Reckitt Benckiser chief executive Rakesh Kapoor reshapes the world of marketing

February 9, 2012

Lapac and Rumea sound a bit like those ancient continents Gondwana and Laurea, which straddled the Earth before tectonic plates carved them into the world map we’re all familiar with.

Actually, the parallel is not so very far off the mark. Except, the carving of these new continental landmasses is being done, even as we speak, by Rakesh Kapoor, recently appointed chief executive of healthcare-to-household conglomerate Reckitt Benckiser.

This is part and parcel of his new vision of the commercial world, articulated as a kind of antidote to some not-overly-impressive full year figures which have been announced at the same time.

As Kapoor sees it the motor-force markets of North America and Europe will, at best, stagnate in the years to come, so he’s taken the radical step of downsizing them into a single operation, centered on Amsterdam, in order to cut costs.

At the same time emerging markets, where almost all RB’s future growth is expected to come from, have been recast with new and emphatic importance. Hence “Lapac”, or Latin America and Pacific countries; and “Rumea”, Russia, the Middle East and Africa.

These are no mere geographical expressions either; Kapoor intends to put RB’s money where his mouth is. At the moment, only half the company’s capital expenditure goes into these regions. By 2016 this will rise to 80%. And we can expect little less revolution in the way the marketing budget be allocated: the bias towards emerging markets will shift from 44% to 55% over the same period.

It can hardly have escaped notice that a strategic realignment of this kind was implicit in Kapoor’s appointment as CEO in the first place. He is the first Indian to lead RB’s stalwartly Caucasian board. As such, he is part of a growing trend in multinational companies: the displacement of WASP leadership.

Look around you and you will see Coca-Cola and Pepsi rearming for an all-too-traditional cola war, with greatly increased marketing budgets. But one corporation is now led by a Turkish-American Muslim, Muhtar Kent, and the other by Indian-born Indra Nooyi. They’re not there by historical coincidence. A lot of that money will be spent over the next 4 years encouraging people in emerging markets to drink cola; rather than simply refreshing the palates of jaded North Americans.

We might note the same trend at Citigroup, whose chief executive is Vikram Pandit, and Deutsche Bank, which has picked Anshu Jain as its new co-chief executive. Or even at that redoubtable WASP establishment Harvard Business School, whose dean of two years is Nitin Nohria.

The big surprise is that Unilever did not take this route when appointing a successor to Patrick Cescau, instead plumping for a Dutch outsider with a P&G and Nestlé pedigree, Paul Polman. Maybe appointing a non-European would have been too far ahead of the curve in early 2009.

That said, the two most promising internal candidates for the CEO job, Harish Manwani and Vindi Banga, were – as their names clearly indicate – both Indian. If Polman decides to move on, I’ll wager that the next Unilever CEO will be Indian.

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Brazilian partner Peralta says “Tchau” to StrawberryFrog

February 1, 2012

Relief for StrawberryFrog, the maverick but financially-challenged New York advertising micro-network, is nigh.

SF founder Scott Goodson has realised his 30% investment in Sao Paolo agency StrawberryFrogPeralta, which he set up with Brazilian creative whizzkid Alexandre Peralta in 2007.

The way Peralta tells AdAge the story, break-up was all his idea. SF NY has never had operational control over Peralta’s outfit, but it does boast a string of enviable global clients, such as Emirates and Pepsi, that were expected to spread their love to Brazil via the association.

No dice, says Peralta. All his clients, even Pepsi, were won locally. “The fact that 100% of our clients belong to us made us rethink the partnership.”

That may be true, but the fact is Brazilian hotshops are not above playing fast and loose with their international allies. Thanks to growth rates of 30% or more a year, they can more or less set their cap at who they like – once out of contract. In Peralta’s case, this currently seems to involve flirtation with MDC-owned CP&B. Certainly he was coy on the subject when pressed by AdAge.

Just before Christmas, I highlighted a similar situation at Neogama BBH. Founder Alexandre Neogama was giving his UK partners a hard time, even threatening to defect to a rival network. In the event, this seems to have been a bluff aimed at leveraging his existing position, although we cannot yet be certain of that.

For Goodson, parting with Peralta must be a mixed blessing. On the one hand, he can congratulate himself on a shrewd financial investment. SFP is profitable, enjoys an estimated $8-9m revenue and, according to Peralta, is expected to grow by 50% this year. On the other, when is Goodson likely to come across such an opportunity again?


Omnicom close to $100m deal with Communispace

December 13, 2010

Omnicom is poised to clinch a $100m deal to acquire eCRM and research company Communispace, according to sources in a position to know.

Communispace specialises in creating communities online – it claims to have over 350 in operation. It can mine and shape sophisticated customer database material for large, blue-chip clients – which often find difficulty in establishing the actionable status of “chatter” in the social media sphere. Communispace clients include Coca-Cola, Campbells, Colgate, Hasbro, Heinz, HP, Microsoft, Pepsi and Unilever.

