P&G or Procter & Gamble is currently the world’s biggest advertiser. It is also openly struggling to reduce its expenses on all fronts as it competes with its chief rival, Unilever.
Over the summer, the company told investors that it had saved $300 million (or 15 percent) on global agency expenses via consolidation in which it reduced the total number of shops on its roster by 40 percent. But P&G wanted that number to be 20 percent or $500 million, and we hear that its executives are pressing its various agencies, chief among them Publicis.
One can see why the client is doing this.
This week, Unilever essentially said, “I’ll see your $500 million and double it,” promising to save a billion dollars via a “zero-based budgeting” strategy. This approach “requires managers to start from scratch to justify marketing and other outlays,” and it will inevitably lead to cuts as Unilever’s investors press for an ever-larger return. (The company’s overall marketing spend in terms of absolute dollar amounts continues to rise.)
All of the biggest clients are doing this sort of thing. Last October, the newly-formed Kraft-Heinz told its agencies that they would not be handling production on future campaigns as it would instead outsource all related work to a single entity (which some Chicago-area production department vets believe to be WPP’s Hogarth Worldwide).
Omnicom recently consolidated all of its biggest production departments to avoid this very sort of thing, but the success of that strategy remains to be seen.
P&G will post its quarterly earnings next week, and observers predict that its sales increases will again fail to match those of Unilever, hence the increased pressure on agencies.
We hear that P&G sent a team of executives to Publicis Groupe’s New York office last week to discuss this very topic.
Sources tell us that Publicis Communications’ chief Arthur Sadoun and his team also flew in from Paris to attend. The general consensus on these meetings holds that, while Maurice Levy’s “no silo” mantra and his frank admission that “it will be extremely difficult for [advertisers] to reduce their marketing budgets” is the correct approach, he might not be moving quite fast enough.
We hear that some staffers were let go but that the list could begin to grow as P&G follows Unilever’s lead in increasing its austerity demands on all agency partners.
Sources seem certain that P&G will go through more rounds of consolidation in 2016 just as it did last year when it sent all of its grooming brands to Grey, consolidated the Secret business with W+K and proclaimed Omnicom the winner of its media agency review in a move that will eventually see Publicis lose all of the P&G media business.
In short, the relationship between Publicis and P&G is not particularly stable at the moment.
We’ve reached out to holding company reps but haven’t heard back.