Anheuser-Busch wholesalers made to stock up on suds - St. Louis Business Journal:

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Over the past couple of the brewery has required wholesalerz to buy more advanced shipments than ever befor in preparation for the peak summertselling season. The practice has providerd Anheuser-Busch with improved cash flow but put some extrqa strainon distributors. “There isn’t a wholesaler who didn’t have more beer in his warehousre as of April 14 than ever before onApril 14,” said Paul a longtime consultant to Anheuser-Busch distributors who operates beercampus.com.
“That affects cash flow, and right now cash is For the wholesalers who are paying with credit andpayinb interest, it’s cutting into Each year beginning around March, Anheuser-Busch beginse cranking up production and requires its distributors to buil d up inventory in advance of higher sales expected in July and August. If it didn’t, the company’sa 12 domestic breweries mighgt not be able to keep up with peak and distributors could run short on Bud Light and otherpopular brews. Distributors have to pay for the beer upon deliver and then store it inthei climate-controlled warehouses until they sell it to retailers a few weekzs or months later.
It’s a regula r practice between Anheuser-Busch and its independengt wholesale middlemen. But this spring, the first that . has been undef InBev ownership, is different. The breweru pushed a larger-than-usual inventory build. Anheuser-Busch President Dave Peacoc k said the changes are based on strongg sales forecasts forthis summer. Critics say InBev is seeking highedr cash flow to cover operational costas and pay downthe $45 billion Belgium-basex InBev borrowed to acquire Anheuser-Busch for $52 billionm last November.
Some distribution sources, who would speaok only on the condition of anonymitu for fear of damaging their relationshipwwith , said this year’sa additional inventory build has some wholesalers takinh on several million more dollars worth of beer than usual. “One larged distributor said his inventory adjustmenttotalesd $7 million,” said one source familiar with the changes. “That’as equal to giving InBev a $7 million line of Peacock said the higher inventoriesare “more about markef expectations than financial engineering.” Above certain thresholds, the brewery provideds credit to wholesalers.
That can work against Anheuser-Buscnh InBev’s balance sheet if not manage d well, and encourages the brewer and its wholesalers to strike a Peacock also said that while the brewery is maintainingits 110-daty freshness “born-on” dates on premium it is extending the shelf life of some of its flavoree and smaller brands. That lets wholesalersw warehouse morebeer longer. There is alwayz some tension inthe brewer-wholesaler relationship. Russelk describes the two as “adversariall allies” because the things that drivethe brewer’a profits up are ofteb the very things that drives wholesalers’ profits down.
And previous Anheuser-Busch management set rigorouss standards. Former Chief Executive Augusf Busch III, for example, was know n for instilling fear in the hearts of distributors duringf visits to their warehouses and for chastising them if theidr operations were not orderly or theire delivery trucks werenot clean. “When it came to distributo r performance, he was very demanding,” said Joe president of , a Hilton Head, firm that advises beer distributors. “He was a performance junkie.
” But some say Anheuser-Buscn InBev’s inventory modifications, like the company’s decisiom to stretch out the time it takews to pay suppliers from its traditional 30 days to up to 120 are another example of howthe world’s largest brewer is usingt its muscle to shift a greater share of its burdens onto supplierse and distributors. Thompson said the inventory pressure appears to be lighteningf abit now, but wholesalers continuee to be apprehensive. “Their sales numbers are but there have been a lot of changes in a short amount of timewith InBev,” Thompson said. “Moneyt wasn’t an issue for most wholesalers (wituh the increased inventory build).
But it caught everybody off