AB InBev is under fire after it was accused by the Government and the business industry for demanding what they deem excessively long payment terms from agencies and small UK suppliers.
The Budweiser and Stella Artois brewer has more than doubled the length of time it takes to pay smaller companies, regularly handing over cash four months after it has received their services. It is a practice imposed on some of the company’s agencies, according to two separate sources close to the matter, who claim they have no other alternative but to endure for fear of losing the accounts.
AB InBev has defended its payment practice and highlighted that all terms were set in “mutual agreement” with suppliers.
In a statement the brewer said: "Like many other global companies, we review our payment terms and conditions regularly in accordance with good commercial practices and applicable law. Payment terms are always set as part of commercial negotiations and established in mutual agreement. Elements that influence the payment terms include price, quality, size of the supplier, type of product/service and volume.”
The stance has been criticised by the advertising industry, which it feels is emblematic of an ongoing trend whereby agencies are coming under unnecessary financial pressure from their clients. Premier Foods u-turned on demanding suppliers to make annual cash payments in order to retain roster positions last month after it was condemned by the Government and the IPA.
Tom Lewis, IPA finance director, said: “Whilst payment terms are a commercial matter between businesses, the IPA will always continue to call for fair terms for our members; we do not see it as being part of an agency’s business to bankroll clients – given that staff are typically paid at the end of the month and rent often in advance, we feel that agencies should not be asked to agree to extended payment terms without appropriate financial compensation.
"The IPA is not aware of any details of this latest reported request for extended payment terms and would welcome information from any member agencies who have been approached.”
The view was shared by The Federation of Small Business (FSB), which said the brewer along with Heinz, which is reported to have similar payment structure, were examples of companies “tarnished by the way they treat their suppliers”.
Mike Cherry, FSB national policy chairman, said: "No-one should expect to wait four months to get paid, not least smaller companies that simply cannot absorb the impact these terms have on their cashflow. The mounting evidence coming to light shows the scale of the problem, with too many large companies and their respected household brands abusing their suppliers. The attitude of these businesses towards their suppliers has to change. Unless it does, the reputation of business as a whole will continue to be damaged, and continue to restrict growth and job creation.”
The Small Business Bill currently going through Parliament aims to help accelerate the shift, however, the FSB is pushing for businesses to take greater responsibility to curb the practice.
AB InBev’s controversial stance on supplier payments is indicative of a company geared around a culture of sustainable cost management instead of one-time slash-and-burn exercises. The business has been shaving costs, particularly from its marketing and media spend, in a bid to trim billions off its annual operating outlay following its buyout of Mexican brewer Modelo in 2013.