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Neogama loses Bradesco, Omo to Interpublic – and 40% of its revenue

January 30, 2013

alexandre-gamaNot all fairy tales have a happy ending. One such is the marriage of convenience between Brazilian hotshop Neogama, its micro-network affiliate BBH and Publicis Groupe. Readers of this blog will recall that, a little over six months ago, Publicis chief Maurice Lévy bought out the 51% of BBH PG did not already own. A useful by-product of the deal was that he acquired not only BBH’s 34% stake in one of Brazil’s hottest agency properties, but the majority shareholding of its founder and creative supremo, Alexandre Gama, at the same time. Neatly, Lévy solved the creative succession crisis at BBH with the same stroke of his pen – by appointing Gama as BBH’s global creative chief, replacing Sir John Hegarty.

Alas, the deal has worked out somewhat better for Gama than for Lévy and Publicis. Gama managed to bank his cheque, but Neogama has just lost about 40% of its revenue, and two of its principal clients. Or so I hear.

It is common knowledge that one of the reasons Gama was hawking his majority stake in the first place was that he feared his agency was too reliant upon a single account, that of Brazilian bank Bradesco. Indeed, rumours soon began to surface that the bank was about to review. Well, now it has: and placed the account with McCann.

For Interpublic, McCann’s parent, Neogama’s plight is, however, a double joy. Another major – this time multinational – client has also fallen into its lap. I mean Omo (“Dirt is Good”), which has moved to Lowe.

In retrospect, we can see this was an accident waiting to happen. As is well known, PG is a Procter & Gamble agency group, and Omo is owned by Unilever. Under the status quo ante, Neogama had an element of protection from client conflict, in that BBH – itself a major Unilever network – was still majority-owned by its founding partners (i.e., Nigel Bogle and Hegarty). All that ring-fencing was swept away by the Lévy deal.

8027388763_a9feed3b19_zIt will interesting to see who gets the blame for this cock-up. My money is on Jean-Yves Naouri, the once but not future king of Publicis.

One thing you can be sure of: it won’t be the Silver Fox himself, who now seems comfortably ensconced in a permanent chairman role, despite recent protestations that he was – at 70 – on the point of retiring.

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£1.7bn global ad review is creative solution to Johnson & Johnson’s money problem

July 25, 2012

It would be nice to think that Johnson & Johnson’s newly announced review of its £1.7bn annual advertising spend was driven by a need for greater creative consistency. But it isn’t.

Money’s the thing – saving it that is. J&J may be one of the world’s biggest brands, but it’s also a company in trouble. Since 2009 J&J has suffered numerous recalls in the US, mainly of its over-the-counter drugs like Tylenol and Benadryl; but the prescription and medical devices businesses have also been hard hit. All in all, it’s said to have lost $1bn in sales, partly through bad luck and mostly through sheer incompetence.

At first it was the staff – including the marketing department – who paid, by being made surplus to requirements. Now it is the spend that’s being trimmed. Judge for yourself from the officialspeak: “Johnson & Johnson is conducting a global agency review and consolidation to build greater value and deliver innovative and fully integrated solutions for our consumer brands.” Well, they wouldn’t want less innovative solutions would they? And they could hardly be less fully integrated than they are at the moment.

In truth, there’s an easy win here for the new kid on the block, Michael Sneed – who became J&J’s top marketing (and PR) officer at the beginning of this year. There could hardly be a less efficient way of running your global marketing services than the one that exists at the moment. Uncle Tom Cobbleigh and All are at the advertising trough. It would be simpler to name a global marcoms group that isn’t on the roster.

WPP has business through JWT and AKQA; Publicis Groupe through Razorfish; Interpublic through Deutsch, Lowe, The Martin Agency and R/GA; Omnicom through DDB and BBDO; and Havas through Euro RSCG. That leaves, er, Dentsu and MDC off the list.

Sneed is a company lifer who, at various stages of his J&J career, has shown considerable sensitivity towards advertising creativity. It will be interesting to see whether this natural instinct gets overridden by the all-powerful imperative of saving the company money. Don’t expect a self-aggrandising Ewanick moment – Sneed seems too modest for that. Do expect a financial deal, of the “Team WPP” or more likely “Commonwealth” variety, that dresses up financial expediency as a coherent creative solution.

