No advertising agency dominates its home market as comprehensively as Dentsu, which controls around 30% of all mass media advertising in Japan and has a staggering portfolio of more than 6,000 clients, managed through a multitude of separate domestic units that allow Dentsu to manage the business of rival companies without conflicts of interest. Staff from different units even travel in separate elevators to avoid compromising the security of competing clients. Creative and media are still handled side-by-side in a way that Western agencies long ago abandoned. Despite the best efforts of its competitors to erode its dominance, Dentsu remains almost twice as big as its closest domestic rival, and offers a vast range of additional services through satellite subsidiaries. The most significant of these are probably sales promotion house Dentsu TEC and interactive agency Cyber Communications (or CCI), but there are many others. Dentsu is one of the world's biggest brokers of sports marketing rights. There are also film and TV casting agencies, companies that specialise in digital music distribution online, animation programming and even film funding and production services. Until recently, Dentsu's influence outside Japan and especially outside Asia was limited to say the least. In 2000, though, the giant began to spread its wings, backing the merger of Leo Burnett and D'Arcy, and then swapping that stake for a sizeable minority stake in the newly expanded Publicis Groupe in a concerted bid to increase its share of Western advertising budgets. That partnership was terminated amicably in 2012, by which time Dentsu had begun to bolster its resources in the West with selective acquisitions. One of its first successes was the purchase of the New York shop McGarryBowen, but that deal was eclipsed in 2013 by the purchase of Aegis Group, parent to the Carat and Vizeum global media networks, giving Dentsu a fully global profile for the first time. It has continued to build its profile with a succession of additional acquisitions. However, since 2018 that widely spread international business has become increasingly unwieldy. Dentsu has also been forced to firefight serious problems at home, most notoriously the stress-induced suicide of an employee, a reflection of what was traditionally an all-consuming work ethic. This prompted the resignation in 2017 of CEO Tadashi Ishii. His successor is Toshihiro Yamamoto. Employment reforms left a big dent in profits in 2018, exacerbated in 2019 by a slowdown in international performance, and more recently the effects of the Covid pandemic. Dentsu was one of the worst hit among the major marketing groups, reporting eight consecutive declines in organic revenues since the end of 2018. For 2020, gross profit (effectively net revenues) slipped to approx $7.8bn. Another large charge for impairments, restructuring and adjustments resulted in a second consecutive net loss, which doubled year-on-year to approx $1.5bn.
Capsule checked 8th December 2020
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Dentsu's quarterly organic growth since 2016
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Adbrands Daily Update 11th Aug 2021: Dentsu was again the last of the marketing groups to report. Like its peers it enjoyed a solid rebound in Q2, with organic growth of 15%. Dentsu Japan contributed 12.0% (from a higher base) and Dentsu International 17.0%. Net revenues of Y218.1bn (approx $1.97bn) were still well below the same period in 2019, when the group reported Y221.3bn (approx $2.0bn). However, net profit for the latest quarter was significantly better at Y31.2bn, compared to just 438m in 2020 and Y2.5bn in 2019.
Adbrands Daily Update 14th May 2021: Dentsu, last of the groups to report results for Q1, remained deep in the red for organic growth, despite a return to positive development in the final month. For the quarter as a whole, the organic decline was -2.4%, the worst result from any of the Big Five groups. International business was hardest hit, down -3.5% compared to -0.9% for Japan alone. North America especially was still struggling, down -3.8% for the quarter, while China fell by more than -5%. Brazil and France performed particularly badly, with declines in excess of -10%. However the combined 2.5% uplift for the group as a whole in March suggests the worst is now over. Net revenues came in at around $2.1bn (Y222.5bn) with net profit of $46m (Y4.9bn). See organic growth charts for all groups.
Adbrands Daily Update 15th Apr 2021: "But Then I Saw You". The first few frames might make you think you're watching a high school remake of Japanese horror classic 'The Ring', but actually nothing could be further from the truth. Just in time for Japanese cherry blossom season, Dentsu crafted a spectacular one-take tracking shot for Otsuka Pharmaceuticals' immensely popular Pocari Sweat sports drink. The whole thing was captured in-camera, along an 85-metre undulating runway. Top marks to actress Nakajima Sena for maintaining her poise throughout. The director is Show Yanagisawa, something of a local industry star for his award-winning campaigns for Shiseido, 'High School Girl?' and 'The Party Bus' (both previously featured in these pages).
Adbrands Daily Update 15th Feb 2021: The final quarter of 2020 was another difficult one for Dentsu, with all international regions reporting double digit organic percentage declines of between -10.9% (APAC ex Japan) and -14.4% (EMEA). That was softened by marginally "less worse" performance in Japan, where the organic decline scraped in only just below double digits at -9.9%. Combined figure for Q4 was -11.6%, the group's 8th consecutive organic decline (and the worst by some margin of the three groups to have reported so far). For the year as a whole Dentsu was down -11.1% organic. Quarterly net revenues came in at approx $2.2bn (Y233bn) but a large impairment charge resulted in a net loss for the quarter of approx $1.6bn (Y170bn). For the year, Dentsu reported a second consecutive net loss, which doubled year on year to $1.5bn (Y160bn) on net revenues of $7.8bn (Y835bn). Separately, the group revealed the outline for a new corporate structure that will focus its operations on four key offerings of AX (Advertising Transformation), BX (Business Transformation), CX (Customer Experience Transformation) and DX (Digital Transformation). It's expected that all its agencies will be consolidated to become aligned with one of those four service areas.
Adbrands Daily Update 7th Dec 2020: Even before Covid, Dentsu was already one of the industry's worst performing groups. It has registered a decline in organic revenues for seven straight quarters since Q1 2019. That's a feat unmatched by even MDC Partners or WPP, both whom have at least managed just one quarter of growth over the same period. The full year decline is expected to come in at as much as -12.5% (from -10.9% for the none months to-date). Worst affected are the group's international operations, formerly Dentsu Aegis Network. Dentsu had already warned of a massive consolidation of that extensive portfolio of more than 150 separate companies into just six global brands. Now the group warns that thousands of jobs will go along with all those other brands. This week it announced a 12.5% reduction in headcount in operations outside Japan, equivalent to around 6,000 staff. Total cost of the downsizing will be approx £640m, most of it in the final quarter of 2020. However, the group hopes to start making savings of as much as £400m a year from next year.
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