How Coca-Cola's Mammoth Agencies Review Is Impacting the Industry

After Coca-Cola spent 11 months reviewing its global marketing, the iconic advertiser finally found a winning partner in the world's largest advertising holding company, WPP. Monday's announcement, however, left more questions than answers about the review. Coca-Cola's initial announcement highlighted WPP as the big winner, taking on media buying for all markets, with the exception of a few select markets in Asia where Dentsu has a strategic advantage. In total, it amounts to more than 90% of the media business falling to WPP. On the creative front, WPP shops will lead a number of strategic partners, including McCann, Mercado and Leo Burnett. Coca-Cola global CMO Manolo Arroyo told Adweek WPP will receive a minimum of 65% of the creative work. Wieden+Kennedy and Havas' full-service agency BETC are among a number of shops that have recently executed work for Coca-Cola brands, but at this time, Coca-Cola has not confirmed whether they will remain on the roster. "For WPP, this continues on their strong momentum outside the U.S. and gives them traction inside the U.S.—their creative agencies have struggled for North American growth, but this, along with the Unilever announcement, should be the impetus to drive the holding group forward," said Greg Paull, co-founder and principal of consultancy R3. WPP has deferred comment for this story to the client. WPP and OpenX Unlike some bespoke units that pull talent from specific agencies within a network, WPP's dedicated OpenX unit will allow Coca-Cola to work with any agency within the WPP network, Arroyo said. This provides the flexibility to use WPP talent across the more than 200 countries and territories the company currently operates in. Arroyo said the model is designed to integrate WPP's capabilities from end-to-end. Ogilvy, Wunderman Thompson and MediaCom have some of the strongest existing ties on the WPP roster within OpenX to Coca-Cola across the globe. Coca-Cola's data and production also fall under WPP's remit, supported by its new data offering Choreograph, and Hogarth, WPP's production company. According to COMvergence, GroupM handles about 24% of Pepsi's media spend, with that largely coming in various Asian markets and Russia. Currently, Omnicom Media Group also handles 72% of Pepsi's spend globally with other holding groups and agencies in charge of the remaining sliver. Coca-Cola declined to comment about WPP's current relationships with Pepsi. In the dark Since Coca-Cola announced the results of the review on Monday, the brand has been largely quiet about its future arrangements with its agency partners, but that's by design, according to Arroyo, who said Coca-Cola plans to finalize its roster of strategic partners by the end of the calendar year. Arroyo explained that strategic agencies won't hold a traditional agency of record relationship with specific brands in the company's portfolio. "Our Marketing Network Partnership and open creative model is designed because we believe that great creative ideas will—and should—come from anywhere," Arroyo said. Many agencies with relationships with Coca-Cola prior to the announcement told Adweek they are still largely in the dark about their fates. Some unknowns include whether they'll be picked for the strategic roster of creative partners, what their remit will be and who they will be working with on the WPP side. The losses vary across the agency landscape. According to COMvergence, Dentsu and IPG each controlled about a third of Coca-Cola's spend, and Publicis oversaw less than 10%. Given talent shortages across the industry, the holding companies are expected to absorb the employees who worked on Coca-Cola across their companies. Scales shift to WPP Multiple sources familiar with the review said the client was pushing 90-day payments based on the date of execution for the work, though Coca-Cola declined to comment on whether it implemented 90-day payment terms with WPP. The industry has lobbied for shorter payment periods, as longer terms can handcuff even the most cash-flush agencies. Longer payment terms lead agencies to float media budgets for an extended period of time, often resorting to working with credit facilities for loans, which can damage the holding company's or agency's credit rating. “Ninety-day payment terms on media buying is unreasonable, and we usually counsel advertisers away from that because it can negatively affect agency service and buying performance, negating the benefit," Tom Denford, CEO of growth consultancy ID Comms, told Adweek. Sources told Adweek that WPP's global scale and size allow it to more easily stomach 90-day payments. Once Coca-Cola combined the creative and media review over six months into the process, the scales tipped toward WPP because it could provide the staffing and resources needed.