day, and now they were already starting to remove them from their shelves. It was as ridiculous as a joke.
"What is the pharmacy's reason?" He didn't blame the marketing department for its poor performance. He knew it wasn't the marketing department's fault; it was all due to the external environment. Since Minhong dared to confront traditional bad habits head-on, she should be prepared to endure hardship.
“Yesterday I spoke with the purchasing department of Fushengtang Pharmacy, and today he told me privately the reason. He said that several large pharmaceutical distributors in Chengdu have joined forces to pressure them to remove our products from the shelves, otherwise they will stop supplying the medicines they distribute.” Ding Ruonu answered loudly with a frown. This marketing elite, who was promoted from a technical position, had not yet learned to read the boss’s face and act cautiously.
Of course, this is related to the atmosphere at Minhong. As long as you follow Minhong’s corporate culture, this honest and straightforward work attitude will not affect you at all. Minhong originally planned to adopt an unconventional business management model, and the external marketing department did not need to engage in any messy or illegal activities. Ding Ruonv, who was not influenced by the bad practices of market sales in society, was just right to do this kind of work.
Seeing that the boss was still frowning and thinking, Ding Ruonu continued, her tone quite angry, "After receiving the notice from major pharmacies, I made a special trip to meet with the purchasing department of Fushengtang and found out some things. Today's collective boycott of our products was initiated by Chuanlong Pharmaceutical, and several large pharmaceutical distributors in Sichuan are involved."
"Chuanlong Pharmaceuticals?!" the purchasing manager, who was standing at the conference table waiting for the report, exclaimed in surprise. "They really know how to do bad things."
"Xiao Ding, don't be nervous, it's okay. We expected this to happen." Luo Jimin relaxed his eyebrows and looked at Ding Ruonv gently. The smile on his face gradually calmed her excited mood. As the company's boss, he couldn't show that he was in a dilemma. A leader must always make his subordinates feel confident in order to motivate them.
Luo Jimin stood up, patted Ding Ruonv on the shoulder, and said, "You paid for your own expenses yesterday and today, right? Go to the finance department for reimbursement later. The marketing department didn't specifically audit entertainment expenses, which was our mistake. Although we don't advocate bribery, normal entertainment should still be done. Your marketing department should submit a budget proposal first, and then we'll discuss it and set a standard. From now on, the company will pay for these things; we can't let individuals suffer losses."
"Thank you, Mr. Luo." Ding Ruonu nodded gratefully. "Mr. Luo, how should we handle this? My personal opinion is to issue a notice allowing Xingrentang Pharmacy to sell the medicine exclusively. Chengdu is only so big. Are we worried that the parents of those children won't know to come and buy the medicine? Just look at the still bustling scene at the Shawan Convention and Exhibition Center. We can tell that we don't actually need to rely on these chain pharmacies for sales."
Luo Jimin nodded repeatedly; he shared the same thought.