Case Study: Sunbelt Beverage

A leading wine and spirits distributor with growing, profitable multistate operations was failing to meet internal debt reduction goals established at the time of acquisition by a private equity sponsor.  Excess inventory investment resulted in a requirement for unexpected credit line over advances.  We were retained by the sponsor to evaluate management, review the organization structure and recommend improvements to the company’s financial control systems.

Our analysis indicated that, generally, the businesses functioned very effectively from an operating cost and marketing standpoint.  However, failing to consider expense tradeoffs involving inventory carrying costs combined with loading pressure from suppliers at certain times of the year resulted in excess inventory and liquidity issues.  We assisted management in developing strategies for negotiations with suppliers related to optimizing seasonal stocking of inventories.  This entailed the company accepting slightly higher unit costs in exchange for greater ordering flexibility to better manage its inventory investment.  In addition, we made numerous recommendations relating to improvements in management reporting, communications and cash management and inventory control processes that were implemented by the company.  After completing the assessment phase, we were retained to design and implement a new computerized purchasing and working capital management and control system as well as the associated procedures that enabled the new processes.

Major inventory reductions were achieved and debt was reduced significantly below the projections made at the time of acquisition despite above plan sales growth.