
Buy Now, Pay Later Helps JAB Billionaires Build Beverage Empire - mr_golyadkin
https://www.bloomberg.com/news/articles/2018-01-30/buy-now-pay-later-helps-jab-billionaires-build-beverage-empire
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pasdoy
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 life balance, but price/cost and
work/reward conditions imposed by the billion dollar firms. Side note, they
often used umbrella non-profit organization that are "active" in the community
to conduct business. I could go on and on on this topic.

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aphextron
>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?

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s73v3r_
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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pfarnsworth
Not paying suppliers for 300 days sounds extremely exploitative, especially
since most of the suppliers are from 3rd world countries. Supporting companies
that have such draconian payment contacts is immoral, there should be a push
for more fair payment terms.

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gwern
> “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.

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charlesdm
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 introducing caps on interest deductions
(e.g. at most 30% of EBITDA per tax year). Since you're paying more to your
supplier, which tends to be an at arms length market rate transaction, the
entire acquisition cost can just be tax deducted and thus falls outside of the
application of said laws.

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gwern
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.

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charlesdm
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.

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B1FF_PSUVM
What I love about these stories is the demonstration of how absurdly rich (as
a civilization) we have become.

Things that in no way, shape or form are needed for bare survival account for,
i don't know, 95% of our expenses?

We've always been pretty profligate, but I'd say that for many centuries we
did not break 50%. Does anyone have hard data?

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jjoonathan
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.

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sremani
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.

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jjoonathan
No doubt. The point is that there's work to be done -- and it's not the type
of work we've collectively gotten so good at.

> I understand flipping the sanctimonious "bird" may make you feel like some
> kind of intellectual gangster.

Really? You think I primarily care about the single most severe caveat to the
success of our industrial economy _in order to look cool_?

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diogenescynic
They aren’t great to their own employees either. Several departments didn’t
get bonuses this year despite meeting goals. They don’t seem like a generous
employer.

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unknown_apostle
So they negotiate 300 days of credit and cajoled you into becoming a kind of
banker. But hey, why complain? You're being "rewarded" for the waiting while
they grow even bigger (and more fragile) on the acquisitions you helped to
fund. It's win-win!

This article is yet another example of how not just the financial economy but
also the world of "real stuff" has become calibrated on policies of extremely
low interest rates. The financialization of everything is complete.

And here's the important bit of the article:

"Sharply higher interest rates or a sudden spike in futures prices could leave
traders with losses or stretch their financing needs as hedging costs go up."

The priests have spent a decade praying and sacrificing central bank balance
sheets to the gods of inflation. Some day their prayers will be heard but we
may not like it when that happens.

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epanchin
Does Fair Trade certified coffee and similar impose immediate payment terms?

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Cw67NTN8F
TL;DR After nestle they are the largest buyers of coffee beans so they act
like Walmart. But they pay interest, at European rates (very low.)

$58 BILLION...in six years. It might not end well. A small hiccup at those
numbers can kill you.

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fiveFeet
Thank you. I wish there is an automated way to get a "TL; DR" version of a
page. These bloomberg, wsj, nytimes articles are lengthy with very little
useful information.

