Diageo shortlists three agency groups in global media review

Guinness: Diageo brand
Guinness: Diageo brand

Payment terms have been issue for some participants.

Diageo has shortlisted three agency groups in its global media planning and buying review.

Dentsu Aegis Network’s Carat, the main incumbent, is facing off against Publicis Media and Omnicom Media Group.

Interpublic’s IPG Mediabrands was in the race but dropped out around the turn of the year.

WPP’s Group M, another incumbent, ended its involvement at an earlier point in the process, which began in September 2019.

Industry sources said that Diageo’s commercial terms have been an issue for some agency groups and claimed that the British drinks giant has been discussing 90-day or longer payment terms.

Diageo, which prides itself on having a "strong partnership" with suppliers and publishes a 16-page "code for suppliers" on its website, played down suggestions of friction with agencies.

"As we continue to be at the forefront of media planning and data-driven marketing plans, we are looking for a partner who shares our ambition and can bring the right talent, expertise and creativity to our business," a Diageo spokesperson told Campaign.

"We always consider total commercial value when selecting an agency partner and want this partnership to be mutually beneficial."

Diageo, the owner of Guinness, Johnnie Walker, Smirnoff and Tanqueray, did not comment directly on whether it might be asking for 90-day or even longer payments.

"Our standard payment terms are 60 days in the UK. Any longer payment terms are for large suppliers including multinational companies which are mutually agreed on a case-by-case basis," the spokesperson said.

"Our approach is always to find a win-win for both parties, so our conversations with large, multinational suppliers cover a broad range of areas, including relationships, the product or service and the way we do business, as well as price and payment terms."

A number of agency groups are known to be opposed to 90-day payment terms in principle and are reluctant to agree to such deals.

Some large advertisers have been known to ask for 120 days or longer.

Campaign US reported in December that Anheuser-Busch InBev, the brewing giant, might be looking to lengthen its payments terms when it runs its next media agency review. The company dismissed the report as "speculation".

'Culture of everyday efficiency'

Diageo is one of the world’s biggest advertisers and is thought to spend upwards of £500m a year on paid media. 

The FTSE-100 company’s annual report shows its total marketing outlay was more than £2bn ($2.6bn) last year and it has a reputation for investing in its brands, rather than cost-cutting.

Diageo increased its marketing spend by 8% in the last financial year – ahead of 6% organic revenue growth – and expects to "further upweight" marketing expenditure again in 2020.

However, there is pressure to increase profitability.

"Our focus remains on delivering quality sustainable growth," Ivan Menezes, global chief executive of Diageo, told the annual shareholder meeting in September 2019. 

"This is supported by a culture of everyday efficiency that enables us to invest smartly in marketing and growth initiatives while expanding margins."

Diageo’s biggest market is North America, which generates 35% of its net sales. Europe represents 23%, Asia-Pacific 21%, Africa 12% and Latin America and the Caribbean 9%.

An industry source said it was not yet certain whether Diageo will consolidate its spend with one agency group or pick several agencies to serve different markets.

None of the agencies would comment. MediaSense, which is supporting Diageo on the pitch, also declined to comment.

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