Adbrands Weekly Update 13th May 2010
A weekly round up of key news about 
leading advertisers, agencies and mediaowners
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United Biscuits

Four of our favourite ads this week: 

Carlsberg "Team Talk"
by Saatchi & Saatchi London

Audi "Next Big Thing episode 2"
by Heimat Berlin / Neue Digitale Razorfish

Starbucks "My Frappuccino"
by BBDO New York

Amp Energy "Soft Serve Robot"
by Proximity Canada

Update only subscribers: click here to view Ads of the Week

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It's been an interesting week. The dominant topic here in the UK has, inevitably, been the political horse-wrangling that followed last week's inconclusive general election as the Conservatives, Labour and Liberal Democrats arm-wrestled with each other to see who might be best able to form a government. That's all out of the way now thankfully, or at least for now. If the Conservative-LibDem coalition falls apart we can look forward to another election after the summer. But at least, we Brits can now focus on the really important things... like whether the England football team can (ever) finally bring to life those long-cherished dreams of hoisting aloft the World Cup for a second time. It's the same every four years, and sadly it always ends in tears. Or does it?

Anyway, it will be virtually impossible to escape the World Cup over the next three months, and we are already being flooded with footy-themed commercials. Here's our favourite of the current crop - we are English after all - Saatchi London's celebration of English sporting aspirations on behalf of Carlsberg. A host of sporting champions (and other folk) line up to cheer on the England team. We spotted England coach Stuart Pearce (of course), Trevor Brooking, Jack Charlton, Kelly Holmes, Steve Redgrave, Ellen MacArthur, Nigel Benn, Clive Woodward, Ranulph Fiennes, members of rock band Kasabian and Ian Botham. Did we miss anyone?

Speaking of celebrities, singer Justin Timberlake is doing a pretty decent job in Audi's new webisode thriller The Next Big Thing. Here's episode 2, released this week. Future episodes, as well as the first instalment, can be seen on the Audi A1 website, with a new episode launching each Tuesday. Nicely done, by German agency Heimat, in association with local Razorfish subsidiary Neue Digitale.

How's this for a change of pace? BBDO New York launched a clutch of new ads this week for Starbucks. There are two others for the coffee chain's Via instant brew but we have a particular fondness for this delicious concoction promoting the new custom-made Frappuccino service. Tasty!

... but obviously not as tasty as this bizarre spot from Proximity Canada for PepsiCo's Amp Energy beverage. Boy, did they have fun making this ad!

In the news this past week: Brands & Advertisers

It's reporting season for Japanese companies, most of which have March 31st as their year-end. Among the notable developments, Nintendo reported its first decline in annual profits for six years as sales of the Wii console and DS handheld both slowed dramatically. Net income fell 18% to Y229bn ($2.4bn) while revenues slipped 22% to Y1,434bn ($15.3bn). Unit sales of the Wii shrank by more than 20% to 20.53m units, hindered by the lack of any significant new product development. Analysts highlighted the Wii's lack of high-definition graphics as a major concern for the future, compared to other consoles. That issue is likely to be addressed in the near future although there are no firm plans yet. However Nintendo does hopes to bolster DS sales during the course of the year with a the launch of a 3D version, which promises three-dimensional gameplay without special glasses. Sony, on the other hand, reported an improvement in performance, better even than it had predicted a couple of months ago, though still short of net profits. Revenues continued to slide, down by a further 7% to Y7,214bn ($77.2bn), but the company reported an unexpected operating profit of Y31.8bn ($340m) compared to the previous year's Y228bn operating loss. However, the net position after share of losses at Sony Ericsson as well as impairments, restructuring and other charges, was still in the red at a loss of Y40.8bn ($436m). Sales were down across all the group's electronics segments except semiconductors, but those declines were partly offset by increases at Sony Music - reflecting the buyout of Bertelsmann during the year - and also at the group's financial services division.

