Anheuser-Busch Imposes New Payment Terms

(Feb. 18, 2009) NORTHFIELD, ILL.: Anheuser-Busch, typically the biggest buyer of Super Bowl TV time, has sent a letter to vendors advising them of a new payment policy.

“Effective March 1, 2009, Anheuser-Busch and all its subsidiaries will adopt the AB InBev global corporate policy governing payment terms for Media supplier invoices as net 120 days,” the letter states. “Payments will be distributed on the 4th and19th day of each month (or the subsequent business day). This policy applies to all goods and services ordered from our suppliers on and after March 1, 2009.”

Busch further advised vendors who can’t conduct business on its terms to notify the brewer by Feb. 28.

“If we do not receive a letter from you, you will have agreed to the new payment terms,” it said.

The new policy trumps any previous agreements with Busch.

The Media Financial Management Association said it considered the action to be “an egregious use of power being wielded in a difficult economic climate.”

“What concerns us is that this statement says, in effect, that the advertiser expects to be extended credit but will not adhere to the media outlet's credit terms,” said Mary M. Collins, president and CEO of the MFM and its credit reporting subsidiary, BCCA.

“Further--and I must stress that this is my opinion--it concerns me that they are expecting their media outlets to fund their businesses,” Collins said in an email. “I wonder if they are extending the same credit terms to their distributors.”

One other factor affecting the payment cycle is that Busch generally buys through an ad agency, Collins said.

“Having an advertising agency in the mix means that many media outlets will effectively be waiting 150 days or more to get paid for a campaign,” she said. “While MFM recommends Joint and Several Liability, most agencies operate on a Sequential Liability basis. Under this scenario, the agency is only liable to pay for advertising after they’ve been paid by their advertising client.

“The situation becomes one of the media outlet having delivered the service but having to wait four-plus months to be paid. In the interim, they must pay their suppliers and employees for goods and services used during that same period. To do so, some companies may need to get short-term financing. Short-term financing is difficult to find and very expensive in today's economy.”

The MFMA encouraged members to respond to Busch. -- Deborah D. McAdams