The most interesting thing about this review may be the losers. If Interpublic is among them, perhaps group CEO Michael Roth will at last seek to do a deal with Publicis Groupe. The air is certainly thick with rumours to that effect at the moment.


Why Unilever’s Chrysalis was no butterfly

July 5, 2010

“Odd” was how one highly placed Unilever source described the food, toiletries and detergent giant’s decision to scrap its innovative Chrysalis unit after only two years. Odd indeed: its disappearance is as enigmatic as its existence in the first place.

Chrysalis was a kind of wholly-owned incubator, in which Unilever stored some of its most treasured “local jewels”, such as Marmite, Pot Noodles, Peperami, Slim-Fast and Bovril. Altogether, there were 14 of them, stretching across 3 markets: Germany, France and Britain. These brands had one thing in common. Their quirky, national character possessed almost no transborder appeal. On the other hand, put together, they added up to a £500m business – no small change.

Unilever never made the rationale of Chrysalis entirely clear, leaving journalists and City analysts to fill the vacuum with speculation. Unilever’s one categorical utterance on the subject was that the brands were not for sale. Which the City boys (such as Citigroup) took to mean the exact opposite.

Look at the company’s strategy, One Unilever, they said. It’s all about multinational power brands such as Axe/Lynx, Persil, Dove and Wall’s. What possible role could tiddly, if charismatic, brands like Marmite have in this? By way of justification, they pointed to various strategic disposals the company had been making around the world: Boursin in France, a Brazilian margarine company here and an American detergent company there. Second, they pointed to an inherent contradiction in running these highly localised brands out of a central organisation based in Rotterdam; meaning Chrysalis must be a short-term expedient. And third – the clincher – Unilever had deliberately segregated its minor brands into two categories. There were those – like Colman’s mustard and PG Tips – that remained in the main Unilever fold and then the rest – the black sheep so to speak – which had been hived off into Chrysalis.

So much for that theory: all the black sheep have now been herded back into the main fold  – under the name of Incs (Incorporated Businesses) – leading Investec analyst Martin Deboo (for one) to conclude ruefully that rumours of a sell-off were overcooked.

I’m not so sure. The obsession with a brands sale seems to have arisen from a partial misunderstanding of Chrysalis’ purpose in the first place. By the same token, its dissolution cannot be regarded as a guarantee the brands will remain in the long-term ownership of Unilever.

First, the creation and purpose of Chrysalis. Admittedly, in the past, these brands might have ended up in the hands of private equity companies. But by 2008, the date of Chrysalis’ origin, such funding was already becoming very tight. At one level, the unit was clearly intended to keep them financially afloat. It was equally apparent, however, that – put in the hands of semi-detached entrepreneurial managers – Chrysalis would serve as a nifty brand laboratory whose lessons could be imported into mainstream Unilever culture.

The man chosen to lead this alternative operating model was James Hill, who had a considerable track record behind him as first chairman and md of Lever UK, the Unilever detergent arm, and subsequently senior vice-president marketing operations Unilever Europe.

Whether under Hill’s leadership these 14 brands actually made significantly more money for Unilever I have no idea (but some doubts). More evidently, his brands did succeed in making a lot of positive media noise for big, boring Unilever and embarked on some interesting experiments.

Marmite is a good case in point. During Hill’s stewardship, the brand name has finally passed into the English language as a metaphor of sharply contrasted appeal. Marmite led the way (well, co-led it with HMV) in pioneering temporary “pop-shops”. These exploited high-profile retail premises left fallow by the recession to merchandise 100 Marmite-branded products, including food, clothes, art and even Christmas boxes.

I seem to remember Marmite also made skilful use of its brand personality to keep itself front of mind during the late, long-drawn-out, election with a “Love Party versus “Hate Party” campaign featured on a specially devised website, http://www.marmitenewsnetwork.com.

The Marmite campaign soon amassed some valuable political capital when Nick Griffin, leader of the BNP, decided to do some passing off of the “Hate Party” – complete with hijacked Marmite logo – in his own political broadcast. Threat of legal action by Unilever not only forced a humiliating climbdown by Griffin, but caused him to lose his irreplaceable webmeister in the media furore that followed.