Communispace was set up in 1999 by current president and chief executive officer Diane Hessan, a Harvard MBA. It is based near Boston, Massachusetts, but has global reach, with offices in London; Genoa, Italy; and in the Asia Pacific region, operating out of Sydney, Australia. Maria Rapp, a founder of Communispace, is managing director of European operations.

Communispace is 43% owned by California-based Dominion Ventures Inc. A further 13% is in the hands of Boston-based Women’s Growth Capital Fund. Senior staff appear to own the rest.

It is easy to see why Omnicom would be interested in buying such a company, but not why it should be paying so high a price –  if financial data that has come my way is any guide. Communispace’s 2010 gross revenue is expected to be $47m and profit before tax, $6.3m: which suggests an already high price/earnings multiple of about 16. Additionally, however, just under 30% of that profit-before-tax figure is expected to be siphoned into an options bonus scheme for senior Communispace management, which would effectively make the multiple soar well into the 20s. It has rightly been pointed out that Omnicom is not normally known for its financial extravagance. Nor has it been particularly active on the acquisitions front recently. There must be a pretty important piece of mutual business at stake to justify paying Communispace’s $100m asking price.


PD James Thompson onslaught kills off BBC private sector marketing experiment

October 13, 2010

Spare a thought for BBC director of marketing, communications and audience Sharon Baylay, who leaves next year – and not entirely of her own volition.

The axing of her position is a monument to the ineptitude of director-general Mark Thompson in front of a microphone. It was preordained from the moment that he allowed himself to be kebabed on the skewer of a little old lady’s forensic interviewing technique.

Cast your mind back to December 31st, 2009. PD James, the little old lady in question, was guest-editing the Today programme. I don’t know whether Thompson had a premonition he was going to be that morning’s toast. He certainly acted like a fox lamped by headlights when the crimewriter and former BBC governor moved in for the kill.

In her cross-wires were the 37-plus BBC employees who – inexplicably in her view – earned more than the prime minister. Thompson attempted to bat it off by justifying the salary of then BBC1 controller Jay Hunt, with her £1bn budget. But James was having none of this. She was not talking of Hunt and her kind, she said. Who were all these over-salaried bureaucrats with not a shred of creativity in their make-up? And in particular, this clan of clones with marketing and communications in their title, paid for by the taxpayer? Why, the litany is endless: there’s a director of marketing, communications and audiences on £300,000, and a director of communications on £225,000 – doesn’t he do what the other person’s supposed to do? Then there’s a director of brand and planning, a director of audiences… And so on. It begins to sound like an extract from the script of Yes Minister, only it’s for real.

At first sight, Baylay seems an identikit fit for an “over-salaried” bureaucrat. Her basic salary is £310,000 and her pedigree is not the BBC but Microsoft, where for 15 years she played a competent but fairly faceless role in a number of managerial positions, culminating in general manager of online services. But that’s to look at the appointment, which happened in May 2009, in the wrong light.

Baylay is less a techno-mandarin than the last of series of expensive imports from the private sector who have swelled the power and importance of the marketing function within the BBC. The first marketing director in any meaningful sense was Sue Farr, who had a background weighted more towards advertising than brand management. But that was no bad thing: in those days marketing, which was much more lowly in the BBC hierarchy than it is today, was largely about on-air ads, such as Perfect Day. Farr had another, unofficial, role. She was the publicly acceptable face of director-general John Birt, a skilful if robotic strategist and not someone you’d particularly want to invite to dinner.

Farr came a cropper with the advent of Greg Dyke as Birt’s successor in 2000. Dyke, probably the most successful and certainly the most popular d-g in recent times, suffered from no such interpersonal skill inhibitions as his predecessor. He wanted a “real” marketer who would oversee not only the BBC’s content and PR operations, but be at the heart of its audience research as well. And he eventually alighted on Andy Duncan, with his classic fmcg background at Unilever.

The early success of Duncan, reflected in the take-off of Freeview and his subsequent promotion to chief executive of Channel 4, set a precedent. It was reinforced by his successor, Tim Davie – once again equipped with impeccable fmcg credentials, this time Pepsi-bred. The difference between Davie – who moved on to become the BBC’s director of audio and music – and his successor Baylay really amounts to sector emphasis. At a time when media is ever more interactive and internet-driven, it made sense to appoint someone steeped in digital experience. And where better to look than Microsoft, which had been closely involved with the BBC in the development of the iPlayer?


Chinese corruption probe extends to Publicis media operation

September 14, 2010

In the global village, there’s nowhere you can hide – for long. A spreading corruption scandal in the little-known Chinese city of Chongqing (population about 35 million) will be causing the worldwide media bosses of Vivaki Exchange (Publicis Groupe) and OMG (Omnicom) some sleepless nights. It’s a cautionary tale about using Chinese brokers as intermediaries in media negotiation. All the main global networks, with the exception of WPP, use one – though not necessarily the same one. They broker the client rather than the media owner.

