Molson Coors defends move to triple payment terms

By Elaine Watson

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Related tags: Payment terms, Money, Payment

Molson Coors defends move to triple payment terms
Molson Coors has defended its decision to triple the time it takes to pay its suppliers from 30 to 90 days.

A spokeswoman for the brewer told FoodManufacture.co.uk: “The payment terms are changing from 30 days to 90 days. The terms are changing to be more consistent with industry standards and to be more competitive in the global beer market.”

The new terms – which came into effect on September 1 – were “part of a global initiative on working capital​” and reflected the tough times facing the trade, said the firm, which sells brands such as Carling, Grolsch, Worthington’s and Cobra in the UK.

It added: “The total beer profit pool is down approximately 30% over the last five years.”

Late Payment Hall of Shame

However, the Forum for Private Business (FPB) – which was alerted to the change by one of the brewer’s supplier – said the move could create major cashflow problems for small suppliers.

Molson Coors has also been added to the FPB’s ‘Late Payment Hall of Shame’, where it joins Carlsberg, Inbev, Diageo and United Biscuits, who have been singled out for taking too long to pay suppliers.

An FPB spokesman said 30 days was a fair amount of time for suppliers to wait: “Many SMEs simply can’t afford to wait months and months to be paid for work they have carried out.”

Former British Retail Consortium director general Kevin Hawkins said 90 days was an unusually long time to wait for payment, with 30-60 days more common, although there were wide variations in the trade depending on a range of factors from the size of businesses to the length of the trading relationship.

However, moves to force firms to pay within a set period would be "crackers​", he argued, given the diversity of firms and challenges in the sector.

"There has to be some flexibility on this. Similarly, contrary to popular belief, many retailers sometimes pay more quickly if a supplier has got cashflow problems."

Grocery Supply Code of Practice

The new Grocery Supply Code of Practice (GSCOP), which governs relationships between the leading supermarkets and their suppliers, says suppliers must be paid “within a reasonable time after invoice”​ (without defining ‘reasonable’).

However, it also states that “payments must be made on time” ​– that is, according to the terms of any supply deal - which could cause confusion, according to Asda.

In its submission to the Competition Commission about the revised code, Asda said: “GSCOP should not permit a supplier to reach such an agreement and at a later date claim it was ‘unreasonable’.”

It also highlighted its 'Pay Me Early' system whereby suppliers that agree to discount their wares can get paid early.

The scheme has had a mixed reception from food and drink manufacturers, however, with one industry source describing it as “[Asda] paying on time and very graciously charging the supplier for the privilege”.

RSM Tenon: Ombudsman must investigate payment terms

Duncan Swift, director, recovery, at RSM Tenon, said it was "incredibly rich"​ that some supermarkets had "extended payment terms to well beyond anything that could be described at reasonable, and then effectively charged suppliers interest for the privilege of being paid in a reasonable amount of time".

While the GSCOP was "well-intentioned"​, it would have no teeth in this area unless the ombudsman/adjudicator proactively investigated payment terms, issued guidance describing what was "reasonable"​ in a given sector and then pursuued firms relentlessly if they did not adhere to it, he said.

While the Late Payment of Commercial Debts Regulations (2002) provided for 'representative bodies' to challenge contractual terms that were 'grossly unfair' on behalf of SMEs, said Swift, he was not aware of any case where this avenue had been pursued.

"The problem is that supermarkets have been slowly pushing out payment terms and larger manufacturers in particular have just been passing on the pain to their suppliers."

Related topics: Drinks

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