Mars Inc. seems to have placated ad-production trade groups who had blasted the candymaker's 120-day payment term policy, but the impact on agencies is still unclear.
Fearful that the controversial practice could severely harm companies that make and edit the candy giant's ads, the Association of Independent Commercial Producers sent a letter to Mars Global Chief Marketing Officer Bruce McColl stating that the policy would "simply decimate the way this industry operates." The group, known as AICP, represents companies involved in 85% of all domestic commercials aired nationally.
The Association of Independent Creative Editors -- representing editing, visual-effects, audio-mixing and video-finishing studios -- also sent Mars a letter saying the policy is "patently unfair" to its members and "directly threatens their financial future."
In an email dated June 19, Mr. McColl responded to the AICP, saying, "Let me assure you that Mars has no plans to establish payment terms for production beyond the industry norms. ... Dollars earmarked for production will not be subject to extended terms and will not be swept into any sequential liability terms."
The letters from the production industry were sent after Ad Age reported late last month that Mars was seeking to extend the period before suppliers get paid to as long as 120 days. The policy follows moves by other big advertisers to extend payment periods, including Procter & Gamble, which has sought to move to 75 days from 30, and Mondelez International, which confirmed a year ago that it was seeking 120-day terms.
The concern of the production groups was that extended-payment-terms moves by Mars and other companies "ultimately boils down to a large multibillion-dollar corporation leaning on independent small businesses for interest-free loans, and that's just absurd," said AICE Executive Director Rachelle Madden.
Money typically flows from marketers to ad agencies, which in turn pay production companies.
In its letter to AICP CEO Miller, Mars' Mr. McColl said the company has "structured our production policy and processes within our agencies, marketing, procurement and accounts payable to ensure that we meet the pre- and post-payment deadlines established for each production project in accordance with industry norms. We have every desire to manage payment terms in a way that ensures AICP can continue to deliver quality work."
Mr. Miller responded to Mars that the news gives "the production community a good deal of relief."
Left unsaid, however, is whether Mars will institute the policy with ad agencies. As Ad Age has reported, a person at one agency that works for Mars said the shop was approached about extending terms, but the agency was able to keep its current terms.