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Cheil

Cheil Worldwide (Korea)

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Cheil is South Korea's leading advertising agency, more than three times the size by billings of its nearest domestic rival. Like many of South Korea's leading agencies it began life as a subsidiary of one of the chaebol, the diversified industrial conglomerates who have traditionally driven the Korean economy. Cheil's biggest individual shareholder is Samsung, undoubtedly the country's most powerful business. Cheil's size derives largely from the fact that it supervises much of the global Samsung Electronics account, often in partnership with local agencies. Since 2008 it has set out to strengthen its profile through the recruitment of experienced non-Korean executives and selective strategic acquisitions of Western agencies, such as Barbarian Group and McKinney in the US, BMB in the UK and global network Iris in 2014.

Competitors

See ranking of Leading advertising Groups Worldwide and Leading Agencies in Korea

Brands & Activities

Cheil is intent on living up to its name, which means "the best" or "number one" in Korean. It is developing a reputation as Asia's most international marketing group after Dentsu, with a growing presence outside its home market, although that profile is almost entirely dependent on lead client and part-parent Samsung. The group showed signs of ramping up its international profile considerably in 2007 and early 2008, recruiting a string of Westerners for key international positions. (That strategy has yet to stick; few of the most senior Western recruits have lasted for more than a year or two). The group officially changed its name from Cheil Communications to Cheil Worldwide in 2008 to emphasise its global reach.

The agency offers a wide range of services from traditional advertising to strategy & consulting, sports marketing and sponsorship, events and sales promotion. It claims to be Korea's only integrated marketing communications agency. Following Cheil's IPO in 1998, Samsung reduced its stake to what is now around 28%, held through several different arms of the wider group. Samsung also remains the agency's biggest client by far, accounting for around 72% of domestic billings, and essentially all of the main Cheil network's billings outside Korea, excluding acquired agencies.

By the beginning of 2017, the group had offices in 43 countries including the US, Germany, Hong Kong, China, Russia, India and Singapore, making it the most internationally experienced by far of Korea's domestic advertising networks. (Though Hyundai's Innocean is catching up fast). Ad Age estimated global revenues of $859m in 2016, including $61m in the US. In most countries, Cheil acts primarily as the local liaison office for Samsung. Although main global brand advertising duties for Samsung are currently handled by the Leo Burnett network or 72andSunny in the US, the local Cheil offices manage creative, media and promotional marketing for Samsung's smaller electronics product ranges, as well as promotional events and roadshows. In fact, the group is determined to increase its share of Samsung's overall marketing expenditure and has begun to bolster its own resources by appointing experienced Westerners to take on key international roles.

In 2008, Cheil established a solid presence in the UK, acquiring a 49% holding in leading creative agency Beattie McGuinness Bungay for an undisclosed sum. There are plans to develop a small international network for BMB, which will also take over local management of Cheil's key account, Samsung. Cheil increased its holding in BMB to 75% in 2014, and then 100% two years later. In 2009, it acquired the New York digital agency Barbarian Group (revenues of $20m, according to AdAge). In 2012, the group expanded its presence in the US dramatically with the purchase of independent agency McKinney (US revenues of $23m) for around $50m. However, the US division has suffered a degree of turbulence, not least with a succession of problems at Barbarian.

In 2014, Cheil agreed to acquire an undisclosed minority shareholding in UK-headquartered integrated network Iris. It has steadily increased that holding to 95% by 2017.

Cheil also has a growing presence in China following the acquisition in 2012 of local agency Bravo Asia, run by Aaron Lau, former head of DDB China. It owns leading Chinese digital agency Cheil PengTai (or Open Tide).

One of Cheil's most important international divisions is Cheil Sport Business, an international sports sponsorship arm which, among other deals, arranged for Samsung's sponsorship of Chelsea FC in the UK and of the US NFL. In 2015, the agency took over management of Samsung group's wholly owned professional baseball team, the Samsung Lions. In 2016, the group launched a new retail marketing division across its entire network

Hakuhodo Cheil, also based in Korea, is a joint venture with the Japanese agency and is Korea's #12 agency. It was originally set up as a joint venture with US agency Bozell. Following the restructuring of Bozell's international network, the US agency sold its 51% stake to Hakuhodo, and Cheil Bozell became Hakuhodo Cheil.

Financials

Cheil's revenues (or gross profit) for 2016 rose 5% to KWon 997bn ($858m), while net income was up 11% to KWon 82bn ($70m). International contributed 71% of revenues. Top markets are China (revenues of KWon 238bn), Europe (KWon 227bn), North America (KWon 52bn) and India (KWon 45bn).

Management

Daiki Lim, president & CEO of Cheil since 2012, stepped down in 2017 in favour of Jeongkeun Yoo, previously EVP & co-head of business. Cheil has repeatedly attempted to boost its profile in the US and Europe with the appointment of Westerners in key central positions, but few have lasted the course. Bruce Haines, former CEO of Leo Burnett London was named as global chief operating officer in 2008, before becoming chief strategy officer three years later. However, he left the company in 2012. Lotta Malm Hallqvist was recruited from McCann Worldgroup at the beginning of 2015 to become global chief growth officer, a new role within the company. She departed the following year for MDC Partners. Later in 2015, Paul Hammersley (ex Lowe, ex Red Brick Road, ex EDC) was appointed as CEO, Cheil UK & BMB, but he too moved on after only a year in that role. The group has had more success with former Ogilvy and SapientNitro creative leader Malcolm Poynton. Appointed as global chief creative officer in 2015, he is still with the company, working out of the London office.

Background

Cheil Communications was formed in 1973 to manage the international marketing of Samsung Group, then just beginning to develop a worldwide presence. Initially it formed an alliance with Japan's Hakuhodo to develop its internal marketing skills. In 1987 the agency formed a partnership in the US with Bozell and later extended that arrangement to Korea, forming Cheil Bozell, a joint venture handling smaller pieces of Samsung business as well as local representation for Bozell's Chrysler account.

In 1988 Cheil was the first domestic agency to establish an office outside Korea, initially in Japan. Over the following years the agency opened a number of additional international bureaux (including in the US in 1992) to supervise local advertising for the huge portfolio of Samsung products from cameras and computers to fridges and washing machines. In 1997, it was the first Korean agency ever to win a Cannes Lion. The following year, part of its equity was floated on the Korean Stock Exchange and was one of the country's most successful shares over the next five year, benefiting hugely from the run-up to the 2002 World Cup. Cheil organized the opening ceremony, as well as several other major sporting events in Asia. As a result, it was also commissioned to produce the opening ceremonies for the African Nations Cup football tournament in 2004, to considerable acclaim. the following year.

However, the agency also earned some negative headlines in 2001 when it announced that it would acquire a 75% stake in the loss-making internet activities of Lee Jae-yong, son of Samsung Group's chairman Lee Kun-hee, and heir apparent to the group. The charge of nepotism was impossible to deny.

Last full revision 11th January 2018

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