Unilever Claims to Have Saved 30% on Production Costs After Taking Work In-House

Unilever, which has taken repeated steps to combat increasing pressure on the consumer-products space, announced in its 2017 annual report last month that it had saved about 30 percent on agency fees after taking more of its ad work in-house and reducing the roles of its external agencies.

“In marketing, we are creating more of our own content in house while making existing assets go further,” the report read. “Our 17 U-Studios in 12 countries are creating content for brand teams faster and around 30 percent cheaper than external agencies.”

Unilever unveiled its in-house content unit, U-Studios, in 2016, saying at the time it would use it to find new ways to engage with digitally focused consumers while simultaneously countering the rise of ad-blocking software.

It is not clear what duties U-Studios took from Unilever’s external agencies or how the company is going about managing them. The company did not return a request for comment.

However, Unilever’s revelation plays into a larger trend of budget-cutting among America’s biggest spenders—a trend agencies have been increasingly wary of. Procter & Gamble, another CPG giant, said on its fourth-quarter earnings call in July that it had cut approximately $100 million to $140 million in digital advertising spend due to brand-safety concerns and also reduced its agency and production spend by an unspecified amount.

Apple’s Beats Electronics, the brand formerly known as Beats by Dre, also has been making moves to take its creative account in-house, sources told Adweek in January. Carl Johnson, CEO of the brand’s lead global creative agency, Anomaly, confirmed that his agency no longer handled as many creative duties as it once did, saying it “decided to take a breather from executing work with Beats.”

In October, international consultancy R3 released a report showing that the size of the average U.S. creative account win shrunk 38 percent last year compared with 2016 due to in-house studios taking on more work. Following that report, Pivotal Research senior analyst Brian Wieser told Adweek that he does not expect brands to stop shifting marketing efforts in-house anytime soon.

Unilever itself revealed last year it would put a cost-cutting plan in place, removing half of the creative agencies and 40 percent of the consultancies from its roster. After the announcement, WPP, the largest global advertising holding company and a major Unilever partner, saw its stock plummet.

A week ago, WPP suffered its steepest stock drop in nearly two decades (14 percent) after reporting weaker-than-expected 2017 financial results. On an earnings call, WPP CEO Martin Sorrell admitted 2017 was “not a pretty year” and attributed his company’s woes to cuts by historically big spenders like P&G and Unilever.

Still, brands should be cautious about losing the outside perspective that comes with taking creative work in-house. Pepsi and Dove learned this lesson the hard way, releasing respectively the now-infamous tone-deaf Kendall Jenner ad and a Dove soap spot that was deemed racially insensitive from their in-house studios.

Lindsay Rittenhouse

@kitten_mouse

Lindsay Rittenhouse is a staff writer at Adweek, where she specializes in covering the world of agencies and their clients.