Adbrands Weekly Update 25th February 2010
A weekly round up of key news about 
leading advertisers, agencies and mediaowners
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Four of our favourite ads this week: 

Pedigree "Catch/Jump"
by TBWA\Toronto

Dove For Men "The Journey To Comfort"
by Ogilvy New York

Procter & Gamble "To their moms they'll always be kids"
by Wieden & Kennedy

Honda "Imagined by them, brought to life by us"
by Concept Cafe Advertising Miami

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

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We're really impressed by the work coming out of the TBWA\ network just now for Mars's Pedigree dogfood brand. We featured a spot here a couple of weeks ago for Dentastix, but this new ad from TBWA\Toronto really takes the (dog) biscuit. It's a re-edit combining two earlier spots shot by director Bob Purman with the Phantom ultra-slow-motion camera which captures 1,000 frames a second instead of the usual 24. The results are stunning and quite beautiful.

You may remember we picked the Dodge "Manthem" ad a few weeks ago as our choice of "Best Man's Ad" from the Super Bowl, but it was a close-run thing. The challenger was this just-as-impressive spot by Ogilvy for the new Dove For Men line. We're pleased to see that the Ogilvy spot is now getting wider exposure around the world as the launch ad in all markets (though mostly without the American football clip), so that's our opportunity to finally feature the ad. Nicely done.

Wieden & Kennedy got a big promotion through the ranks of P&G's agency roster to produce a series of corporate spots celebrating the packaged goods giant's sponsorship of the US Olympics Team in Vancouver. This is by far the classiest of the bunch, executed with great sensitivity and giving a nice big tug on the old heart strings. Top notch.

And finally, a gorgeous little ad developed by Miami-based multicultural agency Concept Cafe for Honda's new Odyssey MPV. We're not sure just where this is running - mainly in the UK judging by the end voiceover, though we've not seen it here yet - but we love the idea and the execution.

In the news this past week: Brands & Advertisers

The reporting season continued apace. Nestle unveiled generally robust performance for the year, although net income fell sharply against last year, which was boosted up a by a huge gain on the sale of shares in Alcon. Excluding one-off benefits or losses, Nestle' underlying growth remained strong, especially in the petcare business, coffee and other beverages (but not water, which was the only division not to report like-for-like growth). Reported revenues were CHF 107.6bn (around €71.3bn), with net profit of CH 11.8bn (€7.8bn). As with all all other major marketers, sales declined in the developed markets of North America and Europe, but continued to grow strongly in Asia and Latin America.

There were poor figures from Daimler. Revenues plunged 20% to €78.9bn and losses almost doubled to €2.6bn as a result of steep declines in Mercedes passenger cars and especially trucks. French retail and luxury group PPR was resilient, with comparable sales down 4% to €16.5bn but net income up marginally at €1.0bn. Gucci and other subsidiary luxury businesses felt the benefits from continuing growth in China and other markets, offsetting declines for Western European retail businesses. Dell was weak as a 17% fall in hardware revenues was only partly offset by growth in services. Group revenues slid 13% to $52.9bn. Net income plunged by 42% to $1.4bn.

Among retailers, French supermarket group Carrefour claimed to have achieved its objectives, but results were weak, with sales down slightly to just under €86bn on currency fluctuation and net income which plunged by €1bn to €385m as a result of impairment charges. Despite a huge investment in price cuts and promotions, market share in its key domestic territory clawed up by just 0.2%. Most larger American retailers followed a similar pattern, celebrating better than expected results in the 4Q, after extremely difficult trading for the first nine months of the year. America's JC Penney also suffered tough trading, with sales down 5% to $17.56bn and net income slashed by 56%, mainly as a result of a top-up of the company's pension plan. Both sales and profits were the lowest reported by the company in more than five years. Macy's revenues slipped 6% to $23.5bn, but bottom line was back in profit at $350m, after 2008's $4.8bn loss. Sears Holdings was also down 6% at $44bn, while net income rebounded from last year's lows to $235m. The group's Kmart division has made a much faster recovery that the core Sears business, still struggling with same-store declines. Target was flat at $63.4bn, up on last year, but flat compared with 2007. Net profits improved on 2008, but were still below 2007 levels.

