Global consumer products giant Keurig Dr Pepper — which includes recognizable brands 7up, Canada Dry, Sunkist, Schweppes, Snapple, and Dr Pepper, and at-home coffee products for Cinnabon, Krispy Kreme, McDonald’s, and Newman’s Own Organics — has ruffled some agency feathers.
In a recent request for proposals (RFP) for a U.S. PR agency, Keurig Dr Pepper has outlined that its selected firm must accept net-360 payment terms. These extended terms mean a PR agency would work for nearly a year before seeing a single payment for its services.
While the company’s brands might be a dream for any PR agency’s client roster, its proposed payment terms are a nightmare.
“You wouldn’t hire an accountant to file your taxes and expect to pay them a year later. The same goes for a doctor or lawyer. They would laugh you out the door with such ridiculous payment terms,” said Mike Neumeier, APR, CEO of Arketi Group, and ex-officio executive committee member of PRSA’s Counselors Academy.
This arrangement excludes any agency without a generous benefactor, equity backing or incredible savings that they’re willing to risk for the brand names. Few PR agencies are financially able to work with Keurig Dr Pepper.
“Positioning the RFP this way says two things: One, small firms need not apply. Two, while we are a very large global corporation, we expect the agency to serve as our bank in the coming year,” said Hinda Mitchell, president of Inspire PR Group and a member of the Counselors Academy executive committee.
In addition, the terms demean the public relations profession, agency leaders say.
“The payment terms are offensive to the entire communications industry given the signal they send that public relations professionals are not valued collaborators worthy of respect and payment for their work, but are instead merely vendors who will be paid eventually,” said Ben Finzel, president of RENEWPR and a member of the Counselors Academy executive committee. “This kind of behavior isn’t just shocking; it is insulting and unprofessional and should be condemned.”
It also gives the perception that Keurig Dr Pepper does not place value on public relations, and the function it should play within a global business.
“The relationship between an agency and its client should have a strong foundation rooted in trust. That takes time to establish and requires fair play, mutually beneficial terms, and a shared understanding of expectations and the day-to-day working arrangement,” said Mitchell. “Starting a partnership under these terms feels more like “our way or the highway” or “just trust us…we’ll pay (eventually).”
As an alternative to the extended payment terms, the selected agency can receive financing for Keurig Dr Pepper’s work through Atlanta-based Prime Revenue. With this option, the agency is paying a fee to a financial services company to receive their cash sooner for work completed for Keurig Dr Pepper.
“If this is how an organization treats your agency before hiring you, consider how much they will value your work once they do,” said Neumeier.
A worrisome precedent for smaller firms
Keurig Dr Pepper could set a dangerous precedent for other global brands to consider.
“If other companies follow suit, there could be few opportunities for small and minority-owned firms to begin working with large brands,” said Missy Hurley, APR, principal of B2 Communications and a member of the Counselors Academy executive committee. “These brands lose the opportunity for a variety of perspectives, fresh thinking and access to diverse talent by limiting RFPs to only the largest and best-financed PR firms.”
VoxComm, a global trade group that represents the 4A’s, PR Council, Institute of Canadian Agencies and other marketing and PR associations, has already issued a “red alert” in response to Keurig Dr Pepper’s search.
The RFP window closed, and Keurig Dr Pepper reportedly has selected an agency. Time will tell who has taken the financial risk to work with the company.
Rebecca Holmes is co-founder and chief operating officer at Kiterocket, a Phoenix-based PR and marketing agency, and she is chair-elect of PRSA’s Counselors Academy.[Photo credit: makibestphoto]
Anyone who responded to an RFP like that without challenging the terms is just crazy. Not your firm’s job to finance their eceivables.
As I read this, it only reaffirms my belief that the organizations who need the most help from a PR firm are the least likely to see the need for one. If they had a PR firm (or employed a PR staff), Keurig Dr Pepper would have (or should have) been told how damaging this requirement would be for their reputation. IMHO, I believe finance professionals inflict the most reputational damage to their own organizations.