A-B Extends Payment Terms for Suppliers

Moving from 30 to 120 to cut supply-chain costs; A-B InBev opening NYC office
ST. LOUIS -- The flow of money from Anheuser-Busch to hundreds of suppliers is going to slow in a couple of weeks. About two months after being purchased by InBev of Belgium, the St. Louis-based brewer is pushing its suppliers to tighten their belts, reported The St. Louis Post-Dispatch.

Starting February 1, A-B will give itself 120 days to pay suppliers. Previously, standard terms were 30 days, said the report.

InBev's purchase of A-B produced the world's biggest brewer and the fifth-largest consumer products company. The combined company has said it plans [image-nocss] to use its heft and leverage over suppliers to squeeze costs out of its supply chain. This latest move gives A-B more control over its cash, the report said.

In a letter dated January 14, A-B asked suppliers to notify it in writing immediately if they were unable to conduct business on the new terms. "If you are not able to work with the change in payment terms, we may have to consider an alternative supplier," the letter stated. "While we recognize these terms may be difficult for some of our suppliers, they are consistent with standards used by other multinational companies, and we hope we will be able to continue working together."

Anheuser-Busch also said the decision to adopt new payment terms came after a monthlong review of the company's payment policies. "The new terms will help us better manage our business," the company said, according to the Post-Dispatch.

This is not the first time InBev has changed its relationship with suppliers, the newspaper added. In June 2007, the Forum of Private Business, a U.K. trade group, blasted InBev for lengthening payment terms to 60 days. Len Collinson, the group's executive chairman, called the move "an abuse of buying power."

"Not only was this decision taken without the consent of InBev's suppliers, but also they were given less than a month's notice of the change," Collinson said at the time. "Many suppliers of the firm will find it difficult to adapt and will have problems with their cash flow."

InBev said at the time that it wanted to offer the potential of long-term sustainable business growth with its suppliers. It said it would try to help suppliers make the transition.

In other company news, Anheuser-Busch InBev said that intends to establish an office in New York City to better support the needs of the new combined organization. The New York office would have an operational focus supporting the business in the implementation of the company's strategy under the direction of the global headquarters in and center of strategic decision-making in Leuven, Belgium.

The establishment of an office in New York would enable management to better support the realization of opportunities and day-to-day management of the business. The office would host functional management heads together with members of their marketing, finance, people, supply and legal teams.

A-B InBev has previously said that St. Louis, the longtime headquarters of A-B, is the North American headquarters for the combined company and the global home of the flagship Budweiser brand. The new announcement did not specify any changes of status for that office.

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