What is Confectionery Trade Finance?
Confectionery Trade Finance
Despite the global outlook, several economic trends are disrupting the UK confectionery market, creating tough conditions for some traders. A level of uncertainty around the implications of Brexit for tariffs and quotes on sugar and cocoa, and for major retail supply chains, is affecting order volumes, and fluctuations in the prices of key commodities have out the squeeze on suppliers. Consumer habits are also shifting, increasingly perceiving confectionery as something to be shared or given as a gift. However, these are creating profitable trends towards “premiumisation” as shoppers seek new flavours, different experiences, and quality products. Imports of American confectionery, particularly sour candy, are also growing rapidly. Many wholesalers are also increasingly focusing on global markets, as major Asian markets such as Japan and South Korea drive demand for premium products and European and US branded confectionery.
Establishing or expanding international trading operations can be tough for some firms’ finances. The delays between payment of suppliers, transportation of the purchased goods receivable, and eventual sale of the product to retailers or consumers can create lengthy trade gaps in firms accounts receivable, leading to cashflow issues and uncertainty about further investments or ventures. Trade financiers can support these firms by advancing lines of credit to repay suppliers with lengthy repayment terms which allow firms to profit from the sale of the imported goods before repaying their lenders. These loans are also commonly made without the stringent capital requirements required by conventional lenders, easing pressure on firms’ cashflow and maximising their profits from the ventures they invest in.
Key confectionery products include:
- Sugar confectionery
- Non-cocoa confectionery (i.e. white chocolate)
- Chewing gum
- Cocoa powder
- Bulk chocolate (in powder, liquid, granular, paste or block)
- Chocolate confectionery
- Your business is profitable with an established trading history
- You are operating a creditworthy business
- You have an agreed buyer or seller for your proposed venture
Trade Finance Global can provide finance products and trade finance tools to maximise profits and minimise uncertainty for confectionery traders in two main ways. Firstly, conventional export factoring products secure finance for profitable ventures from a wide variety of private backers against firms’ accounts receivable. This avoids directors having to deprive their firms of funds to meet the high capital securities required by conventional commercial finance or reduce their control of the firm via extended equity sales. Second, TFG can administer a variety of trade finance tools, such as letters of credit or performance bonds, to ensure that buyers and sellers both receive the documentation and prompt payment they need to securely conduct international transactions across trade jurisdictions. This can empower buyers to negotiate discounts from suppliers who can expect to receive payment quickly and securely, whilst maintaining the consistent, timely flow of receivables critical to trading firms’ margins and profits.
What is the SIC Code for Trade in Confectionery?
The manufacture of confectionery is covered by two SIC codes dependent on whether the confectionery produced is a “sweet” (sugar confectionery) or a “chocolate” (chocolate confectionery). Subsequent SIC codes exist for the wholesale and retail sale of confectionery products and cocoa.
|10821||Manufacture of cocoa and chocolate confectionery|
|10822||Manufacture of sugar confectionery|
|46360||Wholesale of sugar and chocolate and sugar confectionery|
|46370||Wholesale of coffee, tea, cocoa and spices|
|47240||Retail sale of bread, cakes, flour confectionery and sugar confectionery in specialised stores|
A separate trade finance pages exists for Sugar Trade Finance, and for broader Food & Drink Trade Finance.
A confectionery wholesaler specialising in cross-Atlantic trade of confectionery came under increasing cashflow pressure as demand for its products grew its orderbook. TFG was able to finance several large orders to maintain profitable revenue streams without compromising the business.