The world’s largest advertiser, Procter & Gamble, recently proceeded with its plan to take more North American marketing work in-house, this time on the media side, as billionaire activist investor Nelson Peltz continues to push the company to cut costs and improve profit margins.
For agencies, the latest stage of that process consisted not of a formal review but rather a round of internal bids among three parties, with incumbent media shops Hearts & Science and Carat and P&G’s own in-house team each bidding against one another on parts of seven separate categories of the North American P&G business, including fabric care, oral care, feminine care, personal healthcare, home care, skincare and baby care.
“We can confirm we are in partnership with our agencies as we explore a new media model for fiscal year 19-20 that ensures our brands are in best control of their levers for growth while maintaining the significant scale advantage Procter & Gamble currently sees,” said a company spokesperson.
P&G’s representative noted that the CPG giant does not, as a matter of policy, comment on agency assignments. Multiple parties with direct knowledge of the business, however, stated that Carat will now control media buying and billing for a larger share of the business, while Hearts & Science will no longer handle some of the categories and brands it has worked on since winning a late 2015 review that ended before the Omnicom agency even had a name.
But the biggest winner in this shootout might be P&G itself.
According to two parties close to the matter, for example, the company’s own team won at least one of the bids for media buying on its oral-care lines, which will now be handled by a dedicated in-house division.
The company recently launched a similar in-house team called Woven to handle media planning work for its fabric line of products. Woven, which is housed within Saatchi & Saatchi New York, is part of the cross-holding company team first announced at April’s 4A’s Accelerate conference in Miami. A Publicis Media spokesperson declined to comment.
When asked to provide additional detail on the results of the bids, the company spokesperson said, “We are constantly working to optimize our media buy, and we will work closely with our media agencies on how that work is done. We clearly see an important role for the agencies.”
“Previously, we outsourced all our work, from planning to buying through bill pay, to an agency,” he continued, summarizing P&G’s new model. “We are now providing brands a little more flexibility to decide if they do their own planning, digital buying or put their hands on the keyboard for search and programmatic. This puts our brands closer to decisions to drive growth.”
In keeping with the P&G statement, some of the bids concerned not only ad buying but also operational, or billing, work—and the specific mixes varied by category.
Adweek’s sources also stated that some (but not all) of the categories have joined a growing number of clients insisting that media agencies agree to 120-day payment periods in their contracts. Those terms have been universally shunned by TV networks, which remain the primary sellers of ad space to companies like P&G. This means media agencies that agree to such deals may, in some cases, be forced to “float” the money until they get paid, effectively acting as their clients’ banks.
“We’re happy to have secured the businesses for which the scope and terms align with our offer,” said a Hearts & Science spokesperson. Carat, which is part of the Dentsu Aegis Network, declined to comment.
Carat has gradually increased its share of the P&G business since 2016, most significantly picking up the hair care category in North America last year. Wieden + Kennedy continues to handle media planning and buying for the Old Spice line of products.
P&G’s decision to handle more of its own media work is in keeping with last year’s move to embrace “more efficient ways of production” on its campaigns as the Publicis team handling that work went through a round of restructuring.
The latest numbers from Kantar Media have P&G spending $2.75 billion on paid media in the U.S. in 2017 and just over $2 billion from January to September of last year.