Corporate View: Lisa Wang, Anheuser-Busch InBev China

Published: May 2011

Anheuser-Busch InBev China is the Chinese arm of the Belgian-based brewer Anheuser–Busch InBev. Headquartered in Shanghai, its 33 breweries supply the Chinese beer market – the largest in the world. Its focus brands include Budweiser, Harbin and Sedrin.

Lisa Wang

China Treasurer

A telling insight into the growth of the Chinese economy is afforded by the country’s consumption of beer. Twenty years ago demand was steady but unspectacular. In the two decades since, the nation has rapidly acquired a taste for the liquid and alcohol consumption has outstripped the West’s.

China is the world’s largest and fast-growing beer market. “The market is not yet really consolidated and the growth rate is still quite high. There are a lot of players still competing with each other,” says Lisa.

In November 2008, InBev acquired Anheuser-Busch, to form Anheuser-Busch InBev, the world’s leading brewer and one of the world’s top five consumer products companies. Both companies had already established a presence in China, so when the two joined forces the new company found itself commanding a sizeable share of the Chinese market to boot.

Currently with 33 existing breweries and several green field constructions ongoing or planned, and with presence all over China, ABI China is ready to compete more effectively in the world’s largest beer market.

The treasury team

In Shanghai, Lisa Wang leads a team of four managers and analysts to cover cash management, liquidity planning, risk management, insurance, credit control activities, and a number of process improvement projects.

“Our company has established a Business Service Centre in Xiamen. It allows us to improve the control and efficiency of transactions. Some of our treasury payments and reporting jobs are already being handled in this service centre. As we roll out more SAP ERP systems in the future, we will move more entities, transaction handling from local teams to the service centre.” says Lisa

Which cash management banks do you use?

We use both foreign and local banks. We have set up a cash pool with one of our international relationship banks. This cash pool effectively allows the cash-rich entities to enter into entrustment loans with cash poor entities. By the end of 2009, we saw our interest costs decrease significantly as a result of this.

All the entrustment loans are done automatically and seamlessly without manual input. At the end of the day, the entity accounts are zero balanced (ZBA). The cash is swept to the pool head. There are many entities in the pool and this number will rise as we build new breweries. At the right moment, we will add more entities into the pool.

We also use some local Chinese banks and we have kept those basic accounts and we have good relationships with them. We continue to use them to handle payroll. They offer us good credit lines to support our growth.

How are your relationships with these banks?

The relationship with our banks, both local and international ones, is good. However, that’s not to say that it cannot be improved. For example, last year we gave feedback to some of our banks to speed and improve their e-banking system – which they did. We always provide candid feedback; we don’t hold back. The local banks are very diligent and professional – great partners who deeply understand the local market. They currently provide us with payroll services and credit facility lines. We also have some banks providing us with collections services. We have different kinds of customers – some big and some small; we have different cash collection models, so the banks have to tailor services to us.

What FX exposures do you have?

Not a lot. We always try to hedge ourselves with suppliers. In other words, we tailor our contracts so that we mitigate our FX risk and also our commodities risk directly with suppliers. Additionally we have a partial natural hedge given our export business.

You have improved your DSO and DPO in the past two years. How did you do this?

After the merger with Anheuser-Busch we further focused on cash flow generation and working capital optimisation. We achieved great results thanks to good cooperation with our suppliers and a lot of hard work internally to optimise our processes.

In respect to suppliers we were honest about the challenges we were facing after the merger and we negotiated new payment terms. Suppliers overall in China were very quick to react and did a great job. We feel proud that our better terms were achieved without delaying payments but by fair discussions and negotiations. One key success factor for us has been the centralisation of procurement, which makes negotiation much easier.

The second thing we did was to link the KPI of the cash flow to the majority of our employees. This person can be a manager, a brewery worker, a finance person – everyone has the cash flow running off their KPIs. Everybody is then trying to do the best he or she can with regard to that. For example, the sales people want to collect more receivables and they are very cautious in terms of giving out new credit.

What regulatory problems do you have in China?

China is a developing economy facing huge growth and we have seen the regulatory environment improving over time. We do have challenges in China but they are not materially different from the challenges we face in other developing countries like Brazil. Overall we receive very professional support from local regulatory agencies, like SAFE [the State Administration of Foreign Exchange].

What are the challenges you face at the moment?

Cash flow forecasting accuracy is difficult. With so many entities, we find that some of the smaller entities have poor cash flow forecasting. This is not a situation confined to this company. Many treasurers face the challenge of improving their cash flow forecasting accuracy so they can see how much of a shortfall they may have in the next two weeks – or whatever.

To improve the situation, we are improving the training of our staff. We have insisted that the local brewery finance team do a good job and don’t take it lightly when they do their forecasts. They can have a big impact on our business success. We want them to do it every week, on a rolling basis – every Friday for the next eight weeks.

For some of our business entities we forecast the cash flow ourselves; for others it is done locally. We have a pay schedule for the month so the cashiers in the shared service centre aren’t supposed to make payments every day. This will hopefully make the forecasting more accurate in 2011. Better communication, training and methodology are key when it comes to cash flow forecasting.

We also face a challenge in getting bank coverage for some of our new businesses. We have branched out recently and entered new cities. Our company is expanding rapidly where international bank coverage isn’t necessarily there, so we need to keep up good relations with local banks.

What projects do you have planned in 2011?

We are working on a multi-bank cash management system. It will bring us visibility of our local bank accounts and will allow us to see our balances on all our accounts. We are collaborating with our bank partners now. The process started in 2011 and I am optimistic that two or three local banks will be on board by the end of the year.

We are also developing an automated payment system. We want a safe payment process – from the creation of the vendor’s master data to the purchase request approval. This will involve the automatic uploading of payment files from the SAP system to the e-banking system. We want to improve the control and efficiency of the payment process.

The collection picture is also very challenging. We have a lot of cash collection models – big customers, mom and pop shops, sometimes third-party logistic companies are involved – it is always a mixed picture. In 2011, we will be working on that.

We have made a firm commitment to China and have an aggressive expansion plan in place. We are very excited about the future.

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