Alcohol Importers Toast Launch of Purchase Order Finance
- Navigating excise
- Cashless importing
- Leveraging distributor credit
The Russian Health Ministry has estimated that its thirsty citizens consume 200 million deciliters of vodka a year. This sounds like a lot…and it is! About 4 billion bottles. Amazingly, the Russian still have a drop or two left over to export. More than a drop actually, because over the last decade it’s replaced whiskey as the most popular spirit in the world.
Not surprisingly, some of it manages to trickle into Australia. In fact Australia is the largest consumer of Vodka in the southern hemisphere.
This would naturally lead one to believe that Vodka importers in Australia would be in high spirits.
Apparently, many are not. This is mainly due to the very high excise placed on spirits (in fact any imported liquor with a high alcohol content) by the government.
Sometimes the excise can be over 3 times more than what the importer paid for the landed goods.
So what, you’re probably saying. Just add the excise to the cost of goods plus a margin and you’re in business.
Not so fast Vladimir!
Even if you have quality buyers (distributors) waiting eagerly for delivery, you must pay the excise to the government before the vodka can be released from the bonded warehouse.
This means, you’ll need cash. And if you haven’t got enough…well that’s how I found out about this whole vodka gig a few months ago.
An importer called the office. He said he’d tried other debtor financiers but they couldn’t help.
This makes sense because if there’s no invoice from a distributor, what are you meant to finance against?
So I did, what I normally do, when I don’t know what to do.
I asked Dan.
“Get the distributors to show their intent to buy by having them sign purchase orders. We can fund against that.”
He shook his head and then went back to his computer screen. I think Dan vicariously lives through his PC. Or maybe I’m just getting older. Or maybe both.
But he’d solved the problem. I called the importer. We put the deal together and Boris is your uncle!
The concept can be applied to any situation where a wholesaler/importer has landed goods, quality buyers but insufficient cash to pay excise.
So it’s bottoms up for PO finance or should I say NAZDAROVYE?