Global candy giant Mars Inc. is seeking longer payment terms from suppliers -- including from at least one U.S. marketing agency -- becoming the latest big advertiser to engage in the controversial practice.
The maker of M&Ms and Snickers confirmed to Ad Age that it has sought to extend the period before suppliers get paid to as long as 120 days.
"We can confirm that while our objective is 120 days, there is a spectrum of days payable with each of our vendors based on various factors including geography and scope," the company said in a statement. "The reason we made this move to 120-days payment terms is to align closer to the trends of our peers."
Marketers recently seeking longer payment terms include Procter & Gamble Co., which said last year it would seek to extend payment terms from 30 to 75 days in new contracts with agencies. Mondelez International about a year ago confirmed it was instituting 120-day payment terms. Other companies known to have sought longer payment terms in recent years include Anheuser-Busch InBev and Johnson & Johnson.
U.K.-based food trade publication Just-Food.com reported earlier this week that Mars had begun seeking longer payment terms in the U.K. The move drew backlash from a U.K. organization representing small businesses called the Forum of Private Business. Just-Food quoted the organization's CEO, Phil Orford, saying: "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 organizations."
The publication reported that as Mars was doubling its terms from 60 to 120 days, the company was "couching the extension within a new scheme that offers suppliers a chance to be paid a reduced invoice within 10 days."
It is unclear how successful the company has been in extending terms with its marketing agencies in the U.S. A person at one agency that works for Mars said the agency was recently approached about extending terms but the shop was able to keep its current terms. Omnicom Group's BBDO, New York, which is Mars' lead creative ad agency, referred calls to Mars.
In its statement to Ad Age, Mars said, "many of our suppliers have opted for longer payable terms in order to utilize our offered financing approach which gives them greater financial flexibility." The company did not elaborate on exactly what that finance approach was and how it gave suppliers greater flexibility.
In a report published late last year, the Association of National Advertisers stated that at least four in 10 marketers lengthened payment terms for at least some marketing services in the preceding year.
"Client-side marketers need to consider what is fair and how they would want to be treated," the ANA report said. "If the payment terms they are suggesting to their suppliers would not be acceptable to them as suppliers, a re-think might be in order."