InBev's Payment Slowdown

Anheuser-Busch InBev's net income soared in its first quarter, but the beer giant also issued a warning that the rest of the year might not yield such stellar results.

The remaining three quarters might be even weaker than InBev is forecasting if the company decides to start paying its bills in a timely fashion. Amid all the news surrounding its glowing earnings report—and its confirmation that it will sell its South Korean brewery to KKR for $1.8 billion—are a growing number of complaints that the Belgian company, which paid a hefty $52 billion for Anheuser-Busch last year, has stretched out the time it is taking to pay suppliers and vendors from 30 days to 120.

"InBev has crossed the line with this decision," wrote Steve McKee of the marketing/PR firm McKee Wallwork Cleveland, in a rant published by Advertising Age. "By forcing other companies to finance its operations, InBev is tying up capital that doesn't belong to it. That hinders those companies' ability to invest in innovation—not to mention meet their monthly payrolls. InBev is stealing their futures, plain and simple. And in plain sight."

Morningstar analyst Ann Gilpin has been similarly acid in her comments about the practice. A little less than a year ago, when the merger was being debated, Gilpin described InBev's management as "a bunch of machete-wielding investment bankers."

She's saying similar things about the new bill-paying policy. "They're very ruthless," she told the public-radio show Marketplace on Tuesday. InBev took on too much debt to buy Busch, and this is one way to deal with that, she said. By stretching out its payments, InBev is able to collect more interest—up to three months' worth.
The Belgian government is investigating the practice, and some suppliers and distributors are complaining publicly. But only a handful so far, maybe because of InBev's hardnosed approach. In a statement last month when the new policy was announced, the company said that while it is willing to work with its vendors, "we may have to consider an alternative supplier if the revised standard terms and conditions of payments would not suit the current supplier."