NEW YORK In the past decade, the media planning and buying consolidation tide has swept up major advertisers in almost every category. Health and beauty was one of the last holdouts, but now even that barrier has been breached.
L'Oréal last week offered the latest evidence that—come boom, bust or recovery—media consolidation is continuing. It's a trend that has seen more than $20 billion in global and U.S. media billings into play since 2000, according to Adweek reports.
The Paris-based beauty products marketer last week completed its U.S. media review by keeping all but $75 million of its consumer products media assignments intact. And this week, presentations begin for L'Oréal's global consumer products division from the marketer's two global roster shops, Publicis Groupe's ZenithOptimedia and Interpublic's Universal McCann, in several other markets, including Europe, sources said. L'Oréal spends an estimated $1.5 billion on global media, although it is unclear how much of that will be up for grabs.
Joseph Campinell, president of L'Oréal's consumer products group in the U.S., which includes Maybelline, L'Oréal Paris and Garnier, confirmed the global search but declined further comment.
"In 1997, Procter & Gamble consolidated tactical planning, and in 1999, Unilever consolidated all planning and buying. Since then, there's been a massive amount of activity. In addition, global clients are now consolidating across geographies, by region and globally," said Irwin Gotlieb, CEO of WPPP Group's GroupM. And one consolidation often breeds another. L'Oréal is partially owned by Nestlé, whose global media consolidation—eventually won by Zenith- Optimedia and GroupM—and the parent's experience was closely scrutinized—and now emulated—by L'Oréal, sources said.
"Everybody's got the jones for consolidation," agreed George Hayes, evp, director of client services at UM, who has participated in several U.S. and global consolidations in the past five years—including Sony's $600 million North American search in 2002, which UM won; Nestlé's $1.5 billion global consolidation in 2004, which UM lost; and L'Oréal, among others. "Financial services got in the game late, but they're doing it. HBA is now."
From 2000 to date, the five most consolidation-prone categories include food and beverage ($5 billion put into consolidation play), followed by packaged goods ($4.2 billion), automotive ($3.1 billion), pharmaceutical ($2.1 billion) and telecommunications ($1.9 billion). Before L'Oréal's search went global, HBA didn't even crack the Top 10.
The reasons for advertisers' continuing and widening obsession with narrowing rosters to one or, at best, a couple of shops begins with money, of course. "Most if not all of the reviews are being driven by price," said Alec Gerster, worldwide CEO of IPG's Initiative. "The price of media and the price of service."
But cost savings isn't the only objective. Management efficiency is another, agency executives noted. The catalyst for General Motors' current $3.2 buying review was the client's dissatisfaction with service, sources said. And the review was in effect a consolidation shootout between its three media resources, Publicis' Starcom MediaVest Group (whose GM Planworks handles planning) and IPG's GM Mediaworks and UM's LCI (GM's buying shops). (Although struggling GM, which was expected to make a decision this week, "got what it wanted from both agencies in terms of cost-cutting," said one executive.)
Another spur is the growth in resources of the major national and global shops. The decision whether or not to consolidate has "always been about what the client considers best in class versus buying efficiency," noted Gotlieb. "But as the level of the game has escalated, there are now a number of shops that can offer a broad array of disciplines as well as efficiency, and in many cases across geographies. So consolidation has become practical."
Finally, corporate mergers and acquisitions often force media consolidation. In March, Cingular and AT&T Wireless' marriage resulted in AT&T's media shop, WPP's Mediaedge:cia, winning about 70 percent of the new entity's $925 million in billings, with Cingular's OMD, retaining print.
Naturally, there's a limit to consolidation. As Starcom MediaVest Group Americas CEO Renetta McCann observed, with so many major advertisers already consolidated by now, "who else is going to be able to do it?"