Home improvement giants Home Depot and Lowe's also felt the impact of cuts in consumer spending, although both reported a strong upturn in 4Q. Home Depot's sales continued to slide from their highs three years ago, falling 7% to $66.2bn. Net earnings rose 18% to $2.7bn. Lowe's reported a 19% decline in profits to $1.8bn but a fall of only 2% in sales to $47.2bn. As a result the gap in sales between the two companies, arch-rivals, has narrowed considerably from around $30bn three years ago to less than $20bn.

Heineken and Carlsberg continued to enjoy the benefits from their break-up of UK brewer Scottish & Newcastle two years ago, despite a generally challenging year. Both companies reported strong results, although beer volumes overall were flat or in slight decline. Heineken reported revenues up 3% to €14.7bn while profits quadrupled to over €1.0bn. The previous year's results were impacted by the Scottish & Newcastle acquisition. Carlsberg's revenues were flat at the equivalent of around €8.0bn. Net profits jumped 31% to the equivalent of €560m.

Toyota's senior managers endured the shame of being hauled in front of a US Congressional committee to answer questions on the safety lapses which have plagued the automaker's models in recent months. Akio Toyoda, grandson of the company's founder, and recently appointed as group CEO, made a formal apology for the company's errors. In a prepared statement he admitted the company had lost its way. "I fear the pace at which we have grown may have been too quick," he said. "We pursued growth over the speed at which we were able to develop our people and our organisation." However, that apology in no way lessened the embarrassment caused by documents leaked this week which suggested that the company not only already knew about the faults, but struck a deal in 2007 with America's National Highway Traffic Safety Administration not to recall the affected vehicles. In one old memo, a Toyota executive boasted that the company had saved itself $100m by securing an agreement with the US authorities not to issue a full recall.

The long-term cost to Toyota now is likely to be far in excess of $100m, as deeply emotional testimonies from affected drivers and the family of victims killed in related accidents, swelled what already looks sure to be a deluge of class action lawsuits. Many of Toyota's Congressional investigators have been intent on drawing parallels with a similar set of problems, caused by electronics malfunctions, which affected German manufacturer Audi in the 1980s. That crisis came close to killing Audi's US sales, and the company had to work long and hard to rebuild the trust of American buyers. Toyota firmly denies that electronics are to blame for their own faults. Former Toyota exec Jim Press loaned his support to the beleaguered company, telling the WSJ "the root cause of [Toyota's] problems is that the company was hijacked, some years ago, by antifamily, financially oriented pirates. They didn't have the character to maintain a customer-first focus. Akio does. Akio Toyoda is not only up for the job, but he is the only person who can save Toyota."

Over at General Motors, the sale of Saab to Dutch company Spyker completed, causing huge sighs of relief all the way from Detroit to Gothenburg in Sweden. Another GM brand, Hummer, was not so fortunate. The proposed sale to Chinese manufacturer Sichuan Tengzhong Heavy Industrial Machinery collapsed, forcing GM to begin winding up Hummer's manufacturing operations.

Coca-Cola announced plans to acquire the north American operations of its main US bottler Coca-Cola Enterprises for up to $15bn including debt. Until very recently, Coke and Pepsi have both pursued a strategy whereby the companies responsible for bottling and distributing their products were left to operate as independent businesses, publicly quoted but anchored by a large minority shareholding. This allowed the drinks companies to concentrate on product development and marketing without the distraction of logistics and physical production. However, PepsiCo kicked off a change of strategy last year, launching a substantial bid to take full control of two of its biggest bottling suppliers in North America. This will not only boost topline substantially, but also allow the company to make what it says will be significant savings on costs. As independent public companies, the bottlers took a substantial cut of the sales of their clients' beverages. By integrating that side of the business, PepsiCo and Coca-Cola can not only strip out additional cost but also negotiate one-to-one with end-retailers, without having to share those discussions with their bottlers. That advantage is especially valuable to PepsiCo, which can more easily negotiate bulk deals covering both beverages and its Frito-Lay snacks. Coke is clearly keen not to lose out from such a new competitive challenge from its arch-rival.

The European airline industry has become the new home for the sort of old style industrial walkouts that at one time seemed mainly to affect automobile manufacturers. This week, pilots at German national airline Lufthansa went on strike on Monday, grounding around 900 flights. The dispute is over fears that the airline will try to cut staff costs by shifting jobs to foreign subsidiaries where wages are lower. However, Lufthansa persuaded the union to postpone a further three days of strikes until March 9th while they try to thrash out an agreement. On the same day, British Airways cabin crew voted overwhelmingly in favour of an extended walkout which, if called, is likely to stretch for up to 10 days. A previous 10-day strike over the Christmas holidays was averted only after a court ruled it would be illegal. The new action has been planned carefully to avoid any such obstacles, but the union said it would wait for the outcome of current negotiations with BA before it confirms a date for a walkout. It reassured passengers that it will try to avoid action over the Easter holiday period. Thousands of French airline passengers have also been stranded this week as a result of a five-day walkout by the country's air traffic controllers. This is over plans to integrate all Europe's traffic control systems under a single management system.

