Dive Brief:
- Coffee traders are seeing wait times for getting paid for their roasters' beans supply increase, according to Reuters, particularly now with JAB Holding Co's growth in the coffee industry. This most recently includes its pending acquisition of Keurig Green Mountain.
- JAB raised its net financing terms to 120 days or more, a significant increase above an industry standard of 30 days or less, many industry sources told Reuters.
- "Such a move would pose problems for trade houses that operate behind the scenes to move coffee beans around the world. It would heighten their risk of not being paid, and tie up capital they would rather use to buy coffee for other roaster clients," Reuters reported.
Dive Insight:
While coffee roasters stand to benefit from this move, as they can enjoy better cash flow and access to cheaper capital, traders are at a disadvantage as they are positioned to be inexpensive lenders for their customers, per Reuters' sources.
"The changes offer a hint as to how JAB ... is disrupting traditional practices in the coffee market as its influence grows," Reuters reported.
JAB isn't the only company to change up its financing terms. Last July, Jacobs Douwe Egbert (JDE) altered its policy to permit credit terms "up to 180 days or more" for larger suppliers, while small businesses have a 30-day maximum payment term, the company said in a statement. Mondelez merged its coffee business with that of D.E. Master Blenders 1753 to create JDE in July.
While no one is sure whether Keurig will do the same, two of Reuters' sources said it was likely, based on the fact that Keurig already increased its credit terms to 60 days earlier this year.