Last top 10 Brazilian indie Neogama sells out to Publicis Groupe, not BBH

July 4, 2012

It seems that months-long negotiations over who will own the controlling stake in fashionable Brazilian agency Neogama BBH (see my earlier post here) are now completed. So says the Brazilian trade press.

And the answer, shortly to be announced on the French Bourse, is: Publicis Groupe. Not BBH.

Do such technicalities matter, given that all these agencies are part of the same, happy, family? Well, yes they do. There’s more for micro-network BBH in this award-winning agency than a 35% stake.

Neogama’s biggest single client is burgeoning Brazilian bank Bradesco, but the agency also plays an important role in servicing BBH global clients such as Unilever and Diageo.

As is well known, Publicis Groupe is essentially Procter & Gamble-aligned. The only reason BBH, and therefore Neogama BBH, is permitted to handle Unilever business is a ring-fencing 51% stake in BBH held by its senior staff, chiefly group chairman Nigel Bogle.

If Publicis Groupe has directly bought out Neogama BBH, which it appears to have done, what will happen to that sizeable chunk of Unilever business? That is the question – as posed by rival Unilever agencies WPP, Interpublic and Omnicom.

Neogama’s principal shareholder is its flamboyant founder, Alexandre Gama. His is the only top-ten agency Brazilian agency that, up to now, has managed to remain independent. His motives for selling out? He has been running his agency a long time – over 12 years. Bradesco is overweight as the main client. And money, yes money. Gama’s services are highly in demand, and he knows it. He has been hawking his stake about for some time – in the not unreasonable expectation that he will get a bigger wedge from PG if he does so.

Ideally, BBH should have been the one to buy him out. But it doesn’t have the money. So Publicis Groupe, which probably had first refusal anyway, stepped in and snapped up the agency. Gama will now have to report directly to PG group chief executive Maurice Lévy, which he will not enjoy very much. By all accounts, the two men loathe each other.

Even when the Neogama acquisition is completed, WPP – owner of Y&R, JWT and Ogilvy – will continue to be the biggest biller in Brazil.

Neogama’s $667m turnover in 2011 was up 5% on the previous year, according to Inter-Media Project. Its revenue was $53m. It has 270 staff, according to Publicis Groupe.

UPDATE 9/7/12: Some further facts and figures about Neogama’s performance have come my way. Almost certainly included in the deal were two Neogama subsidiaries, Triacom – a promotion company – and MIM – a digital specialist. BBH’s precise share in Neogama was 34.4%. It had no share in Triacom or MIM. The latest financial performance figures were:

Gross revenue, for Neogama, Triacom and MIM respectively:  $66.7m, $8.7m and $1.1m. Net revenue: $57.3m, $7.9m and $0.9m. Operating profit: $28.4m, $1.5m and $0.4m. Operating profit after tax: $18.1m, $06m  and $0.3m.

A rumour has surfaced that Neogama’s biggest client, Bradesco, is reviewing.

Rosenfeld’s wretched road to Mondelez

March 22, 2012

By and large, corporate life is no laughing matter. One exception – and a cause of bottomless mirth at that – is the pompous business of corporate name-minting.

Latest in a long line of jokes is “Mondelez International”. What, you ask? It’s the new monicker for the Kraft spin-off snack business which will shortly be headed by Irene Rosenfeld, after offloading the lumbering US grocery business onto poor old Tony Vernon.

One of Vernon’s few high cards will be the fact that he retains the Kraft name which, whatever its downmarket connotations, has the merit of being agreeably monosyllabic and memorable.

If only we could say the same for Mondelez International. Why, oh why (as The Daily Mail might put it) couldn’t it take the Cadbury name? After all, organisationally and with the exception of a few Kraft legacy brands such as Oreo, Mondelez is the ex-Cadbury company. It faithfully maps Cadbury’s emerging markets strategy and, if it is to achieve the higher margin growth commonly associated with the snack sector, that will in no small part be due to the dominance of Cadbury brands within its portfolio.

Instead of the instant mnemonic, however, we have the instantly forgettable “Mondelez”. Apparently, this was dredged up from an exhaustive trawl of 2,000 ideas – fashionably and inexpensively crowd-sourced from Kraft employees. The ultimate choice was, in fact, a portmanteau word derived from one suggestion fielded in America and another in Europe. Which probably tells you all you need to know about Rosenfeld’s imaginative powers. Camel, horse, committee anyone?

On second thoughts, however, I’m not entirely convinced by this folksy little conceit of hers. “Mondelez” has about it a strong whiff of corporate ID specialist. Allegedly it’s a bit of cod-Latin, derived from a hybrid of mundus (world) and delectatio (delight or pleasure), which is more readily understood by substituting the French modern equivalents “monde” and “délice”. Note the subtle potential French wordplay – Mon délice – perfect but for the fact it is grammatically incorrect, délice being feminine.