Enough of Marmite. Let’s also consider Peperami. The sado-masochistic salami brand created a bit of a sensation last year when its group marketing manager, Noam Buchalter, fired Lowe – its agency of 16 years – and solicited members of the public to come up with ideas for the next ad campaign. Crowdsourcing, as it is called, is increasingly trendy these days – a kind of marketing analogue of social media. Walkers used it to some effect recently when coming up with a new crisp flavour. What’s far less usual is to fire one’s ad agency in the process. This heinous act sparked an explosive debate in creative agency circles, the gist of it being that Unilever is a cheapskate, seeking to circumvent agency fees with inexpensive ideas sourced through the internet which achieve, at best, tepid success. We have yet to judge, in Peperami’s case. More importantly, however, the Peperami crowdsourcing episode was a first for Unilever which succeeded in capturing the attention of new chief marketing officer Keith Weed. One of Weed’s first initiatives on taking over from Simon Clift earlier this year was to approve a crowdsourcing drive for 13 of Unilever’s biggest brands, including Wall’s, Lynx and Dove involving the same $10,000 “bounty” for the lucky winner.

Weed has subsequently felt the need to back-pedal, and reassure agencies, on the issue of crowdsourcing. In an interesting and wide-ranging debate with WPP ceo Sir Martin Sorrell at Cannes (where Unilever was declared Advertiser of the Year) he had this to say:

“In general, I’m not going to use crowdsourcing as a substitute, with the exception of Peperami.” Consumer-generated ideas, he added, are merely a way of allowing Unilever to “pilot and test things”.

Which brings me to why Chrysalis was eventually ditched. At the beginning of this year, James Hill moved to another Unilever job, that of chairman of Italy. Buchalter has also quit, to become a consultant. It would be easy to surmise ‘writing on the wall’ here. I doubt that is the case, however. There is an exactness about Hill’s two-year term that suggests this was a valued Unilever “lifer” taking up a new turn of duty. More likely the closure has come about because the new top management team, led by ex-Procter & Gamble executive Paul Polman, couldn’t see Chrysalis’ long-term relevance. Indeed, Weed specifically referred during the Cannes debate to Polman’s decisive influence in making lines of communication with the consumer simpler and more direct. A complex hybrid operating system, and a business culture licensed to be irreverent, may have had no place in his thinking.

Does the dissolution of Chrysalis matter? In the short term, no. Matt Burgess, formerly managing director of Chrysalis UK, remains in charge of the Marmite, Bovril, Pot Noodle and Slim Fast brands as md of the new “integrated” unit Incs. I suspect, however, that some of the fizz has come out of the laboratory idea, that the future of the brands will be more pedestrian, and their value more meticulously cost-accounted.


Greg Delaney makes it a hat trick with DLKW Lowe deal

June 28, 2010

I think Greg Delaney deserves some sort of medal, quite possibly an Olympic one. Because he has just proved – beyond all doubt – that he is one of the smartest deal-makers in adland.

Success in building advertising agencies, as with comedy, is about timing. It’s all about knowing when to buy and when, at the top of your game, to sell. The slightly-built chairman of Delaney Lund Knox Warren has demonstrated this quality not once, not twice, but three times in his business career.

First, he was instrumental in the buyout of DLWK (then Delaney Fletcher Bozell) from Bozell Worldwide in 2000, then the acquisition of his agency by marketing services group Creston plc in 2005 for an astonishing £38m. Lastly, post earn-out, he has just engineered a management buy-in at Lowe London which values DLKW at £28m. The cash, stumped up by Lowe’s parent Interpublic, goes into Creston’s coffers. But the fact the new agency is to be known as DLKW Lowe rather than Lowe DLKW, tells you almost everything you need to know about the deal. This is a talented management team (consisting, among others, of joint ceos Tom Knox and Richard Warren) propping up a once-great agency name; tapping into a strong international network; and rewarding themselves, yet again, with a ride on the gravy train (this time with minority stakes in the new agency).

DLKW has never been regarded as one of the most creative agencies, but it has proved one of the best managed. Which is all the more commendable considering its start in life was almost an accident. Most agency breakaways are entirely fueled by their founders’ egos. DLKW’s foundation, by contrast, had more to do with a fortuitous set of circumstances. Bozell, its then network, was being merged and purged with group parent True North’s other arm, FCB. However, the London team would have none of a proposed merger with FCB’s Banks Hoggins O’Shea and, by an astonishing oversight, were allowed to go their own way.

