DENMARK: Carlsberg boosted by payment terms change

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A change in supplier payment terms earlier this year helped to boost Carlsberg's cash flow in the first half of 2009, but has drawn criticism in the UK.

Denmark-based Carlsberg confirmed to just-drinks today (14 August) that it standardised its supplier payment terms in the spring of 2009. 

"The new terms mean that we pay our suppliers after the end of the current month plus two months and two days," said a spokesperson for the brewer.

Carlsberg's changes follow those made by others in the beer sector, the spokesperson said, and were new terms were introduced to "increase our working capital management".

The new terms contributed to a 170% rise in group cashflow in the first six months of 2009, compared to the same period last year, the spokesperson said.

Carlsberg said in its half-year results statement this month that the group focused on efficiency savings during the six months, but specific details of these efficiency measures were not given at the time.

However, the brewer has drawn criticism from some in the UK.

The UK's Forum for Private Business (FPB) claimed today (14 August) that some businesses may have to wait 120 days before payment, according to the new terms.

"The FPB is arguing that Carlsberg's payment terms - the longest the FPB has ever been made aware of - could threaten the viability of countless small businesses involved in its supply chain," said the group, which this week sent a letter to Carlsberg UK CEO Isaac Sheps.

"Most of the businesses in our Hall of Shame have been exposed for taking between 40 and 60 days to pay their suppliers," said the FPB policy representative Matt Goodman.

Carlsberg said it was not alone in seeking a longer payment timetable. "Carlsberg is not first mover with respect to new payment terms for suppliers. A lot of companies have changed their payment terms as well," said a spokesperson for the brewer.

Earlier this year, both Diageo and A-B InBev found themselves in rows with the FPB following changes to their payment terms.

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