Mars UK faces late payment ‘hall of shame’ threat

Mars makes confectionery products such as M&M's and Bounty

Mars UK faces late payment accusations from lobbying group the Forum of Private Business (FPB), which is threatening to place it in its ‘hall of shame’ over the issue.

FPB claims the UK arm of the global confectionery giant is using a supply chain finance scheme as cover for extending the length of time it takes to pay suppliers. Its comments have also appeared in an article in The Times published on May 19.

An FPB spokesman told it was acting on the basis of an anonymous letter of complaint it had received.

According to FPB, Mars UK, which makes brands such as M&M’s, its iconic Mars bar and Bounty, had doubled its supplier payment terms from 60 to 120 days.

In addition, it was couching the extension within a new scheme offering suppliers the option to be paid a reduced invoice within 10 days – or receive full payment within 120 days.

Written to Mars

FPB said such a move would closely resemble tactics adopted by other major retailers in the past 12 months. It had written a letter to Mars UK to ask for clarification over the extent of the changes to its supplier terms, it added.

“Whilst the FPB is a great supporter of supply chain finance schemes in the right circumstances, they should not be used as a justification for a company extending payment times to its suppliers,” said FPB ceo Phil Orford.

“We are concerned to learn that Mars UK is doing just this … Lengthy payment terms can be extremely damaging for small businesses. Whilst the supply chain finance scheme allows them to be paid quicker, it is at a cost.

‘Fundamentally unfair’

“The practice of using a supply chain finance scheme in order to extend payment times is happening more frequently … At a time when our economy is beginning to grow again it is fundamentally unfair that small businesses are being used as a line of credit for larger organisations.”

FPB claimed Monsoon and Debenhams had carried out similar practices in recent years. And it said GlaxoSmithKline and Premier Foods had both charged suppliers a one-off fee in order for them to be considered as preferred suppliers in the past.

“We can confirm that we are making changes to our supplier payment terms,” said a spokeswoman for Mars UK. “We really value our relationships with suppliers and are working with our partners on the changes.

“We are in the process of communicating the details of the new terms that we believe will offer suppliers greater flexibility.”

The government is still working on its response to a consultation on late payments that closed in January.

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Comments (1)

Brian Shanahan - 20 May 2014 | 11:51

Illegal to charge for 60 Days plus payment

It should be remembered that under the new late payment legislation (in force since 16 March 2013) it is illegal to make a charge to a supplier for payment that is in excess of 60 Days, i.e. if a supply chain finance scheme demands that you pay a fee for payment on day 61 or more or else wait for payment in 90 days the scheme has broken the law. Equally having a contract that states a payment term in excess of 60 days is illegal under the same legislation. So if the details of this article are correct Mars UK are braking the law of the land.

20-May-2014 at 11:51 GMT

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