By - CTL
April 25, 2017

By Dorothy Thompson.

It might surprise you to learn that some of the world’s leading FMCG manufacturers and marketers are being accused of behaving like terrorists. The brands including Mars, Kellogg’s and Fonterra have been engaging in extortion-like behavior according to Australia’s small business fraternity and the Family Enterprise Ombudsman.

Kate Carnell in her first official statement said “I commenced in my role as Australian Small Business and Family Enterprise Ombudsman (ASBFEO) on 11 March this year.”

 “The role of the ASBFEO is to advocate for small businesses and family enterprises, to provide access to dispute resolution services to assist with the resolution of disputes, and to ensure that government policies take into account the needs of small businesses and family enterprises”.

In the course of her inquiry into payment times by big business she uncovered a pattern where global giants push out payments to small businesses and then offer the same small businesses loans to keep them afloat. Yes you read this correctly. Big businesses arrange “low interest loans” for small businesses that they wouldn’t need if they were paid within a reasonable time frame. There is pretty well no way of figuring out how this pie is being divvied up and who is making what from each loan transaction. But without question, you would be quite right to think this is abject madness and that the lunatics have surely taken over the asylum. What next? If you default on the loan that by rights you shouldn’t need, big business moves in and takes over your small business, there’s receivers and liquidators on your premises, and you’re out on the street?

“It’s pretty close to extortion really,” Carnell said. “Large multinational businesses’ payment terms have blown out considerably. They are now moving to have standard contractual payment times of up to 120 days. It’s really bad for midsize businesses and a shocker for the SME space. It will kill SMEs.”

Naturally most small Australian businesses struggle to survive while waiting up to 120 days to be paid for their products or services. “What we are seeing is that some of those big companies expect that this will cause some cash flow problems and are offering finance,” Carnell said. “I must admit I thought it must be an unusual scenario but now we have seen this sort of approach is quite systemic.”

Carnell says large fast-moving consumer goods companies including Mars, Kellogg’s and Fonterra all offer loan arrangements to small businesses. “Mining companies are bad, the big construction companies are bad, it seems that the worst offenders are those multinationals headquartered out of the United States,” she said.

“What’s being put by these companies is, ‘in your contract is 120 days, but we have an arrangement with the bank where you can get a loan and we can organise that at a few percentage points lower than the market and we are using our size to deliver that so aren’t we good?'” 

But Carnell sees nothing good for small business in the arrangement.

“The only reason [the small businesses] need the money is they are being paid really slowly,” she said.

Ms. Carnell, it is all well and good to breath fire and brimstone, but just what are you doing in your capacity as Australian Small Business and Family Enterprise Ombudsman to address the problem? Acknowledging that it is an appalling situation is not enough. Surely your office has certain statutory powers that can be called upon to rectify this outlandish behavior? If not, what’s the point of having an ombudsman? (Don’t you wish it was an ombudswoman?)

Peter Strong, chief executive of the Council of Small Business Australia, agrees the loan agreements are a “rip-off”. 

“It’s worse than I thought,” he said. “[Big businesses] are using the system they have created to their own advantage and to the disadvantage of small business. I’m quite worried that it’s a deliberate structural thing to leverage more money out of the system.”

Strong says legislation is needed requiring small businesses to be paid by a certain time.

“Small business is between a rock and a hard place,” he said.


Mars is one of the global companies singled out by Carnell and a spokesperson for the food giant confirmed it does have payment terms of up to 120 days. They do offer finance to small businesses.

The spokesperson for Mars said, “Of the 2000 suppliers Mars does business with in Australia only 6 per cent have payment times of 120 days and of these approximately half are small-to-medium enterprises”. 

“Mars understands the concern of the small business and family enterprise ombudsman about the impact of extended payment terms on small suppliers,” the spokesperson said. “The remaining 94 per cent of Mars suppliers have payment terms “significantly less” than 120 days with 91 per cent on payment terms of 60 days or less.”

“Any supplier agreeing to Mars’ extended payment terms also has access to a supplier financing programme through which the supplier may access finance at the favourable rates available to a larger organisation like Mars,” the spokesperson said. “Some suppliers have chosen longer payment terms in order to access the supplier financing programme.”

The spokesperson says “two-thirds of those SMEs with payment terms of 120 days have accessed its “supplier financing programme”.

The spokesperson declined to reveal which lenders provide the financing, the interest rates charged and whether Mars benefits from the arrangement, as this is “commercial in confidence”. 


Cereal and snack manufacturer Kellogg’s confirmed it has moved its payment terms to 120 days.

“As part of this new approach most of our suppliers are able to benefit from a supply chain financing model which means that they can access their payment in as little as 24 hours once approved,” Shanaka Wijesuriya, chief financial officer of Kellogg Australia & New Zealand said. “This helps businesses manage their own cash flow and in some cases, they benefit from better financing rates.”

Kellogg’s refused to detail who provides the finance to its suppliers, what the interest rate is or whether Kellogg’s benefits from the loans.”


The world’s largest dairy exporter, Fonterra, also confirmed it is offering finance to small businesses.

A spokesperson for Fonterra said, “Globally Fonterra has a standard payment term of 61 days from the end of the month that the invoice was sent (a potential payment lag of 92 days)”.

“However, we do take the needs of smaller businesses into consideration and work with them individually to reach an agreement that meets their business’ needs,” the spokesperson said. 

The dairy giant offers a “number of options” for payment including instant credit card payments for smaller purchases up to $1000 and supply chain finance.

“Supply chain finance works with the vendor selling their approved Fonterra invoice to a third-party funder, and for a small discount they receive early payment of that invoice,” the spokesperson said. “The discount varies depending on how early the vendor requests payment. Our vendors get the benefit of Fonterra’s excellent credit rating and the discount can amount to less than half a percent of the invoice. “Fonterra uses Prime Revenue to offer its supply chain finance and Fonterra’s spokesperson said “we receive a small discount for early payment of the invoice, but other than that, there are no benefits to Fonterra”.

In real terms Prime Revenue is a glorified pawnbroker. They buy your say $10,000* invoice for say $9000*, then they wait to collect the $10,000 when the invoice becomes due in 120 days. But then Fonterra steps in and pays the invoice early and gets a discount. Why can’t they just pay their supplier within a reasonable time? The only loser is the supplier who has been forced to reduce the price of their product and or service. The deal between Prime Revenue and Fonterra is confidential, so we will never know who gets what, but Fonterra actually admits they “receive a small discount for early payment of the invoice”.

Really, I don’t know about you, but it appears to me that if big business just paid their bloody bills on time there would be no need for the financial plans with “generous interest rates”. Or maybe we at CTL are just too stupid to understand how big business works! I’ll let you be the judge.

* amounts are for demonstration purposes only

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