Consumer-packaged-goods giant General Mills is currently seeking new creative agencies to help promote its broad range of brands. But at least some of the shops that received a call to pitch have voiced displeasure with the conditions listed in the RFP.
This follows GM’s recent decision to move away from the agency of record model, with all such partnerships operating on a per-project basis.
According to two sources close to the business, the RFP went out in recent weeks to a series of agencies, some of which reached out to other industry contacts expressing disbelief. The specifics of these agreements, sources said, include 120-day payment periods, no compensation for the pitch process and complete ownership of all creative concepts, whether General Mills ultimately hires the agencies in question or not.
“Any company that issues an RFP to an agency asking for net 120 terms or ownership of IP has absolutely no idea how the business model works.”
Business development executive
The briefs are also “blind” or undefined, meaning competitors have no idea which brands are involved, how many projects winners will receive, how long their contracts will last or what the nature of the ultimate assignments will be. One person called these conditions “insane.”
“We are exploring evolving the business relationships with our agencies to make them fit for the future,” said a General Mills spokesperson. “We are seeking a balance that better serves both the needs of our business and the opportunities for theirs. We do not discuss the details of particular RFPs.”
Regarding the nature of its agency assignments, the representative added, “We do not have a creative agency of record. We have a portfolio of agencies that our brands can use based on their current needs.”
One source with direct knowledge of the review process said the RFP went out to both smaller independent agencies and midsize holding company networks.
“I’m surprised that there’s so much surprise,” the source said. “It’s been going in this direction for a while.”
Indeed, 120-day terms are not a new development. Some of the world’s biggest advertisers, including AB InBev, P&G, Mars and Mondelez, began expanding their payment periods approximately five years ago, and fragrance brand Coty made headlines in 2015 for stretching the period to 150 days before paying its partners. But such conditions often require agencies to use acceleration payment plans in which they owe a share of revenues to a third-party loan provider.
The more significant concern, according to sources, is the potential lack of compensation for an agency’s intellectual property. This is less relevant for TV spots, which could only apply to certain brands, than ideas involving unique applications of technology or social media platforms.
“Any company that issues an RFP to an agency asking for net 120 terms or ownership of IP has absolutely no idea how the business model works,” said one business development executive. “They should know we’re not a bank; we’re not there to provide credit.” Intellectual property, the person added, should be something reserved for existing clients.
But these practices have grown increasingly common, especially among CPG companies facing significant margin pressure as they struggle to adjust to changing consumer behaviors and declining sales. And while some agencies may refuse to participate in such pitches, advertisers like General Mills will undoubtedly find many others eager for any chance to win new business.
At the same time, the executive told Adweek that most search consultants and procurement departments have done “a really nice job” adjusting to the modern market. “GM is more the exception than the rule, but it’s still disheartening for a company of that size,” he said.