Global reviews could hit Indian advertising agencies4 min read . Updated: 24 Jul 2009, 12:02 AM IST
Global reviews could hit Indian advertising agencies
Global reviews could hit Indian advertising agencies
Mumbai: Global companies, including German drug maker Bayer AG, Anglo-Dutch consumer products maker Unilever Plc/NV and South Korean auto maker Hyundai-Kia Automotive Group, are reviewing their advertising agency accounts in a move that could sting the agencies of their Indian arms as well.
The reviews are taking place as hard-pressed advertisers scrutinize the efficiencies and value for money being delivered by their agencies across markets as they attempt to cut costs and ride out the global economic downturn.
For Indian agencies handling the local accounts, the reviews pose the risk of loss of business and influence with such A-list advertisers, media specialists say.
The bulk of Hyundai’s global media business, handled by ZenithOptimedia Ltd and Interpublic Group of Companies Inc.’s Initiative unit, is being reviewed across at least 170 countries. The account is with ZenithOptimedia in India and a Hyundai Motor India Ltd official, who didn’t want to be identified, said this would be reviewed as well.
Bayer is now seeking to globally consolidate its creative and media business and is reviewing its relationships with the holding companies of WPP Plc., Omnicom Group Inc. and Interpublic Group, according to US journal Advertising Age.
Bayer’s healthcare advertising account in India is divided between RK Swamy BBDO Pvt. Ltd, BBDO India and RK Swamy’s media agency Media Direction. Srinivasan Swamy, chairman of RK Swamy BBDO, declined comment. An official from Bayer India also declined to comment.
UK-based phone company Vodafone Group Plc.’s media business, divided between Omnicom, Aegis Group Plc. and WPP globally, is up for a review overseas, according to Brand Republic, a website devoted to advertising.
The India account is handled by Maxus, a unit of GroupM India Pvt. Ltd.
Two senior agency executives, who don’t belong to GroupM India and did not want to be named, said the review is being extended to Asia and India, too.
VodafoneEssar Ltd’s marketing and new business director, Harit Nagpal, however, denied any review was under way locally or globally.
Media specialist Shashi Sinha, chief executive officer (CEO) of Lodestar Universal Pvt. Ltd, said such reviews could have a significant impact on advertising agencies in India, many of whom had won bulk business because they had a first mover advantage.
“Clearly, more holding companies are taking operations in India very seriously. Earlier, the business used to rest with a few chosen players because they were the only ones who were well established in this market. Today that’s not the case, there are more (media) agencies to choose from," he said.
Meanwhile, two India agency CEOs, who are not part of the Omnicom Group, said soft-drink maker PepsiCo Inc. was seeking to repose more of its Asia-Pacific media business with Omnicom’s OMD unit although a PepsiCo India spokesperson denied this. Pepsi’s media business in India is currently handled by GroupM India.
A Unilever spokesperson confirmed that the company’s media planning and buying businesses are up for a review in key markets such as the UK, the Netherlands, Poland and Russia as well as India and China.
This Rs100 crore-plus media account has been handled by GroupM India for longer than a decade and various media agencies in the country are eyeing at least a share of it.
The media executive of a non-Unilever agency, who didn't want to be named, said the number of Unilever brands had grown significantly in India, and more than one media agency could be handling the roster.
“Currently, most of Unilever’s media services are provided by aligned, leading agencies from within the WPP, Omnicom and Interpublic marketing services groups. All three agency groups will be invited to participate in the review," said the Unilver spokesperson.
The review gives the company an opportunity to evaluate “optimum solutions for our business in our key countries", the spokesperson said. Hindustan Unilever Ltd, the company’s local arm, is India’s biggest maker of home and personal care products.
R. Gowthaman, leader (South Asia), of GroupM India’s MindShare unit, said such reviews were typically undertaken when a contract ends, but declined comment on any specific advertising account.
According to Sinha, more accounts are coming up for review because managements running many of the businesses globally are looking at short-term gains and the tenures of chief marketing officers and CEOs are getting shorter due to the recession.
A heightened emphasis on media-cost savings in the current economic downturn is spurring the effort, said Shubha George, chief operating officer (South Asia), Mediaedge:cia, GroupM India. The loss of accounts from global realignments is only fair, she added.
“The other side of the coin to agencies enjoying local benefits when there is a substantive global win is the global loss despite very good local service...," George said.
The role of Indian agencies in global pitches delivered to multinational companies for their advertising accounts has increased because of the country’s rapid economic growth in recent years.
Few pitches take place without a strategy presentation for and from India and China, said Ambika Srivastava, CEO of ZenithOptimedia.
Often, the incumbent agency is retained in India, she said, although the business may move to some other network at the global level. In such cases, however, the India agency may have to work on newly negotiated terms and conditions in line with the global contract.
In more than one case, India agencies have declined work on new terms, which typically offer far less revenue than their initial contracts.