How would you like to have 120 days to pay your creditors? Adopting a tactic widely used by 3G Capital, the Brazilian private investment group behind the recent merger of Heinz and Kraft Foods, a growing number of the world’s largest food and packaged goods companies are asking their suppliers to give them as much as four months to pay their bills — even though they typically require payment from their own customers in 30 days.
The tactic has gained in popularity ever since an affiliate of 3G Capital put it to use after it bought Anheuser-Busch in 2008.
In the past, extended payment terms often were a signal that a company was experiencing worrisome cash flow problems, but these days big, robust companies are imposing new schedules on suppliers as a business strategy, analysts say.
Bea Chiem, a credit analyst who follows food companies at Standard & Poor’s, offered several reasons that companies might use the tactic: “Their recent performance has been soft, many are in the middle of restructuring and all are trying to balance the need for cash for their business and shareholder returns.”
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