Mondelez squeezes suppliers by extending payment to 120 days - who's next?
As of July, major suppliers to Mondelez must wait a staggering 120 days for payment. An August 15 article in Fortune (A snack maker's unsavory business practices, available online to subscribers), calls the move "a stunning example of one-upmanship."
Payment terms to suppliers and vendors normally range no higher than 60 days, with some corporate heavyweights seeking to push payment up to 75.
Mondelez can now claim to be the market leader in delaying payment, as well as being the most heavily indebted of the major food TNCs.
The two go together. "You can understand why a big company might be tempted to hold off paying its suppliers", the article comments. And might have added: "Particularly when your cash flow is burdened with enormous interest charges." "If you hold on to millions -- or even billions -- of dollars for an extra month or two (or four), you can put that cash to work for your own needs, or invest it and pocket whatever interest it gains", the article continues. But of course Mondelez strictly disciplines its customers: according to the article, payment for confectionery is due with 15 days, snacks within 25.
Mondelez sent the Fortune author a statement containing the following: "Extending our payment terms allows us to better align with industry and make sure we compete on fair grounds, while simultaneously improving transparency and predictability of payment processes."
This nonsense was presumably cooked up in the same kitchen which responds to allegations of human rights abuses. Stringing out payment to 4 months ratchets up pressure on already squeezed suppliers and their workers, and threatens to undermine the company's own supply chain.
Will Mondelez workers eventually face a four month wait as part of the company's efforts to improve "transparency and predictability of payment processes"?