Understanding Cash Flow: What Every Beverage and Spirits Founder Needs to Know

Felicia Gallagher
Nov 13, 2025
3 min read

When you’re scaling a beverage or CPG brand, cash is the quiet current running beneath everything. You can have strong sales, growing distribution, and a buzz-worthy product, but if cash flow isn’t healthy, your brand can stall really quickly.

Let’s break this down with the most common questions founders ask about cash flow, and what they really mean for your business.

What does cash flow mean in business?

In simple terms, cash flow is the movement of money in and out of your business.

For beverage and spirits founders, it’s the rhythm between when you spend to make and move product, like: raw materials, bottles, corks, labels, co-packing, freight, and when you get paid by distributors or retail partners.

Positive cash flow means more money is coming in than going out. Negative cash flow means the opposite. The challenge? In our industry, it’s common to pay for ingredients and production months before distributors ever send payment. That lag can crush even a profitable business if not managed strategically.

What is a cash flow statement?

A cash flow statement is one of the three core financial statements (alongside the income statement and balance sheet).

While the income statement shows profitability, the cash flow statement shows liquidity, which is the actual movement of cash through your business. It tells you:

Where cash came from (operating activities, investing activities, financing activities)
Where it went (production, marketing, debt payments, equipment, etc.)
Whether the business generated or burned cash in a given period

For founders, it’s the single best way to see how sustainable your operations really are.

How is cash flow calculated?

There are two common approaches:

Direct Method – Tracks every cash inflow and outflow (customer payments, supplier payments, payroll, etc.)
Indirect Method – Starts with net income and adjusts for non-cash items (like depreciation) and changes in working capital (inventory, payables, receivables).

In practice, most beverage and spirits founders should focus on a simple formula to start:

Operating Cash Flow = Net Income + Non-Cash Expenses – Change in Working Capital

This helps you see how much cash your core operations actually generate after accounting for how much is tied up in inventory, bottles, or unpaid invoices.

What is free cash flow?

Free cash flow (FCF) is the money left after covering both your operating expenses and the capital investments needed to sustain or grow the business.

Free Cash Flow = Operating Cash Flow – Capital Expenditures (CapEx)

If you’re a growing brand investing in a new bottling line, warehouse space, or tasting room, those CapEx decisions directly reduce your free cash flow.

Why does it matter? Because free cash flow is the best indicator of how much financial flexibility you truly have. It’s what fuels reinvestment, debt paydown, and long-term growth without constantly raising new capital.

Can cash flow be negative?

Yes, and it often is, especially in high-growth beverage or CPG companies.

Negative cash flow isn’t automatically bad; it can mean you’re investing heavily in production ahead of new distribution deals or scaling inventory to meet demand. The danger is when negative cash flow becomes chronic, forcing you to rely on debt or equity just to keep the lights on.

The key is understanding why cash flow is negative and whether it aligns with a growth strategy or signals operational strain.

How founders can improve cash flow

Negotiate better payment terms with suppliers and distributors
Forecast weekly cash (not monthly) to anticipate gaps
Monitor inventory turnover: too much stock ties up cash unnecessarily
Lease vs. buy equipment strategically
Revisit pricing and promotions to avoid eroding margins

Even a 5% improvement in your working capital efficiency can free up enough cash to fund the next production run or launch a new SKU.

Final Thoughts

Cash flow isn’t just a finance term, it’s your company’s lifeblood. For founders building brands in competitive categories like spirits, RTDs, or functional beverages, mastering cash flow is what separates sustainable growth from short-lived hype.

If you’re not sure what your cash position really looks like, or how to improve it, then it might be time for a deeper look.

💬 At ThreeStone Solutions, we help founders turn cash flow chaos into clarity; so, you can scale confidently, not reactively.