The Japanese automobile companies also turned in improving performance. Toyota and Nissan both returned to net profit after large losses in the previous year. That profit was particularly surprising in the case of Toyota, which even managed to deliver a surplus in the first three months of 2010, despite the huge cost of its global "sticky pedal" recall. Full year profits were Y209bn ($2.2bn), after last year's net loss of almost $5bn. Unit sales were also better than had been forecast at 7.24m vehicles, while revenues were Y18,951bn ($202.7bn). Nissan reported revenues of Y7,517bn ($80.4bn) and net income of Y42bn ($449m) on unit sales of 3.52m vehicles, up 3%, mainly because of exceptional performance in China where unit sales jumped by 39%. The company also has high hopes for its new Leaf electric car, which is set for launch in the US, Japan and Europe in December. However the best performance came from Honda. The #3 by sales, it was nevertheless Japan's most profitable automaker for the second consecutive year, with net profit of Y268bn ($2.9bn). Consolidated revenues slipped 14% to Y8,579bn ($91.8bn) and unit sales weighed in at 3.39m vehicles.

McDonalds' global chief marketing officer Mary Dillon has resigned in order to become CEO of mobile service US Cellular. The fast-feeder has yet to name a replacement. Over at AOL, new CEO Tim Armstrong promoted Maureen Sullivan, previously his chief of staff, to fill the position of chief marketing officer, under the title SVP, marketing & brand partnerships. Yahoo hired Shane Steele to fill a new post as VP, global business marketing. Hyundai North America confirmed Chris Perry as its new VP, marketing, replacing Joel Ewanick who was named last week as the new top marketer at GM.

Walmart's UK supermarket subsidiary Asda named Andy Clarke as it new chief executive, replacing Andy Bond, who announced his decision to move to a part-time role last month. Clarke was previously chief operating officer. His appointment to the top job was followed almost immediately by the resignation of trading director Darren Blackhurst.

France Telecom and Deutsche Telekom unveiled further details of their new UK joint venture which now controls the local operations of both Orange and T-Mobile. Both brands will continue to operate separately, but under the management of a single corporate entity, to be known as Everything Everywhere. That company will launch officially on July 1st. Each brand will have its own service centres, shops, advertising campaigns and customer propositions, but all back-office resources will be combined. Tom Alexander is CEO of the merged business, supported by Guillaume van Gaver (VP, marketing), Mark Duncan (VP, sales & loyalty) and Andrew Ralston (chief commercial officer).

EMI's controlling shareholder Guy Hands appears to have pulled off an astonishing feat, announcing that he has secured commitments from investors in his investment fund Terra Firma to provide the 105m of additional funding he needs to prevent the music group from being seized by its bankers Citigroup. EMI fell into formal default over the 3bn it owes Citigroup last month. Provided Hands can collect on all those commitments, he will win himself almost another year to execute a restructuring of EMI before Citigroup's next asset test in March 2011.

Egyptian-born entrepreneur Mohamed Al Fayed sold London's famed Harrods department store to the sovereign investment fund of the Gulf state of Qatar. The colourful and controversial Al Fayed had owned the store for 25 years. No price was announced, but the figure is reported to be around 1.5bn, more than twice the store's annual sales. Qatar Holding is also the biggest shareholder in the UK supermarket group Sainsbury's, as well as key investor in other businesses including Porsche, Barclays and Credit Suisse. The company is said to be considering plans to open a second full-size Harrods in Asia, possibly in Shanghai.

It was a good week and also a bad week for British Airways. The good news came with the collapse of the court case brought by the UK Office of Fair Trading over alleged price-fixing of fares. Four senior executives of British Airways had been charged with running an illegal arrangement with Virgin Atlantic to fix the cost of fuel surcharges on transatlantic flights. Virgin was granted immunity from prosecution for ratting out its rival. However, in a bitter irony, the immensely expensive case collapsed after the release of newly recovered emails between Virgin employees which appeared to undermine the suggestion that the two companies had colluded over price rises. The four BA executives were formally acquitted of all charges. Instead, the red-faced competition authorities have now turned their anger in the direction of Virgin. They are said to be considering legal action against Virgin for failing to honour its promise to provide full and continuous cooperation with the prosecution. Virgin Atlantic denies the accusation.

The bad news for British Airways was the resumption of strike action by cabin crew in the long-running row which has already cost the airline millions of pounds in lost revenues. The Unite union announced plans for a series of further walkouts during May and June designed to ground most BA flights to and from Heathrow for a full three weeks. The latest strike was called by Unite because BA has refused to restore full non-contractual travel privileges to staff who walked out in the last action.

