Business lobby group names and shames drinks companies for squeezing suppliers
  23 February 2009    
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The FPB is naming and shaming two leading alcoholic drinks companies for imposing changes to payment terms and conditions on their smaller suppliers.
 

Diageo, the company behind some of the world's biggest-selling alcoholic drinks brands such as Guinness and Johnnie Walker has extended the period within which it pays its smaller suppliers to 60 days. In addition, the international brewer Anheuser-Busch InBev has emailed suppliers of services, spare parts and capital expenditure projects in order to double its payment period to 120 days from the end of the month it receives invoices.

The Forum of Private Business (FPB) has added both companies to its ‘Late payment hall of shame', and written to them outlining the damage being done to their smaller suppliers. The FPB has also invited the drinks giants to sign up to the Government's ‘prompt payment code'.

"These two companies are attempting to claw back what they have lost as a result of the economic downturn by taking advantage of their dominant position in this sector at the expense of their supplier base," said Phil Orford, Chief Executive of the FPB. "The UK's economy is in recession, and many small businesses are struggling to secure credit in order to maintain any kind of cash flow. In these circumstances, not being paid promptly and in full can be critical to businesses."

He added: "The terms of the Government's prompt payment code demonstrate a commitment to suppliers and provide them with some certainty in increasingly uncertain times. It is important that companies such as Diageo and Anheuser-Busch InBev address their poor payment practices and sign up."

Diageo's adjusted payment terms, which affect all of its non-contracted suppliers, came into effect on 19 January 2009. However, the company sent out a letter of explanation just days before, on 9 January.

InBev purchased Anheuser Busch In July 2008, making the new company the largest brewer in the world. In addition to extending its payment terms from 1 January 2009, it has staggered the amount it pays to suppliers of its capital expenditure projects (45% upon delivery of the equipment on site, 20% upon start-up of the installation, 20% at the provisional acceptance stage and 5% upon delivery of the full spare parts list.

For other suppliers, the company is insisting it compares prices offered to both companies before the merger, stating it will only accept the lower price.

InBev was first added to the FPB's hall of shame in May 2007, after extending its payment terms to 60 days, giving suppliers just one month's notice and telling them it intended to become the ‘biggest to best' in its sector.

"This approach is totally unsustainable. InBev appears to be financing its purchase of Anheuser Busch by exploiting its supply chain," said Ruth Evans, Chief Executive of the Brewing, Food and Beverage Industry Suppliers (BFBI). "It's disgraceful, especially at a time when small businesses are struggling to access finance from the banks. We fully support Anheuser-Busch InBev's intention to become the best global brewer as well as the largest - their success is our success, as long as this is not undertaken at the expense of the supply chain."


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