Deutsche Brauerei's (db) Case

1. What accounts for Deutsche Brauerei's (DB) rapid growth in recent years? What strategic choices were made?

The Ukraine account grow rapidly in the recent years. The strategic is just expanding, more focus on the sale/volume, not on how to turn the order to money. It can be understood that the local distributors need some policy support from DB, because they just start, still at the beginning of capitalization period. The current credit policy is applicable for the starting phase, but long term it needs to be adapted (e.g annual bounce on the pay on time accounts). Meanwhile because of fast expansion, more investments on the Assets in Ukraine is needed. The financial plan includes a 7 million euro investment in new plant and equipment for the Ukrainian operations in 2001, followed by a 6.8 million euro investment in 2002 for a new Ukranian warehouse and distribution center. Which is reasonable, but need more detail plan/business case before make the decision. I would say, half of the amount should be financed by Ukraine team itself, if they are able to turn the account receivable to cash.

2. What is the credit policy for DB for distributors in the Ukraine? Why is it different from other sales? Is it appropriate (examine the business models in both instances).

The credit policy for Ukranian distributors from 2 percent 10, net 40 to 2 percent 10, net 80 (clients could take a 2% discount if payment was made within 10 days of the invoice, otherwise payment was due in full within 80 days). The credit policy for Ukranian distributors differed because Ukrainian entrepreneurs, who are ambitious to grow but without support from the bank as in Germany. The credit policy for the Ukranian distributors is applicable, which can support the distributor to expand, buy new equipment, and required more time than usual to pay. Also is a good investment for DB to build up the relationship with the distributor and meanwhile invest for the futurn. But on the other hand, long payment turn cost bad cash flow. In Ex1, the account receivable increase a lot, which

3. Why does this profitable firm need increasing amounts of debt?

If the company wants to expand, they need cash. It seems that DB is profitable, but because of the big account receivable, which cause actually cash tie-up. In order to still keep expanding, DB have to increasing amount of debt for investing.

4. Something about dividends:

The quarterly dividend proposed is 698,000 euro, an amount equal to 25% of the projected 2001 dividends (2,793 k). However, this dividend increase is based on projected earnings, and several factors affect whether those earnings. Better to reserve a part of money till end of the year.

5. What should Greta do with respect to: the proposed raise for Pinchuk, the quarterly dividend and the financial

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