Last week, the chief executive and number two at Publicis’ buying point in China, Vivaki Exchange, left (or more likely were forced to leave) abruptly. Vivaki Exchange is an on- and offline amalgam of Publicis’ Solutions Digitas, Starcom MediaVest and Zenith Optimedia, formerly known (in China) as China Media Exchange (CMX). The reason for the two executives’ departure?  Warren Hui (left) and Ye Pengtao had had dealings with a media broker called Chongqing Huayu, which operates in China’s so-called South Western markets (Yunan and Sichuan as well as Chongqing itself). Chongqing Huayu is owned by a certain Zheng Zhixiang, recently arrested by the police in connection with the Chongqing Hilton prostitution scandal (highlighted here in the Daily Telegraph). The allegation is that he had been using the media broker to launder money from the prostitution racket. If convicted, Zheng will probably face the death penalty.

According to well placed sources, the broker Huayu (unusually in China, I’m told) owes money to the two buying points: perhaps Rmb100m (£10m) in the case of Vivaki Exchange; the amount owing to OMG (which uses the same broker) is unknown. Whatever the exact nature of the shortfall, it will now be impossible to make good, owing to the scandal. As a measure of how serious the situation is, both Hui and Ye were interviewed by the police on September 4. They were released after 48 hours, but told not to leave the country pending further investigation. I understand that police enquiries have extended to the general manager of Pepsi’s bottler in south-west China. Pepsi is Huayu’s second largest client. Media buying is handled by OMG via OMD.

China is one of the fastest developing advertising markets in the world. Asia Pacific, of which China is the largest component, will overtake North America in size by 2014, according to recent research sponsored by Starcom MediaVest. China’s ad market is already nearly as big as that of Western Europe.

UPDATE 13/10/10. OMD China has “let go” its managing director of five years Winnie Lee and replaced her with Siew Ping Lim, formerly of WPP-owned Mindshare, who holds the upgraded title of ceo. Lee, who “does not have a clear plan at the moment“, will leave next month. Is her departure by any chance related to the above events?

FURTHER UPDATE 23/11/10. More evidence of stress and strain at OMD China. OMD’s Johnson & Johnson global account director, Ben Jankowski, who relocated to China in June – because, he said, it was the place to be – has quit. He is crossing the line to become global media head of Mastercard early next year. Team turmoil is said to be the cause.


Finding marketing meaning in Big Society rhetoric

August 5, 2010

What exactly does David Cameron’s vision of the Big Society amount to? The cynical, but evidence-based, conclusion is: spontaneous acts of unrewarded generosity by almost every segment of society except the state itself.

While ‘mad axeman’ George Osborne frenziedly appeases the rapacious dictates of international capital markets, the rest of us  – it appears – must supply the deficit with sundry forms of “volunteer” work. At the local community level, Cameron seems to be proposing a boy-scout initiative with a bit of unpaid crowdsourcing thrown in. Similarly, business is expected to dig deep into its pockets to subsidise national policy initiatives – such as Change4Life – left destitute by the annihilation of the public funding formerly underpinning them.

Nowhere, right now, is the fallout more visible than in the marketing communications community, which is tasting the bleak disparity between political rhetoric and reality encapsulated in permanently truncated public sector budgets and a crippled COI.

What can be done to reverse this dreary cycle of perpetual cuts and reignite some top line growth? The glimmerings of an answer has been provided by Cameron’s friend Sir John Rose, who happens to be the chief executive of aerospace engineering company Rolls-Royce. Rose is trying to persuade Cameron to engage in a long-term industrial innovation strategy. That may seem a far cry from the immediate needs of the cash-starved marcoms community but, believe me, there is a marketing angle in all of this for those with the skill to exploit it.

Rolls-Royce has recently produced an audit, based around an analysis by the Oxford Economics consultancy, which seems to demonstrate that its activities contribute a quite extraordinary amount of added value to the UK economy. The figure quoted is 0.56% of UK GDP: £7.8bn of £1,400bn. All the more extraordinary, as the FT points out, when we remember that Rolls-Royce employees account for only 1 in 3,000 of the UK population.

Even allowing for exaggeration, there is clearly an important multiplier effect here. The calculus is apparently based on such things as former workers leaving to start their own ventures (one cited example used the skills he had acquired to set up a coffee-machine factory); through to suppliers who assimilate new engineering techniques by working with the company.

The detail is less significant than the power of the idea behind it. Rolls-Royce is embarking on a new form of corporate social responsibility – dubbed in some quarters corporate social activism. Part educational and part public policy oriented, it is designed to help transition Britain from being a vulnerable service economy to a high-value engineering one.

