ACA boss Tony Hale warns of 360-day payment terms: ‘agencies are not banks’
Breaking overnight, US beverage conglomerate Keurig Dr Pepper has attracted scrutiny for demanding payment terms of 360 days, which has now prompted ACA CEO Tony Hale to warn any Australian business of similar conduct.
In a statement released by the ACA this morning, Hale endorsed a red alert issued by global agency association VoxComm as a result of Keurig Dr Pepper’s (KDP) conducting during the pitching process for its PR account.
“Following a worrying trend in agency contracts being drawn up by clients to include extended payment terms, we once again have an example of a globally renowned brand such as Keurig Dr Pepper dictating outrageous terms to agencies responding to an RFP,” wrote Hale.
“Quite simply, agencies are not banks. Delayed payment terms have a significant knock-on effect to agencies, profitability and supply chains, many of which involve small businesses and freelancers.
“The best working relationships are fair; built on trust and mutual respect. Dictating impossible extended payment terms undermines partnerships and is a futile attempt to exert market power.
“These incidents may not be as prevalent in Australia as they are in other parts of the world but clients and agencies must continue working together to keep it this way,” he concluded.
The pitch process in question saw KDP stipulate that pitching agencies either agree to exceptional 360-day payment terms or obtain financing, at their own cost, through a third party bank.
KDP confirmed to US publication Adweek that the RFP had concluded this week and an agency partner was selected.
In an announcement made on 30 November, VoxComm director Scott Knox decried Keurig Dr Pepper’s conduct as an “egregious display of corporate bullying”, noting that, “agencies are not banks and simply cannot be expected to finance a client’s marketing budget”.
Despite VoxComm’s attempts to dissuade the corporation from setting such financial expectations with its agency partners, KDP told VoxComm that “it would not change the direction of this review and felt confident in its partnership arrangements and processes”.
Whichever way you look at it, it’s a disgrace. It’s an insult to the agencies and the people within that do the work.
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Whilst I have never been exposed to 360 day credit terms – our big brands with high profile CMOs regularly have 90+ days on payment – provision or securement of a Purchase Order can take a month alone!….meanwhile the work is done months back, meaning its 90 days after the work is done. Its ok if a ongoing retainer, but large brands also manipulate their suppliers as credit facilities.
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I don’t know how any business can claim to have a “partnership” with an agency and do this kind of thing at the same time.
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Simples.
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