The change in Coca-Cola's long-stable compensation system is another strike against Interpublic Group of Cos.-parent to McCann-Erickson Worldwide, Lintas and Lowe & Partners/SMS-which has seen the cola giant split creative assignments among smaller independent agencies and Hollywood talent shop Creative Artists Agency.
Coca-Cola didn't return calls seeking comment, and one agency executive insisted that a new compensation agreement was still being finalized.
But other agency officials said they have already been notified that media commissions are being cut by 3 points, reducing them to a range of 9% to 12%.
"It's not that Coca-Cola is saving money; it's that they want to reward agencies doing the creative work," said one senior-level agency executive, who cited Coca-Cola's fledgling relationship with several smaller agencies as a reason for the change. "They have to find a way to pay them for project work."
Coca-Cola is following a trend. Industry executives estimate only one-third of major advertisers still compensate their agency at the traditional 15%.
Coca-Cola's creative outsourcing began innocently enough in 1991, when CAA began consulting the marketer and McCann on advertising. The California-based talent agency subsequently snagged primary creative responsibility for Coca-Cola Classic in the U.S. from McCann.
Sergio Zyman, named Coca-Cola's senior VP-chief marketing officer last year, accelerated the creative outreach by awarding assignments to smaller shops, including Wieden & Kennedy, Portland, Ore.; Fallon McElligott, Minneapolis; and Chiat/Day, Venice, Calif.
Renegotiating compensation agreements with Interpublic, one industry executive noted, is "a means of funding what [Coca-Cola Exec VP-Principal Operating Officer/North America Douglas] Ivester wants to do."
Some Interpublic agency executives said they planned to approach Coca-Cola in their individual markets hoping to negotiate the depth of the cut, which they said would force them to trim client services and office overhead.
"This means we have to rethink how we're going to handle the business," said one McCann international executive. "It's made us wonder if it is at all possible to talk to Coke about a fee arrangement, but we have to do what [the Interpublic] network does."