Interpublic shortly afterwards acquired True North; and, as a consequence, a strategic stake in the breakaway agency, which it held on to until Creston bought DLKW lock stock and barrel in 2005. There was irony here. In the shorter term, DLKW proved a thorn in the side to Interpublic by hijacking most of wholly-owned Lowe’s UK General Motors business. In the longer term, however, the stake created a durable rapport and helped open doors when Lowe’s current network chief, Michael Wall, pitched up at Creston with an open cheque book earlier this year (A Wall of money).

Lowe needed to do a deal with someone, no doubt about it. It was that or close down the London office. Rapier and Dye Holloway Murray were also in the frame, but DLKW seems to have been the target, first and foremost. It’s a known, respected quantity and the brands fit.

But, one niggling doubt remains. If DLKW is so all-fired magnificent, why has Creston let it go for £10m less than it paid for it five years ago? At the time of acquisition, DLKW accounted for about half of Creston’s revenues, and even now the figure is roughly a quarter (£19.2m of £80.3m, in the year to March 31). In other words, the agency was, and remains, a major strategic asset.

Creston’s argument is that the money is better deployed elsewhere, in faster-growing assets such as digital. It’s certainly true that advertising is a less dynamic element of the group’s portfolio than, say, healthcare. Indeed, DLKW’s profitability appears to be flat-lining. According to “bottom line” wizard Bob Willott, DLKW group made a post-tax profit of only £1.9m in the last financial year – almost the same figure as that achieved when the agency and its small subsidiaries were first acquired. Above all, however, it seems to have been the flash of cash that did the trick. The £28m payable to Creston on completion is spookily adjacent to its debt pile of £25m. Shareholders were not slow to swallow the implications: Creston’s share price shot up.

Withering on the vine or not, DLKW certainly looks better placed to kick-start itself back into life as part of Interpublic than in the eccentric marketing services portfolio that is Creston. In Lowe, the boys have got themselves a bigger sand-pit to play in. Let’s see what they do with it.


Interpublic’s solution to Lowe London? A Wall of money

April 19, 2010

Who will put Lowe London out of its misery? The loss of its principal accounts seems an everlasting litany. To Stella Artois, John Lewis and Nokia N-Series should also be added the Beck’s account. All that’s propping Lowe London up is international business from Unilever (barring Peperami, which went last year) and Johnson & Johnson. According to Nielsen, 2009’s already depleted billings of £91m shrank to a minuscule £53m.

How to attract top talent in such circumstances – the talent that will draw in vital new business? It’s a vicious circle, from which there are only two ways for a once famous agency to extract itself. Call it a day, as Lowe alma mater CDP did long after it should have. Or buy something that will enthuse new talent and new enthusiasm.

Not surprisingly, it is the latter course that Lowe Worldwide chief Michael Wall has embarked upon. Evidence of his enthusiasm and determination may be deduced from approaches to Creston plc (owner of Delaney Lund Knox Warren); Rapier; and Dye Holloway Murray. So far, it would seem, the overtures have been unrequited. But we should not underestimate the charm of a man with an open cheque book in these straitened times; nor the forcefulness of someone who has managed to persuade cash-strapped Interpublic to cough up.


Age may wither them and custom stale their finite variety

November 7, 2009

Tim LindsayI was struck by WPP chief Sir Martin Sorrell’s comment on the marketing services industry at ad:tech this week. “The people who run agencies tend to be of an older vintage – to put it politely,” he said. “They tend to be resistant to change and want to spend the last three to four years of their careers travelling around the world rather than dealing with fundamental strategic issues on a daily basis.”

They should be so lucky to reach “an older vintage” these days. The number of people over 50 who are active in the ad business is a vanishingly small figure, according to Incorporated Practitioners in Advertising (IPA) figures, and it’s getting smaller all the time. One particularly endangered species seems to be the heads, or group heads, of UK network creative agencies.