European regulators were said to be close to clearing the proposed merger of Orange and T-Mobile in the UK. The two companies have volunteered to surrender some of their combined bandwidth in order to ease concerns over their combined dominance. If the merger goes ahead as expected, Orange/T-Mobile will leapfrog O2 to become the UK's #1 wireless provider with around 37% market share.

UPDATED: Britain's leading cinema chain Odeon/UCI will now show Tim Burton's forthcoming Alice In Wonderland movie. The two sides reached an agreement today. Previously Odeon had threatened to boycott the film because of plans by distributor Disney to cut the period before its release on DVD from the usual 17 weeks to just 12. Odeon said that Disney's plans reduce its ability to recoup the substantial investment it has made in installing 3D projection in its cinemas. It said that 3D titles it screened last year played for an average of 18 weeks after release.

In the news this past week: Agencies

Worldwide digital network LBi expanded its range of services through the acquisition of European search marketing specialist Bigmouthmedia. The complex deal is effectively a reverse takeover of LBi by the smaller company's private equity backers for an effective purchase price of around €108m. However, the resulting business will adopt the LBi name and will continue to be run by LBi's management team. It will switch its public listing from Sweden to the Netherlands. Combined revenues for the enlarged entity will be around €170m.

Digital group Sapient reported strong results for 2009, demonstrating the continuing benefits from its acquisition of the Nitro creative network. For the full year, gross revenues dipped 3% to $667m, held back by what it described as "pricing pressures" as well as currency fluctuations. Organic growth at constant currency would have been 1%. However net income leapt more than 40% to a record $88m.

Canadian marketing services roll-up MDC Partners, best known as the parent to US ad agencies Crispin Porter & Bogusky and Kirshenbaum Bond Senecal, reported generally strong results for 2009. The group slipped back into losses for the 5th time in six years, because of high interest payments on its substantial debt mountain. However EBITDA operating profits were more or less unchanged at $20m and analysts were greatly encouraged by the group's organic performance. MDC's organic decline of 5.5% for the full year was the best so far from any of the multi-agency groups, beating Publicis's 6.5% decline. Better still, MDC actually reported organic growth of 1.4% in 4Q, a feat unequalled by any of the other roll-ups. Crispin Porter & Bogusky accounts for around a third of revenues and approximately 60% of operating profits.

Adweek rounded off its survey of Agencies of 2009 with three additional awards. Edelman was named for PR; Euro RSCG Life for healthcare marketing; and LatinWorks for multicultural. Adweek named its choice of creative, digital and media agencies of the year last month.

Publicis Modem, the digital unit of Publicis Worldwide's digital/direct network, named Jean-Philippe Maheu as worldwide CEO. Maheu joins from Ogilvy where he has been global digital officer for the past three years. Before that he was CEO of Razorfish. He replaces Martin Reidy, who left Publicis Dialog/Publicis Modem last year.

BBDO named Peter Sherman, previously managing director of BBDO's US West Coast operations, to a new role as managing director for the EMEA region. That follows the departure of former EMEA chairman-CEO William Eccleshare last summer. However Sherman has a smaller role than Eccleshare, with responsibility only for BBDO's smaller European markets. Key territories including the UK, Germany and France, will report to group CEO Andrew Robertson.

In other account assignments, Merck & Co called a review of its global media account following completion of its takeover of Schering-Plough. Numerous agencies are affected including Merck's incumbent Initiative, and several networks employed by Schering-Plough, not least ZenithOptimedia, MediaVest and MPG. Bacardi consolidated US media into independent KSL Media, which previously split the account with Universal McCann. The Martin Agency picked up creative for Johnson & Johnson's Tylenol from IPG sister agency Deutsch. Chrysler Group named SapientNitro as lead global digital agency. McGarryBowen picked up three smaller soft drinks brands from Dr Pepper Snapple Group. Bloomberg named JWT for global advertising. Arla Foods appointed Saatchi & Saatchi to global creative for its Lurpak butter, although Wieden & Kennedy keeps the account in the UK. Also in the UK, electrical retailer Comet appointed Euro RSCG, and a consortium of of the country's leading museums and art galleries, including the Tate and British Museum named Total Media to handle their consolidated business. For all other appointments, subscribers can access the full Adbrands Account Assignments database here

