Business

AB InBev payment terms to small suppliers criticised

Beer kegs on production line

A major beer company has been accused of demanding onerous payment terms from its smaller UK suppliers.

AB InBev which brews Budweiser, Stella Artois and Boddingtons, routinely pays the firms four months after receiving their products or services.

Business Minister Matt Hancock said the practice was unacceptable while one firm said it could no longer afford to trade with AB InBev.

AB Inbev said the terms had been mutually agreed with suppliers.

Brewpack, which supplies conveyor belt systems to large drink manufacturers, told the BBC AB InBev demands payment terms of 120 days from the end of the month in which an invoice is issued.

The company, based in Egham, Surrey, and which employs about 25 people, says no other firm takes as long as AB Inbev to pay.

Brewpack said it could no longer afford to take orders from AB InBev because its staff needed to be paid, and VAT would become due on income which had not yet been received. It said banks would not provide bridging finance.


Analysis

Joe Lynam, business correspondent, BBC News

Consumers have plenty of vocal advocates and large multinationals are regularly squired around the world by the prime minister or chancellor on sales trips, but small and medium sized firms are often neglected and lacking advocates.

Credit of 120 days would be considered by most to be beyond the pale in terms of acceptability and AB Inbev will have trouble justifying those payment terms while its Brazilian chief executive earns a bonus of £200m in a single year.

On a wider scale though, such practices have always gone on.

And in an election year, politicians may offer more protection to small and medium-sized enterprises in future.

The deterrent of naming and shaming errant corporate giants may prove be more effective than rules which can be ignored in the cut and thrust of any negotiation between two firms.


Formed from the mergers between Anheuser Busch, Interbrew and Ambev, AB InBev made a global profit of £11.7bn ($17.9bn) last year and paid a bonus of £200m to its chief executive Carlos Brito.

In a statement, AB InBev said: "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."

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Media captionNone of the world's big brewers take as long as AB InBev to pay, reports Joe Lynam

The issue of how small firms are treated by their larger customers was highlighted recently when it emerged that Premier Foods had demanded payments just to continue doing business. Premier later said its arrangement had been "misunderstood and misinterpreted" but it would "simplify" its practice.

The Federation of Small Business said it wants a mandatory code for larger firms which commits them to displaying their maximum and average payment terms.

FSB chairman Mike Cherry, said: "When I hear these stories, it is [with] absolute disgust that large companies... can abuse their small suppliers in this way. It simply cannot continue to happen.

"We are urging government to take some steps while we try to change the culture for good."

Mr Hancock said the government was introducing legislation this year to name and shame large firms who demanded such lengthy payment terms.

"Making small businesses wait unreasonable time for payment is entirely unacceptable. These payment practices hit small businesses hardest and I am determined to stamp them out," he said.

"We are already making the whole payment process more transparent so small business can track the payment practices of larger firms, and hold them to account.

"We are consulting on ending pay to stay practices, and from the end of this month 30 day payment terms will be required in all public sector contracts and down their supply chains."

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