Carlsberg has been accused of abusing its dominant position and flouting EU regulations by making its suppliers wait up to four months for payment for goods and services.

The multinational has told its suppliers that the recession has forced it to stall payment for up to 95 days from the close of the billing month. Previously Carlsberg paid its suppliers within 62 days from the end of the month billed.

“Our response is one of disappointment verging on outrage,” Ruth Evans, CEO of the UK’s Brewing, Food and Beverage Industry Suppliers’ Association (BFBI), told BG today.

“It’s unreasonable for large global companies to expect smaller, local companies to finance their cash flow. Suppliers can pass down some of that but there’s always someone at the end of the chain. Should these companies put their houses up to finance this?”

The BFBI contends that Carlsberg’s unilateral decision to increase payment terms is a breach of EU regulations that state there should be a wait of no more than 30 days for payment, unless an agreement has been reached by both parties.

In stalling payments Carlsberg is following in the footsteps of A-B InBev and Diageo, firms that were condemned earlier this year when they upped payment periods to 120 and 60 days respectively.

Carlsberg wrote to its suppliers in March warning them that from the end of the month it would be upping the amount of time its increasingly cash-strapped suppliers would have to wait for payment.

“As you are aware, the global economy faces unprecedented hardship and we are faced with a very challenging environment,” wrote Carlsberg UK’s director of procurement Kevin Murray on March 25th.

“One of our key principals is to honour our commitments to our suppliers. However, Carlsberg is not immune to the general economic conditions and we need to increase our payment terms.”

Carlsberg’s suppliers have little option but to accept the new terms. Evans said, given the size of Carlsberg and its competitors, legal action remained a risky and expensive option for suppliers.

She added: “In other words they are over a barrel. From a supplier’s point of view you have to keep turnover going and if they [Carlsberg] are responsible for more than 50% of turnover, it is very difficult.”

A Carlsberg spokesman said: “Beer is a resilient category, but Carlsberg is not immune to the current global economic crisis and the volatility in the market. We face increasing pressure from our customers in terms of receivables, i.e. they pay us later.

“Also, we have found that we in many cases pay suppliers faster than required, and sometimes a lot faster than what our competitors do.”

via INTERNATIONAL BREWING INDUSTRY NEWS.

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