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Buy Now, Pay Later Helps JAB Billionaires Build Beverage Empire

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Re: Buy Now, Pay Later Helps JAB Billionaires Build Beverage Empire

#21

Post by gwern »

charlesdm wrote: post #18
gwern wrote: post #15

Earlier quoted context omitted.

> “Our extended payment terms have been in place for many years,” said Becht, JDE’s chairman. “JDE as buyers have paid for the extra costs that go along with the extended pay periods, so this cannot be used as an argument for the alleged extra pressure some trading houses might now be experiencing.” It's just a different way of financing. The interest is built into the higher prices JAB pays.

It's tax avoidance and balance sheet optimisation. No short term debt on the balance sheet, meaning you can borrow more long term debt. Access to debt is important to these multinational companies, because they generally only grow through large M&A deals. They're rolling companies up into one behemoth. The higher rated the debt is, the cheaper (and more) they can borrow. A lot of developed countries are also introduc…

Neither of that hurts the 'poor exploited little suppliers' pfarnsworth is concerned about, though - balance sheet optimization is irrelevant to them or beneficial in helping JAB & thus increasing demand for their supplies, and likewise the tax thing is neutral or helps them.

Re: Buy Now, Pay Later Helps JAB Billionaires Build Beverage Empire

#22

Post by charlesdm »

gwern wrote: post #21
charlesdm wrote: post #18

Earlier quoted context omitted.

It's tax avoidance and balance sheet optimisation. No short term debt on the balance sheet, meaning you can borrow more long term debt. Access to debt is important to these multinational companies, because they generally only grow through large M&A deals. They're rolling companies up into one behemoth. The higher rated the debt is, the cheaper (and more) they can borrow. A lot of developed countries are also introduc…

Neither of that hurts the 'poor exploited little suppliers' pfarnsworth is concerned about, though - balance sheet optimization is irrelevant to them or beneficial in helping JAB & thus increasing demand for their supplies, and likewise the tax thing is neutral or helps them.

Most of those businesses however would probably prefer to get their capital back sooner. Unlike large corporations, for a smaller business working capital is generally worth more than the 2-4% interest they can collect on an outstanding delivery for 7 months.

Re: Buy Now, Pay Later Helps JAB Billionaires Build Beverage Empire

#23

Post by Retric »

sremani wrote: post #12
jjoonathan wrote: post #10

Earlier quoted context omitted.

Yet somehow a large fraction of our population still has to spend a large fraction of their time struggling to secure food and shelter for themselves.

Struggling for food was always the default world wide. Compare any time in human history to now, nothing comes close. I understand flipping the sanctimonious "bird" may make you feel like some kind of intellectual gangster. Humanity made progress in the right direction in spite of its many mistakes and especially Post WWII world had made mind numbing progress that is undeniable across the board.

Hunter gathers actually tended to have very 'casual' lifestyles with easy access to food. Infectious disease was less of an issue due to low populations making them harder to transmit. Violence however was the major issue keeping populations down.

Farming allowed for better defense though increased population density and critically by limiting migration limited contact with outside groups. But, historically farming involved vastly more work.

However, due to are vastly longer history as hunter gathers the average person throughout history probably worked ~2-4 hours per day and had plentiful access to food.

Re: Buy Now, Pay Later Helps JAB Billionaires Build Beverage Empire

#24

Post by aphextron »

pasdoy wrote: post #13

Any idea where they get their coffee beans? While working in that industry for traders in UK it was common to lend money to African farmers for them to buy crops and tools (from the same firm) and then agree on a market price per pound produced. The trading firm would then pay the farmer months or years after. It really opened me on the work culture and conditions over there. By conditions I don't mean work hours or…

>The trading firm would then pay the farmer months or years after.

What is the incentive here for the farmer though? Why would they go along with this rather than just sell their beans at the market price?

Re: Buy Now, Pay Later Helps JAB Billionaires Build Beverage Empire

#25

Post by rhizome »

aphextron wrote: post #24
pasdoy wrote: post #13

Any idea where they get their coffee beans? While working in that industry for traders in UK it was common to lend money to African farmers for them to buy crops and tools (from the same firm) and then agree on a market price per pound produced. The trading firm would then pay the farmer months or years after. It really opened me on the work culture and conditions over there. By conditions I don't mean work hours or…

>The trading firm would then pay the farmer months or years after. What is the incentive here for the farmer though? Why would they go along with this rather than just sell their beans at the market price?

It sounds like a variant of sharecropping to me.

Re: Buy Now, Pay Later Helps JAB Billionaires Build Beverage Empire

#26

Post by [deleted] »

charlesdm wrote: post #22
gwern wrote: post #21

Earlier quoted context omitted.

Neither of that hurts the 'poor exploited little suppliers' pfarnsworth is concerned about, though - balance sheet optimization is irrelevant to them or beneficial in helping JAB & thus increasing demand for their supplies, and likewise the tax thing is neutral or helps them.

Most of those businesses however would probably prefer to get their capital back sooner. Unlike large corporations, for a smaller business working capital is generally worth more than the 2-4% interest they can collect on an outstanding delivery for 7 months.

[deleted]

Re: Buy Now, Pay Later Helps JAB Billionaires Build Beverage Empire

#27

Post by dkoubsky »

pasdoy wrote: post #13

Any idea where they get their coffee beans? While working in that industry for traders in UK it was common to lend money to African farmers for them to buy crops and tools (from the same firm) and then agree on a market price per pound produced. The trading firm would then pay the farmer months or years after. It really opened me on the work culture and conditions over there. By conditions I don't mean work hours or…

I'm interested in hearing more.

Re: Buy Now, Pay Later Helps JAB Billionaires Build Beverage Empire

#28

Post by scott00 »

charlesdm wrote: post #18
gwern wrote: post #15

Earlier quoted context omitted.

> “Our extended payment terms have been in place for many years,” said Becht, JDE’s chairman. “JDE as buyers have paid for the extra costs that go along with the extended pay periods, so this cannot be used as an argument for the alleged extra pressure some trading houses might now be experiencing.” It's just a different way of financing. The interest is built into the higher prices JAB pays.

It's tax avoidance and balance sheet optimisation. No short term debt on the balance sheet, meaning you can borrow more long term debt. Access to debt is important to these multinational companies, because they generally only grow through large M&A deals. They're rolling companies up into one behemoth. The higher rated the debt is, the cheaper (and more) they can borrow. A lot of developed countries are also introduc…

I would expect deferred payment for goods already received to show up on the balance sheet as accounts payable, and would put that in the "short term liabilities" bucket along with short term debt for modeling purpose. I'm skeptical this technique would have any influence on debt ratings or pricing. Am I missing something?

Re: Buy Now, Pay Later Helps JAB Billionaires Build Beverage Empire

#29

Post by s73v3r_ »

aphextron wrote: post #24
pasdoy wrote: post #13

Any idea where they get their coffee beans? While working in that industry for traders in UK it was common to lend money to African farmers for them to buy crops and tools (from the same firm) and then agree on a market price per pound produced. The trading firm would then pay the farmer months or years after. It really opened me on the work culture and conditions over there. By conditions I don't mean work hours or…

>The trading firm would then pay the farmer months or years after. What is the incentive here for the farmer though? Why would they go along with this rather than just sell their beans at the market price?

The incentive is not starving. People stuck in situations like this often had some kind of hardship befall them. Combine that with unscrupulous traders, and you get something like this.
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