How a Veracruz Packer Expanded into Distribution with ProducePay
For produce packers, cash flow is key. It’s cash flow that enables them to prepare for the upcoming season, purchase supplies, pay employees on time, and more. However, maintaining a good cash flow is not always easy. A range of operational challenges can arise that make it hard to maintain financial predictability and stability.
We worked with a lime and avocado packing company in Veracruz, Mexico, which was dealing with cash flow issues – until ProducePay stepped in to provide solutions. So successful was the partnership that the packer was then able to expand their business from solely packing into both packing and distribution.
The Challenge: Pivoting from Produce Packing to Distribution
The Mexican packer acquired their fresh produce from a Colombian exporter. However, after a 5-year partnership, the distributor abruptly decided to cease commercial relations. This was a shock for the packer, and it immediately impacted cash flow.
The only way out of the situation was to bring distribution in-house, and stop relying on Colombian exports.
However, the company’s former partner had been responsible for infusing cash flow to cover on-time payments to growers. This meant that, though they wanted to kick off distribution, the Mexican grower faced a major lack of cash flow.
The company’s initial recourse was to seek commercial partners in the U.S. market to avoid losing the trust of their grower-partners. They were fortunate to quickly find a customer who agreed to pay in advance 80% of each of their shipments, which allowed them to continue with their stocking and packing operations.
However, the company still had to cover the other 20% while final payment was completed. Over time, this placed more and more pressure on their cash flow.
The Solution: ProducePay’s Quick-Pay+ Financing Program
The company’s financial dilemma led its managers to look for financing options. On their search, they came across ProducePay. Upon learning about the advantages of our Quick-Pay+ financing service, the company quickly decided to work with us.
Through our offering, the company is now guaranteed to receive up to 96% of the value of each shipment within 24 hours once the customer accepts the product.
For the company, having 96% of the payment in advance – instead of 80% – makes a big difference to their business. They now have more financial support to continue their operations.
The Mexican company has successfully expanded into distribution, and is now able to pay all of its growers’ shipments on time. They have even increased their weekly deliveries, maximizing storage and shipping capacity. This means customers receive more produce consistently, and the company has boosted its sales. It has also begun analyzing whether to start working with other crops, such as mango and banana.
One of the company’s managers said:
“Thanks to Quick-Pay+, we solved our financial backup problem by being able to pay our growers on time and at the same time increase our lime and avocado shipments.“