Unconventional Times Call for an Extraordinary Approach to Cash. Are You Ready?

PrimeRevenue is fortunate to do business across many industries, which gives us an interesting perspective on what common themes are percolating. One theme we’re seeing as we move into the second half of 2017 is that changes in the competitive landscape and consumer behavior are causing some very real, long-term disruptions across a number of industries.

Take food retail, for example. In an industry that has been built on recognizable brands, increasingly global discount-retailers like Aldi and Lidl (and their private-label heavy selections) are growing rapidly. Then there’s Amazon’s purchase of Whole Foods, which stands to be one of the industry’s most significant and historic disruptions. With Amazon’s expertise, Whole Foods may well improve inventory management, drive online-order / in-store pickup more quickly, add a Prime-style loyalty program – ultimately increasing margins. The impact of this announcement was summed up nicely in this article from Harvard Business Review:

“When Amazon announced last week that it will acquire Whole Foods Market…Amazon’s stock price rose 2.4% on the news, increasing its market capitalization by $11 billion. At the same time, the price of SuperValu plummeted 14.4%, Kroger dropped 9.2%, and Sprouts fell 6.3%. You could almost hear the three-year plans of every grocer, and nearly every other traditional retailer, grinding through the shredding machines.”

Food retail’s sister industry – packaged foods – is experiencing its own changes and disruptions. As consumer preferences have shifted to less processed and more organic foods, the makers of many venerable brands are struggling (Kraft Mac and Cheese, Campbell’s Soup, etc.). It’s causing some companies to sell off underperforming product lines, like Nestle SA, which is actively looking to sell its U.S. confectionery business. Other companies are acquiring their way into greener, healthier markets.

And let’s not forget what’s happening in the automotive industry. Volvo recently announced all of its vehicles will be electric or hybrid starting in 2019. The 2017 model of Toyota’s Prius Prime will feature an advanced solar panel system courtesy of Panasonic. Meanwhile, Ford ousted its CEO due to concerns the company wasn’t responding quickly enough to once-unlikely competitive threats: autonomous vehicles and ride-sharing.

The pace and scale of change happening right now across many industries is mindboggling. Most of us can’t get our heads around it until companies like Volvo and Amazon hit the reset button. How does a company like Ford reinvent itself for a market that may soon look very different than it did even three years ago? How does a company like General Mills breathe new life into struggling parts of its business, like cereal or yogurt? How does a super-sized, inventory-heavy Kroger compete with a hyper-efficient Whole Foods that’s been turbo charged by an eCommerce and logistics ninja?

Just as importantly, what happens to suppliers during an industry transformation? The implications of these broad-sweeping changes are just as serious for suppliers as they are for their customers – if not more so.

How companies respond to these kinds of changes is obviously different depending on the industry. But there is a common denominator: the responses require significant capital. Big steps and bold actions usually require billion-dollar investments.

So where does that money come from? Conventional methods include selling off parts of the business, raising debt or making large-scale cuts to operations. But, for some companies, these options aren’t always viable or wise. If your business is already struggling, is taking on a $1B+ in debt a good idea? Will cuts in spending deliver enough savings in the short-term?

What companies need is immediate access to large sums of working capital. Supply chain finance meets this need head-on. At PrimeRevenue, we enable buyers and suppliers to immediately improve cash flow so they can make meaningful – and often unconventional – improvements to their business. It’s why more than 50 percent of the top 20 food and beverage companies in the world choose to do business with us. The same goes for nearly half of the top 20 global automotive part suppliers.

These companies have recognized that supply chain finance isn’t just a way to improve cash flow – it’s a path to transformation and growth during these very interesting and unconventional times.