And more bad news for Virgin, whose Virgin Money division was knocked out of the contest to acquire bank branches being sold off by Royal Bank of Scotland. Despite all the big talk which accompanied Virgin Money's attempt to acquire the business, its offer of around 1.5bn was well below other bids received. According to insiders, Virgin had gambled on winning the contest by guaranteeing to preserve jobs and save branches rather than simply offer the highest price. There are three bidders left in the contest, but the favourite is widely considered to be Santander, said to have tabled an offer of 2bn.

British pensions and insurance group Prudential's planned acquisition of AIA, the Asian arm of US insurer AIG, is back on. Last week, the company was forced to suspend a massive rights issue designed to fund that $35.5bn takeover as a result of legal concerns from UK regulators. Those fears appear now to have been resolved, and the rights issue is expected to go ahead next week. Acquisition of AIA would make the Pru not only the biggest foreign group in the fast-growing Asian insurance market, but also the world's biggest life insurer outside China. AIG also desperately needs the deal to come off, in order to raise cash with which to pay off some of its huge US government debts.

Technology giants IBM and SAP are on the acquisition trail. Business software behemoth SAP agreed to pay $5.8bn this week to acquire US rival Sybase, while IBM's CEO Sam Palmisano told investors that he has earmarked $20bn for acquisitions over the next few years. "In five years we will spend more in acquisition than we did in the previous ten," he promised. All the major software companies have been stockpiling cash over the past couple of years. Microsoft, Cisco and Oracle are also sitting on substantial reserves, leading to the likelihood of major consolidation within the sector.

In the news this past week: Agencies

BBDO added to its groaning awards shelf with the accolade as Agency of the Year at the 14th annual Webby Awards, taking more prizes than any other shop. BBDO collected a total of 12 awards across all categories. Bartle Bogle Hegarty and TBWA/Chiat/Day each took four, while DDB Stockholm and Wieden & Kennedy took three apiece.

Japanese giant Dentsu reduced its shareholding in Publicis Groupe, selling back to the French company almost 4% of its shares for around €218m. As a result, Dentsu's economic shareholding reduced from 15% to just over 11%, although it retains 15% of voting rights.

In account assignments, Mindshare had a great week, winning US media duties for both CVS pharmacies and RadioShack electronics stores, each worth $150m in annual billings. Kraft shifted US media buying for newly acquired Cadbury into Publicis Groupe's Kraft One Team dedicated unit. Independent Horizon Media will hold onto planning for the time being. Interpublic's Gotham agency was tapped to join the creative roster for the Chrysler brand, working alongside agency of record Fallon. In the UK, Orange/T-Mobile operator Everything Everywhere (see above) hinted that a review of advertising and media duties could be on the cards. McCann London picked up the global creative account for L'Oreal-owned retailer The Body Shop. For all other appointments, subscribers can access the full Adbrands Account Assignments database here

In the news this past week: Media

British terrestrial broadcaster ITV reported a much needed 8% increase in advertising revenues for 1Q, on the back of strengthening spend, and forecast a 22% rise for 2Q because of the World Cup. Total revenues, including the income from production services, were up 8% for the quarter. However the company was quick to point out that percentage comparisons were misleading. Last year, the company suffered a shock 15% decline in ad income in the first half of 2009, so the latest figures are not so much "better" as - to coin Sir Martin Sorrell's phrase - "less worse". Newly appointed chief executive Adam Crozier warned that the second half of 2010 would be more difficult. "Over two years, revenues are still tracking below 2008 levels. The outlook for the latter part of 2010 and early 2011 is tough, with more testing year-on-year comparators and uncertain market conditions post-election." There was no help from the TV regulators either, who refused again this week to loosen the Contracts Rights Renewal system which prevents ITV from increasing the amount it charges for advertising. This system was introduced in 2003 following the merger of the two main commercial TV companies to create a singe ITV entity. Rates are fixed pro-rata according to viewer numbers, and these have steadily declined over the past few years because of the fragmentation of the medium. Despite repeated attempts to force a loosening of the system, regulators have held firm. One glimmer of hope is the change of government. The Conservatives had pledged to remove CRR if elected. It is unclear, though, whether this policy promise will remain intact under the coalition government.

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Simon Tesler
Publisher, Adbrands