What does all this remind you of? Yes, right first time: Diageo, Altria, Aviva and most memorable of all – for the wrong reasons – Consignia. All of these rejoice in being bland latinisms (although Diageo sounds all Greek to me – dia, “through”; geo, “world”: but let’s not get pedantic about it). It seems a curious irony that at a time when interest in classical languages is at an all time low, corporate identity specialists have turned their abuse into a high art form.

And, in their earnestness not to create offence by minting something more meaningful, have often achieved laughable results. Take Aviva for example. On one reading, it could mean “Without life”.

As for Mondelez, which Americans clearly have difficulty in pronouncing, I shall leave you with the wise words of Sharon Shedroff, founder of San Diego consulting firm Strategic Vision Inc:

“Until the brand is established, it will be difficult for people to give it meaning in the US and probably in Asia. Brands under it, like Oreo, could lend credibility to Mondelez.”

So why go to the trouble and expense in the first place?

Neogama founder and creative chief upsets the BBH applecart by trying to sell his stake

December 19, 2011

There’s an interesting ownership conundrum facing BBH and its 49% sponsor Publicis Groupe. Here is what I have learned.

It concerns Neogama BBH, the global micro-network’s Sao Paulo agency. Its founder, president and chief creative officer Alexandre Gama wants to cash up the majority stake he owns.

Neogama, set up in 1999, is one of Brazil’s top ten agencies and quite a feather in BBH’s cap. It is creatively highly regarded and was the first Brazilian agency to win at Cannes. In fact, if my recollection is correct, it now has at least 18 Lions to its name.

The agency’s biggest single client is burgeoning Brazilian bank Bradesco, but it also plays an important role in servicing BBH global clients such as Unilever and Diageo.

Here’s an example of Neogama’s latest work for Diageo’s Johnnie Walker, which may well be a Cannes prizewinner next year. It was devised by Gama himself:

As you can see, a slick, confident peaen to Brazil, the awakening economic colossus.

BBH, seeking to increase its profile in up-and-coming Latin America, came about its minority Neogama stake in a convoluted way. Back in 2002, Neogama was 40%-owned by Chicago-based holding company BCom3 – the 3 referring to an alliance between Leo Burnett, DMB&B (now deceased) and Dentsu. BCom3 passed on a part of that stake to BBH, in which it by then held a 49%  share through Burnett. Still there? Because it gets even more complicated. Earlier that year along comes Publicis Groupe, which swallows the lot, including Dentsu’s 20% strategic stake, in a $3bn takeover deal, making it the then fourth-largest marketing services group in the world. The important point to note is that PG ended up holding a direct 49% stake in BBH, but only an indirect one through BBH in Neogama. Publicis Groupe CEO Maurice Lévy and Gama are not thought to be best buddies.

Although the subsequent BBH relationship has been mutually beneficial, Gama is known to have been hawking his stake at other agency group doors. Why now? Nine years is a long time to wait for your investment to mature, but some go further in speculating that he is worried about his agency’s dependence on Bradesco as a client.

The sense is that Gama is engaged in an act of brinksmanship with Lévy, which involves using rival groups as a stalking horse. He well knows his own worth: Neogama is far and away PG’s best agency in Brazil (and one of its best in Latin America).

However, buying him out may not prove that easy. If BBH could stump up the cash on its own, that would be the simplest and most elegant solution; but  the likelihood is it cannot. So why doesn’t the parent group just step in and sort it out? Well, PG is not a bank – it will want something in return. Such as buying a majority stake in BBH. The trouble is – PG is also Procter & Gamble’s biggest agency group. BBH is of course a Unilever agency, but the 51% majority stake held by the partners keeps the relationship at arm’s length. Even in this enlightened era of agency conflict management, full ownership of BBH might not go down at all well with the good folk in Cincinnati.

As I say, it’s an interesting dilemma. Let’s see how Gama, Lévy and BBH group chairman Nigel Bogle sort it out.

Diageo scores Pyrrhic victory against Sainsbury’s in copycat tussle

October 1, 2009

PimmsWhat a pity. The Diageo/Sainsbury’s copycat dispute has ended in a whimper, not a bang. Still it’s a result of sorts for brand-owners.

Under the terms of the out-of-court settlement, Sainsbury’s will be forced to modify its Pitchers label, so it looks less like Diageo’s Pimm’s brand, on which it is so obviously based. Likewise, Sainsbury’s has agreed to make its own branding more prominent, lest there be a suspicion of passing off.

Diageo is to be congratulated on its pluckiness in taking on the all-powerful supermarket bullies in the first place. And we should of course be mindful that prolonged legal proceedings against one of its principal customers might a) have led to considerable collateral damage and b) knowing the asinine legal system, have produced a negative result. Nevertheless, this is far from a conclusive victory. Sainsbury’s gets to keep the label; still less has it been forced to withdraw the product.

It remains to be seen how much of a shot across the bows this will be for future transgressors.

Why Diageo needs to sue the socks off Sainsbury’s

August 18, 2009

Oh no (yawn!), not another supermarket copycat product. The owner of Pimm’s is getting nasty with Sainsbury’s over something called Pitchers, which looks disturbingly similar – but is notably cheaper. Goes on all the time doesn’t it?