To take a small but illuminating sample, Gary Leih, group head of Ogilvy (just over 50), and Tim Lindsay, president of TBWA\London (53), have both been put out to pasture recently. We could perhaps add the case of Bruce Haines, group chief at Leo Burnett, who managed to stay the course until the ripe old age of 55. And the comparatively youthful former chairman and group chief executive of Saatchi & Saatchi, Lee Daley, who moved on in his late forties to an all-too-brief spell as marketing director of Manchester United. While we’re there, let’s tie in the long time management void at the top of Lowe, and the problems in filling the top slots at Publicis UK a couple of years ago when the self-same Lindsay left for TBWA.

To go back to Sorrell, I’m not sure anyone – other than himself perhaps – is capable of dealing with “fundamental strategic issues on a daily basis”. Just one or two over a two-year period is usually enough. As far as I can see, that’s exactly what Daley, Leih and Lindsay tried to do. They all instituted fairly far-reaching management changes in an effort to meet the digital challenge subverting traditional agency structures. With hindsight, the problem seems to be that they were judged not to have gone far enough. Or, put another way, they may indeed have embraced a “fundamental strategic issue”, but they were not allowed long enough to savour their triumph. The truth is, if an agency doesn’t bring in enough big business in the first two years of your tenure, you’re likely to be turfed out in the third. The digital challenge may simply have made it a little harder to win that business in the first place.

Lindsay was probably on skid row once his agency lost the advertising account for McCain to Beattie McGuinness Bungay. He was lucky to survive the subsequent – abortive – attempt to buy BMB. Nissan had also begun to look shaky. Pinning the Media Arts rebranding fiasco on him sounds like the thinnest of subterfuges employed by a management that had long since lost confidence in him – fairly or otherwise.


No quarter for ad giants

July 29, 2009

GM bankruptAnother day, another dollar less. Quarterly results from the big agency groups paint a revealing picture of financial pain, and nowhere more poignantly than in the case of the stricken automobile sector.

Publicis Groupe recently disclosed that its exposure to bankrupt General Motors was ‘only’ $12.8m (about £8m) rather than the £78m (£47m) originally projected. That did little to soften the blow when the half-way figures came out a few days later: net income (pre-tax profit) down 13%, and nasty deterioration in organic growth in the last quarter. The only bright spot was a 6% increase in digital revenues over the six months. That, and the assurance of group chief executive Maurice Levy that things can only get better – from September onwards. Tell that to the 1,800 people (4% of the group) he has had to ‘let go’ this year.

Still, Publicis did a lot better than Interpublic Group, home of Lowe and McCann Erickson (one of whose biggest clients is GM). IPG has actually managed to achieve a loss of $53m (£32m) over the six months. So the reduction of its latest quarterly net income by 76% must be accounted something of a triumph by comparison with first quarter performance. Quite a lot of its losses are attributable to the severance costs of the 4,100 people it has made redundant – 9% of its workforce.

Omnicom (BBDO, TBWA, DDB etc), too, posted pretty dismal figures, slightly more encouraging than IPG’s but not, on most criteria, as buoyant as Publicis’. It is laying off 3,500 of its staff, nearly 5%. Profits for the last quarter were 24% down, about the same as the previous quarter. Which was probably pretty good really, considering Omnicom’s $58m exposure to bankrupt Chrysler. On this subject, however, chairman and ceo John Wren was understandably vague – despite analysts’ obvious interest in the subject. It was the second biggest search term employed in Omnicom’s earnings call. There are, as I have pointed out before, some unresolved mysteries about Chrysler and Omnicom.

As for WPP, we will not be seeing its half-year results until the end of August. Things are not looking too clever, though. True, WPP is the odd one out so far as the car industry is concerned. Not only has Ford not made its way to the bankruptcy court, it has even managed a small operating profit this quarter. So no write-downs; but that’s slim cause for comfort, as ad spend is likely to be depressed for some time to come. Redundancies give us a fuller picture. In a trading statement released early in June, WPP admitted to making 4,300 employees redundant – about 4% – since the beginning of the calendar year. The final figure is expected to be about 7,200.

Both Publicis’ Levy and Omnicom’s Wren seem to be spinning the idea that we are at, or near, the nadir. Don’t believe everything you hear, though. Next  quarter’s earnings may look better than they really are simply because the dive they took in Q3 last year will flatter the percentage increase. That, at least, is the view of WPP ceo Sir Martin Sorrell.


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