In the news this past week: Media

CBS Corporation celebrated another season as America's overall #1 network with generally robust figures for 2009. Despite the general slump in advertising, which provides by far the largest share of the company's income, topline revenues fell by only 7% to just over $13.0bn. Net income was $227m, a big improvement over the $11.7bn loss reported in 2008, largely as a result of impairment charges. CBS's main broadcast and cable businesses saw improved performance overall compared to 2008, but the local TV and radio subsidiaries, and especially the worldwide CBS Outdoor network felt the worst pain from the recession. Outdoor reported a 21% slump in revenues.

Separately, WPP's Kantar Media research group released estimates of ad revenues for the major broadcast networks for 2009. According to Kantar, the main networks suffered a 7.5% decline overall in ad sales, from $23.7bn in 2008 to $21.9bn for 2009. CBS was the top network with $6.3bn, down just over 5%. ABC ranked 2nd, with a 3% decline to just under $6.0bn. Fox lost just over 3% to $4.4bn, and NBC was the biggest loser, shedding almost 18% to $4.4bn. Its performance in 2008 had been boosted by the Olympics. ESPN was the top-ranked cable channel with $1.5bn, less than 1% down on the year before. TNT was not far behind with $1.1bn, while NBC Universal's USA Network powered up by an impressive 18% to just under $1.1bn.

"Cable operators, you have been warned". That was the advice of the Wall St Journal following Walmart's announcement that it had acquired digital entertainment provider Vudu for an undisclosed sum. That company delivers entertainment content directly to broadband-connected TVs and Blu-ray players. It has licensing agreements with almost every major movie studio and dozens of independent and international distributors to offer a catalogue of approximately 16,000 high-definition on-demand movies, eclipsing the service currently offered by Comcast or other VOD providers. Although the number of TVs with broadband connections is currently small, that is likely to be one of the fastest-growing areas of the home entertainment market in the near future, and especially attractive to Walmart which already sells around one-sixth of America's flat screen TVs. It also provides Walmart with a hedge against the rapid erosion of the DVD market. The retail giant is America's biggest seller of DVDs with around 40% of the market.

Google announced the start of a big new push to build revenues from display advertising, appointing former Doubleclick executive Barry Salzman as head of media & platforms for the Americas. That role includes responsibility for all advertising content on YouTube as well as the group's Doubleclick ad platforms. Although it dominates the search advertising market, Google is well behind rivals in online display ads. Its revenues from this segment were well under $1bn in 2009, compared to Yahoo's $4bn. "Google is starting to see incredible traction in display," said Salzman, "but the enormous part of the upside is still to be realized. A big part of my job is to be Google's champion of display, which has a media piece and a technology piece." At the same time the company launched an overhaul of its main Doubleclick DART and Google Ad Manager platforms, merging them under the new name of Doubleclick for Publishers by Google.

Separately Google faced opposition on two other fronts, as almost 7,000 authors asked to be excluded from the search giant's mammoth book digitisation project. Authors were given a deadline of January 28th to opt out of the proposed service, still awaiting approval by US regulators. Among the opt-outs are well-known names including Thomas Pynchon, Zadie Smith and Phillip Pullman. Meanwhile European regulators launched a preliminary investigation into the methodology behind Google's search rankings, following accusations from three companies that they had been unfairly demoted in results.

US and European regulators finally gave the green light to the search alliance between Microsoft and Yahoo. The ten-year partnership, originally proposed last summer, will give Microsoft responsibility for delivering all search results on Yahoo's network via its Bing service. It will also take over responsibility for self-serve search ad customers. Yahoo will maintain its relationship with larger display advertisers, but is to transfer around 400 of its current sales and tech staff to Microsoft. The deal allows Yahoo to reduce its costs considerably while maintaining a strong revenue stream. It will receive 88% of the revenue from all search ad sales for the first five years, rising to 93% for the second half of the deal. Instead, like the new AOL, Yahoo will position itself as a pure content business. In a separate deal, the company established a wide-ranging partnership with Twitter, integrating real-time feeds from the micro-blogging service into almost all of its pages.

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Simon Tesler
Publisher, Adbrands