Well, yes it does. It’s the way you tell them, though. Let’s try again.

Spot the difference

Spot the difference

Diageo, the world’s most powerful drinks company, is taking Sainsbury’s to court over what amounts to alleged criminal theft. It marks the first time in 12 years that a brand owner has felt sufficiently aggrieved, and sufficiently invulnerable, to mount a legal challenge against a supermarket over the defence of its intellectual property rights. There, that’s more interesting isn’t it?

Last time, in the case of Penguin v Puffin (as it came to be known), Penguin’s owner United Biscuits successfully sued Asda for “passing off” its brand with a cheaper supermarket imitation. Asda was allowed to keep the own-label brand name temporarily, but forced to change the packaging – a decision which effectively neutered the purpose of the copycat in the first place.

Before moving on to how Diageo intends to ‘neuter’ Sainsbury’s, perhaps we’d better tackle an elephant lurking in the room. How come, if UB was so successful and created a legal precedent, that supermarkets have largely ignored the implications of the court ruling and blithely continued with imitations that are a hair-split away from the branded originals? I call to witness, for example, Tesco Temptations crisps, a flattering tribute to the success of Walkers Sensations (2003). Then, let me see, there’s Asda’s ‘You’d Butter Believe It’ margarine, spookily similar to Unilever’s ‘I can’t Believe It’s not Butter’; and Lidl’s ‘Jammy Rings’, so comfortingly close to Burton’s Biscuits ‘Jammie Dodgers’.

The supermarkets do it because they can. In the first place, the law on passing off is weak and ambiguous. Any brand owner taking a supermarket to court could not, heretofore, be certain of a positive outcome.

And that neatly brings me on to a second explanation. Which brand owner in its right mind would dare to do so? Answer: only a very powerful one. The reason is not hard to find. Supermarkets have an ambivalent relationship with brand owners. They  are at once principal customers and competitors (as own-label producers). Offend them, and you risk destroying your distribution.

Indeed, one way of viewing the copycat issue is that it is a symptom of the abuse of market power by our retailers. When I last checked, Tesco held about 31% share of the UK grocery market, and the next three grocers a further 45% between them. Supermarkets may be the main abusers, but they are not unique. Consider, for example, Boots Alliance. Are we seriously supposed to believe that Boots Foot Survival is not a rip-off of Scholl Party Feet? In short, copycatting is arguably as much of an issue for the competition authorities as it is for the passing-off specialists.

But I digress. We’ve looked at why brand owners fear challenging powerful retailers, but not whether, outside the interests of their own shareholders, they are right to do so. Surely we could turn the whole copycatting argument on its head and lionise the supermarkets. Are they not championing consumer interests against greedy manufacturers by producing own-label versions of desirable products at a more affordable, accessible price?

Well, no they are not – whatever they may say. While it is true that the consumer benefits in the short term from a lower price, in the longer run he or she is just as much of a loser as the brand owner. In effect unfettered copy-catting coat-tails on the success of brand-owners at a fraction of the original investment. But the easy ride comes at a high cost. That cost is the chilling effect on future product development by brand owners. If, after years of expensive product development, they are going to be ripped off and their brand premium undermined, why bother? Indeed, some may conclude that it’s better to get into generic production straightaway and form an explicit own-label alliance with the supermarkets; which at least has the merit of keeping the factory production line rolling. It is a process that Andy Knowles, founding partner of design consultancy Jones Knowles Ritchie, has dubbed “brand commoditisation” – the slow death of the brand premium.

Will the Diageo court case make any difference? Surprisingly – given the background – it may. The rights and wrongs of intellectual property law in this area have been left in a mess after a High Court judgement handed down by Lord Justice Jacob in December 2006. This particular case centred not on supermarket “knock-offs” but a dispute between two brand owners, Procter & Gamble and Reckitt Benckiser. Briefly, P&G claimed RB had copied its Febreze air freshener design. Despite the fact that there was an uncanny similarity between the two products (other than the price, that is), P&G lost. And it lost on the curious grounds, according to the judge, that because the RB product was a manifestly cheap imitation, it didn’t deceive anyone. It was the first time a UK court had been asked to decide the scope of a new piece of EC regulation, the so-called Registered Community Design (RCD), and by common account it fell down on the job – creating instead a “Charter for Copycats”.

So, why does Diageo think it might get lucky? Probably because there has been yet another subtle shift in the law that may allow it to have a shot at the problem from a different angle. Last May new consumer protection regulations came into force banning lookalike products which are packaged and marketed with the intention of misleading consumers.

So far they are untested. In the words of Nina Best, an expert in advertising and marketing law at legal practice Browne Jacobson: “…If Trading Standards were to decide to investigate this potential breach of the regulations, it would undoubtedly strengthen Diageo’s case as well as give them the right to apply to the criminal courts for the forfeiture of Sainsbury’s Pitchers.”

Sainsbury’s would enjoy that experience about as much as Admiral Byng his execution. Others, however, might be suitably encouraged.

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