Diageo relents on supplier payment terms

The world’s number one drinks group Diageo has given up on its plans to extend its supplier payment terms, media reported on 13 March 2015.

It had wanted to lengthen the time it takes to pay its suppliers to 90 days, but faced strenuous objections from business groups.

In the end, Diageo acknowledged the importance of small and medium-sized suppliers (SMEs) “to the UK economy and to the sustainability of our own business” and promised to settle its bills within 60 days for UK SMEs. Whether this also applies to Diageo’s suppliers outside the UK is not clear.

Diageo’s supply and procurement David Cutter was quoted as saying: “We continue to take an open and flexible approach when reaching agreements with suppliers and tenders based on existing terms will continue to be accepted.”

The UK government has pledged to toughen up its Prompt Payment Code (PPC), with companies that break terms by pressuring their supply chain removed from the scheme.

Not all majors in the industry seem prepared to settle their bills early. One supplier sent us the following statement they received from one of AB-InBev’s subsidiaries:

“We are part of the AB-InBev Global group (one of the biggest beverage companies of the world) and please note that our minimum payment terms policy is 120 days with 1 payment run per month. Please check and confirm the payment terms to continue with our commercial relation.”

The supplier replied that they also have their terms of payment which have always been “21 days after date of invoice“. Guess what, they have not heard from AB-InBev’s subsidiary since.