Mumbai: WPP Group’s media specialist company GroupM has landed itself in a sticky situation—the nation’s top advertiser, Hindustan Unilever Ltd (HUL), has reportedly threatened to pull out its business from GroupM if its subsidiary wins the joint bid to manage Procter and Gamble Co.’s (P&G) media planning and buying business. And if GroupM backs out of the P&G bid at this stage, it could result in the loss of business it handles for the consumer goods company in other markets.
As reported earlier by Mint, media circles have been buzzing in recent times over GroupM India Pvt. Ltd and rival Madison Communications Pvt. Ltd jointly pitching for P&G’s media business, which was up for review after seven years. This move had signalled a possible joint venture (JV) between the two companies, involving some equity sharing arrangement, said media buyers. GroupM’s pitch was made from its Mediacom Pvt. Ltd company against media specialists such as Starcom MediaVest Group and Carat Media Services India Pvt. Ltd and the results are due any time soon.
HUL’s parent Unilever Ltd, the arch-rival of P&G in the packaged goods sector, has raised objections at the regional level over a GroupM company co-pitching for P&G business since GroupM’s Mindshare India handles HUL’s media business, says a person close to the development.
India’s top advertiser, Hind Unilever that owns brands such as Lux, may pull out its business from GroupM if the latter’s arm wins the joint bid to manage P&G’s media planning and buying biz
Unilever sees a potential business conflict, though the pitch was made out of Mediacom that does not handle any HUL business. Unilever’s regional office has reportedly voiced concerns on client confidentiality with GroupM’s top brass, adds the person.
As per industry estimates, HUL spent Rs1,137 crore on TV and print advertising in 2007, while P&G’s share in India was Rs235 crore.
Bharat V. Patel, chairman of Procter and Gamble Hygiene and Health Care Ltd, said the results of the media pitch are due any day now. He declined to comment on Unilever issues and GroupM’s participation. “As per company policy, we do not respond to speculation,” said a company spokesperson.
The company’s brief for the bidders was to provide strategic planning inputs on two of its brands, Gillette and Head & Shoulders, say media buyers.
Madison’s chairman and managing director Sam Balsara declined to comment, while an HUL spokesperson did not answer emails and could not be reached over the phone. GroupM India chief executive Vikram Sakhuja, too, did not respond to emails, while Mediacom MD Divya Gururaj said the firm has no relation with Unilever.
Usually, multinational advertisers allow different agencies under the same holding firm or brand (in this case, GroupM) to handle competing business and that may explain why P&G itself appears to have no issues with the joint pitch. In this case, Unilever could be evoking what is called an overarching clause in business conflicts, in which the advertiser does not allow even sister agencies to handle conflicting business. The situation is unique as the industry in this case is highly competitive and sensitive to information leaks and the players are top advertisers. A lot also depends on what sort of contract is sealed, and if it’s between the advertiser and the holding company or the global or local ad network, says a media buyer.
In India, P&G’s media buying is currently handled by Madison while planning is divided between Starcom and Mediacom, and Carat is on its global roster. But while Mediacom might handle a few P&G brands in other markets, in India it could handle the bulk of business if it wins the joint bid. A person close to the pitch said: “Unilever is against GroupM handling the bulk of P&G’s media business, via an acquisition or JV route with Madison. They maintain that things were different earlier because Mediacom handled planning for just few of the P&G brands.”
Media buyers say GroupM and Madison could tide over the situation if they set up a separate company under the Madison brand and keep its staff and resources totally separate. Says the chief of a rival media specialist: “Sam (Balsara) could set up a team for P&G on separate premises, which would detour all client conflicts. While Mediacom-Madison officials can take care of the planning, the buying will get executed out of Madison. This is the only practical solution that I can see.”
Madison’s annual gross billing is more than Rs1,300 crore, while that for Mediacom is about Rs400 crore, estimate media buyers.