A sharp deceleration in consumer spending power is forcing major fast-moving consumer goods (FMCG) companies, including Unilever, Nestlé, and local rivals across Southeast Asia and Latin America, to increasingly sell products on trade credit, a strategic shift that bolsters short-term volumes but exposes suppliers to mounting default risk.
Trade credit, a payment arrangement allowing retailers to settle invoices 30 to 90 days after delivery, has long been used selectively. However, industry executives and distributor surveys indicate its use has expanded significantly since mid-2024 as real wage growth stalls and input-cost inflation persists. In markets such as Nigeria, Egypt, and Indonesia, small retailers now routinely request credit terms even for low-margin staples like cooking oil, flour, and detergents.
“When household purchasing power contracts, informal retailers operate on thinner cash buffers,” said Leena Nair, a Mumbai based consumer goods analyst at Ambit Capital. “FMCG companies face a brutal trade-off: extend credit to keep shelves stocked or lose distribution points entirely.”
The shift carries immediate balance sheet consequences. Days sales outstanding (DSO), a measure of how quickly firms collect payment has risen by an average of 12–18% across listed Asian and African FMCG players over the past two quarters, according to a Reuters review of earnings filings. Smaller manufacturers, lacking the financing arms of multinationals, are most vulnerable; several Kenyan and Pakistani producers have already written off 3–5% of receivables as bad debt.
Regulators are taking notice. The Central Bank of Nigeria and Bangladesh Bank recently issued advisories warning of systemic trade credit concentration within consumer goods supply chains. Bond markets have also reacted: credit default swap spreads for regional FMCG issuers widened by 22 basis points in March, reflecting heightened perceived risk.
Looking ahead, analysts expect further pressure on working capital cycles. Goldman Sachs and HSBC revised their emerging markets retail forecasts downward last week, citing persistent real income weakness. For FMCG firms, the strategic pivot to credit may provide short-term resilience but risks compounding liquidity stress if a recovery in spending power does not materialize by early 2026. Investors are advised to monitor corporate receivable aging disclosures more closely than quarterly earnings reports.
