Subscriber login Close [x]
remember me
You are not logged in.

Diageo puts pressure on suppliers by extending payment terms to 90 days

Published:  27 January, 2015

Diageo has written to suppliers to warn them it will now take up to three months to pay its bills.

Diageo has written to suppliers to warn them it will now take up to three months to pay its bills.

A letter, seen by the Telegraph, shows the firm is planning to extend its payment terms from 60 to 90 days from February 1 on all new contracts and tenders.

The Forum of Private Business, which first spotted the letter, said Diageo's behaviour "threatens to break the backbone of the British economy - small business".

The Telegraph reports that Diageo's letter states that the company must "improve our cash flow and drive out costs".

"Diageo continually looks for ways to enable us to invest in the growth of our great brands. This activity supports the long term sustainability of our business and yours," it added.

Phil Orford, chief executive of the FPB, said: "We are very concerned, but sadly unsurprised, to learn that Diageo is yet again extending its payment terms, a practice that is hugely damaging for small businesses.

"The practice of big businesses using a supply chain finance scheme in order to extend payment terms and protect their own cash flow is a worrying trend that is spreading across sectors and industries. At a time when the economic outlook remains uncertain it is fundamentally unfair that small businesses are being used as a line of credit for larger organisations and propping up big business.

Diageo responded, saying: "We value our suppliers and look to have open and fair relationships.

"We have written to all our key manufacturing suppliers to make them aware that from February 1, 2015, we are moving to a different procurement process for future tenders. This will allow them to be fully aware of our procurement terms and to allow them to factor that into future tenders.

"We have not changed the current payment terms with these suppliers. We also offer a supplier financing programme which enables them to benefit from early payment, in advance of normal payment terms giving suppliers' assistance with their cash flow requirements."