Rolls-Royce is not unique in this endeavour. Only last month BAE Systems, our biggest aerospace and defence contractor, announced a £50m investment in its Skills 2020 programme, which aims to supply the UK with a continuous stream of high-level engineering talent. Crucially, BAE has managed to persuade the government to actively support its initiative.

Corporate social activism need not be restricted to prominent aerospace corporations. Look to the United States and you will see that Geoff Imelt, chief executive of GE, recently launched the Ecomagination Challenge. It offers $200m of venture capital money to anyone enterprising enough to find a winning solution to revolutionising the US power grid.

Nor is the consumer goods sector excluded from such activism. Pepsi has recently announced a ‘Refresh Everything’ project, which is funding social enterprise at the local level with hundreds of millions of advertising dollars diverted from supporting the Super Bowl earlier this year.

Here, then, are a few ideas that appear to chime readily with Cameron’s Big Society rhetoric. It’s up to marketers to provide the small print, according to Alan Bell, chairman of Bell Design & Communications – whose company recently pitched for the Rolls-Royce account:

“There needs to be a debate about what the Big Society actually means in terms of industry participation. One of the problems with this country is its ‘quick, quick, quick’ City mentality. We don’t look enough to the long term. And now, as this recession is demonstrating, we’ve  been caught out – with devastating consequences for our service-driven economy. In a funny sort of way, the age of austerity may prove a catalyst for new thinking. If we don’t – for example – train our engineers of the future they, too, will be lost to China and India. That new thinking also applies to marketing. It takes time to understand the longer view; branding is not all about identity makeovers.”

Bell speaks from an unusual standpoint. His was the only agency to be selected by UKTI – the government-sponsored body that promotes British businesses internationally – to represent Britain at the Shanghai Expo this year. Bell Design, which now has an office in China, has been conducting a series of branding workshops that brought its team into contact with some of the country’s most powerful regional bosses.

One thing the Chinese certainly understand, Bell says, is the longer view. He is fond of quoting the late Chinese leader Zhou Enlai. When asked what he thought about the impact of the 1789 French Revolution, Zhou – the architect of China’s industrial take-off – replied: “It’s too early to tell.”

The message is: take a leaf out of China’s book, or get left behind.


Sorry Costa – are you better than Caffe Nero too?

June 16, 2010

Practical experience has long told us that Costa coffee tastes better than the Starbucks brew. So Costa, owned by Whitbread, must have felt on a pretty safe wicket when it came up with a knocking campaign to prove the point. Do its research properly, and it would romp home.

So it turned out. Costa launched a poster and print campaign, via Kamarama, which rejoiced in such wounding straplines as: “Sorry Starbucks: the people have voted”; “Starbucks drinkers prefer Costa” and “Seven out of ten coffee lovers prefer Costa”. And it was a winner. Costa’s sales, on a like-for-like basis, rose 5.5% during the period (though how much of this was share stolen from the unfortunate Starbucks I do not know).

Most wounding of all, no one complained about the unfairness of it all. Well, almost no one. A single complaint was lodged with the appropriate watchdog, the Advertising Standards Authority. Guess who lodged it? A comprehensive inquiry investigating everything from Costa’s methodology to the size of its small print followed. And the result? Triumphant vindication for Costa and superheated milk-froth in the face for Starbucks, all five of whose grounds for complaint were rejected. Game, set and match to Costa.

In such circumstances, it might seem churlish to rain on Costa’s parade, but I do have a niggle. Well, more an enquiry really. The ASA seems more than happy with the professionalism of the market research on which these sensational Costa claims were based, so who am I to complain? Just for the record, though, the blind-taste tests in question also involved a Caffe Nero cappuccino, which alternated with Starbucks’ equivalent brew as the foil to the Costa product. Yet we hear nothing of what our sample thought of Caffe Nero vis-à-vis Costa. Common sense suggests it performed rather better than the Starbucks product, which has unkindly been compared to a warm adult milkshake. But the ASA adjudication document does not make this entirely clear. Supposedly, the full research results are published on http://www.costa.co.uk. See if you can find them. I can’t.

On a footnote, taste isn’t everything. If it were, Pepsi would long since have overtaken Coca-Cola in the UK, according – so I am told – to periodic blind-taste tests.

UPDATE: You will search in vain for the research findings on the Costa website: they have been removed. However, a kindly PR has provided me with a copy of the results and I can report the following:

“Preference for Costa’s cappuccino is remarkably strong in comparison to competitors among those who identified themselves as “Coffee lovers”, With 7 out of 10 preferring Costa (with 72% preferring Costa versus 28% Starbucks; and 69% preferring Costa versus 31% Nero). Significantly, coffee drinkers who prefer Caffè Nero and Starbucks as their main outlets preferred Costa cappuccino over their preferred retailer’s product.”


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