Late-Pay Problems Spread To The US — And Big Suppliers

As lawmakers in the U.K. consider cracking down on the recent practice by big companies of waiting 90 to 120 days to pay smaller suppliers, it turns out the practice has quietly spread to U.S. manufacturers as well, according to The New York Times.

Liquor producer Diageo now asks suppliers to wait 90 days to get paid (except in the U.K., where a highly public backlash forced the company to roll back its terms to 60 days). For Mondelez, Mars and Kellogg, the wait is 120 days. Proctor & Gamble won’t pay for 75 days, and beer-brewer Anheuser-Busch InBev wants terms of longer than 120 days, The Times reported.

Most suppliers wouldn’t speak on the record, fearing repercussions from customers. But a few who rejected the extended terms were willing to be quoted.

Stephen Brock, the owner of Supplied Industrial Solutions, a valve and mechanical-systems supplier in suburban St. Louis, sold equipment to Anheuser-Busch until the company merged with international brewer InBev in 2008. In 2009, the combined company said Supplied Industrial Solutions would no longer be paid in 30 days, but would have to wait 120 days.

Brock, who said the brewer represented roughly 5 percent of his company’s sales, said no. “This really had a dreadful effect on our bottom line,” Brock told The Times. “And because it hit right in the middle of the recession, it took us about a year and a half to recoup those lost revenues.” He said Anheuser-Busch InBev now buys a much smaller quantity of products from Supplied Industrial Solutions — and pays with a credit card.

And while most of the slow-pay terms have so far been forced on smaller suppliers who provide the big manufacturers with ancillary goods and services such as equipment, packaging and advertising, the practice may be expanding — and affecting large agribusiness suppliers. According to The Times, two major commodities houses have confirmed that many of their customers are demanding longer payment terms. That could mean major processed-food manufacturers are putting pressure on Cargill, ADM, and other big suppliers too. Those companies would likely end up passing the extended terms downstream to smaller farmers.