Credit Watch: Stoli Group USA Files for Bankruptcy

The alcohol industry is facing significant challenges, leading to a turbulent market with declining sales and increased risks. Skyrocketing raw material costs and shifting consumer preferences are forcing businesses to reassess their strategy.
‍

Stoli Group USA, the producer of Stoli vodka, has been impacted by these industry pressures, compounded by its own set of unique challenges. This article examines the factors behind this decision, identifies predictive indicators, and offers key insights for credit teams on mitigating similar risks.
‍

‍

Vodka on the Rocks: A Multifaceted Issue

Stoli has recently filed for Chapter 11 bankruptcy due to several challenges, including declining demand for spirits, a significant cyberattack that disrupted operations, and prolonged international legal disputes. 
‍

Stoli has faced a perfect storm of challenges. This strategic move aims to protect the company's assets and operations while addressing financial difficulties exacerbated by recent events.
‍

Despite these hurdles, Stoli Group is committed to navigating through this turbulent period. The Chapter 11 filing allows the company to pause creditor payments and focus on restructuring its finances, which is expected to conclude in the first half of 2025.

‍

‍

Missed Signals: Traditional Data Gaps

We dug into the signals that were available from traditional credit bureaus to identify gaps that might have prevented early warning signs for suppliers. And for those not following the news, it’s difficult to distill signals of distress from data provided by traditional credit bureaus. 
‍

The company’s Days Beyond Term (DBT) spiked significantly in the Summer of 2024:

‍

Despite these patterns, their business credit score remained largely unchanged. During the period of DBT increase, they maintained an average 83 score, which is about 60% higher than the industry average (Source: Credit Safe).

‍

‍

Without additional context, the full picture is unclear, making it difficult to recognize the problems bubbling beneath the surface.
‍

Predictable Patterns: Hindsight is 20/20

When you look more closely, the signs were already emerging for the alcohol brand. Below, we’ll dive into a few key indicators that signal potential risk.

‍

1. Increased Days Beyond Term (DBT): The majority of the company’s outstanding balances are 91+ days past due, indicating late payment trends as early as August.
   
   
2. Declining Demand: While the COVID-19 pandemic led to a surge in alcohol sales, recent years suggest a new trend. Consumers, particularly among Gen Z, are consuming less alcohol—while alternatives like non-alcoholic beverages are seeing sales increases. The result is declining revenue across the entire industry.
   
   
3. Geopolitical Pressures: The ongoing international battle and legal struggle has been publicized numerous times and continues to pose issues for the brand recovering from historical boycotts.
   
   
4. Cyberattack: The final blow came recently as a severe ransomware attack significantly disrupted its IT infrastructure. The company was forced to operate manually, including accounting functions. The disruption is expected to last until early 2025, causing a delay in when they can resume normal business operations.
   ‍

For credit teams, many of these key insights were likely missed—preventing you from being more proactive in collections and risk mitigation. 

‍

Managing Risk: How Vendors Can Be Proactive

Getting in front of potential issues helps vendors mitigate risk for their company. Here’s how you can identify risky business and protect your company finances.  
‍

1. Continuous Monitoring: Establish a system for frequently monitoring financial indicators—such as financial indicators, WARN notices, and adverse media—which can signal financial distress. 

2. Urgent Credit Review: As soon as you identify suspicious behavior, perform an immediate review of the company in question.
   
   
3. Reduce Exposure: Take proactive measures to aggressively reduce credit limits to companies who may be unable to maintain operations or pay back loans.
   
   
4. Secured Credit Arrangements: If continuing business with at-risk customers, prioritize securing credit arrangements, or those backed by collateral. This helps to safeguard interests amid heightening risk.
   
   
5. Tighten Payment Terms: Implement tighter payment terms or require cash in advance for new transactions to minimize financial risk.

‍

Leverage Technology

‍
More data means more predictability. Monitoring platforms, like Credit Pulse, uncover risks and opportunities across comprehensive data sources to deliver predictive insights that identify risks weeks and months in advance.

‍

‍
‍

‍