Coca-Cola Sees Payment-Term Extensions to Agencies as Troubling Trend

Top Execs Say Marketers Should Treat Shops as Partners, Not Vendors

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Coca-Cola knows just the right thing to say to the right crowd.

Chairman-CEO Muhtar Kent and EVP-Chief Marketing and Commercial Officer Joe Tripodi told attendees at a seminar at the Cannes Lions International Festival of Creativity -- many of whom hailed from ad agencies around the world -- that they don't want to get mixed up in the current trend of big marketers extending the time it takes to pay ad agencies.

Messrs. Kent and Tripodi were interviewed by WPP CEO Martin Sorrell. The trio spoke to a packed audience while sitting in front of specially created Cannes Coke bottles in honor of the festival's 60th anniversary, as well as their much-buzzed about "shareable" can. Coca-Cola was named the 2013 Creative Marketer of the Year.

Mr. Sorrell -- saying he felt like he was speaking on behalf of the ad industry -- pointed out that increased influence from procurement and finance in marketing decisions is putting pressure on the system and the supply chain. As a result, the extension of payment terms to agencies is something that's "really worrying the industry" and once-strong partnerships between agencies and clients are now "in danger of being eroded," Mr. Sorrell explained. He added: "The thought that a client would choose an ad agency based on their payment terms is extraordinary."

Coca-Cola's Joseph Tripodi
Coca-Cola's Joseph Tripodi

Mr. Tripodi agreed and said "we don't want to see our agencies as vendors but as partners." To that Mr. Sorrell said he wouldn't even expect to be an equal partner, but at least a "junior partner" to a marketer, which Mr. Kent took issue with. Mr. Kent said one should never expect that there's a junior or a senior level in a partnership, because it doesn't lead to an intellectual or healthy dialogue. Overall, the theme Coca-Cola was trying to drive home was that it respects its agency partners and the value they bring to the company.

The discussion around Coke's agency relationships was by far the most opinionated part of the hour-long discussion, which was largely used to review well-known Coca-Cola initiatives -- from sponsorships of the World Cup and ParaOlympics to corporate social responsibility efforts around water availability in Africa to the desire to bring consumers more choices with "Freestyle" beverage dispenser machines. Even on the controversial topic of obesity, Mr. Kent didn't address the company's challenges or critics who say it's part of the problem, instead remarking he "has a great amount of respect" for New York Mayor Michael Bloomberg, who's been railing against the soft drink industry.

Beyond payment terms, on the subject of agencies, Mr. Tripodi rejected the either-or approach embraced by many marketers of partnering with either large global agency networks or relying on a smattering of small agencies for their marketing needs. Instead, he's found that the best model is a combination of the two, because it allows "freedom within a framework."

A blended-agency model allows smaller creative boutiques to help supplement idea generation and bolster the work large shops can deliver. He noted that's why he partners with a big agency like WPP's Ogilvy, as well as working with more nimble independents. Mr. Sorrell used the Ogilvy comment to interject a comment about how "occasionally," Coke taps big agencies from rival Publicis too, in an effort to make a cheeky remark about his competitor. To which Mr. Tripodi smilingly retorted: "Yes ... they do a great job for us."

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