Association of Accredited Advertising Agents Malaysia (4As) chief executive officer Khairudin Rahim
PETALING JAYA: The recent move by global consumer products giant Keurig Dr Pepper to dictate the terms of its payment for agencies accepting its requests has come under fire from international advertising associations.
Keurig Dr Pepper is currently running a PR agency search in the United States, where part of the task is for agencies tendering to accept 360-day payment terms.
Those that cannot are being offered the option of financing, at their own cost, through Atlanta-based Prime Revenue.
Keurig Dr Pepper’s brands include 7up, Canada Dry, Sunkist, Schweppes, Snapple and Dr Pepper. They also manage at home coffee products for Cinnabon, Krispy Kreme, McDonalds, and Newman’s Own Organics.
Commenting on the harsh and unjustified move, the Association of Accredited Advertising Agents Malaysia (4As) chief executive officer Khairudin Rahim told StarBiz that “payment terms universally by advertisers are between 30, 45 and 60 days. This depends on individual negotiations between an advertiser and an agency.
“What this advertiser (Keurig Dr Pepper) is mandating is unprecedented, grossly unreasonable and unethical by any known standards of business conduct. Agencies are not banks.
“Keurig Dr Pepper should firstly lead by example by paying its staff salaries one year later and secondly, allow its trade customers to also pay the advertiser one year later.”
Furthermore, he added that on the whole, extended payment terms were an unfair business practice that damaged the agency-client relationship, harmed agencies’ ability to hire and retain the best talent and put smaller firms, especially locally owned agencies that often don’t have access to capital, at risk of survival.
VoxComm director Scott Knox, who is also the president and CEO of the Institute of Canadian Agencies (ICA), said this was an egregious display of corporate bullying by Keurig Dr Pepper. Agencies are not banks and simply cannot be expected to finance a client’s marketing budget, he noted
“Shareholders of the corporation should be holding the leadership to account, especially when their own supplier Code of Conduct states that they are committed to high standards of ethical conduct.
“Keurig Dr Pepper’s website publicly states a commitment to equality, how does asking a business a fraction of the size of theirs to bankroll marketing activity for a year create a culture of equality?
“There will be agencies owned by people of colour, lesbian, gay, bisexual, transgender, queer and others and other diverse creatives that, because of the inequity that already exists in business, will never be able to afford to adhere to 360-day payment terms,” Knox said.
VoxComm, in which 4As Malaysia is a member, is the new global voice for agencies, championing the value that agencies bring to their clients as turbo boosters for growth.
It, among others, stands for the power of commercial creativity in all its forms – across strategy, ideas, content and media – as a proven lever for growth that businesses neglect at their peril.
VoxComm had previously highlighted statements from the US and global brand associations that challenge this extended payment terms practice which is an abuse of an advertisers dominant position.
For example, the Association of National Advertisers’ (ANA) Payment Terms report, March 2020, stated that: “Extended terms often come with consequences, including reduction in flexibility and higher prices.”
World Federation of Advertisers CEO Stephan Loerke in May 2020, added that “It cannot be in clients’ long-term interest, when reputation is so critical to ensuring you can work with the best possible talent, to unfairly extend payment terms”.
ANA CEO Bob Liodice in the same year said: “I think there are situations which are unfair and cross the line, and I am not a proponent of continuing to extend terms.”
