Smithfield Foods Disputes Claims That China Tariffs Facilitated Cuts in Its Marketing Budget

By Erik Oster Comment

UPDATE: Doner has amended its initial statement. “Correction: The evolving needs of our clients have led to a minor restructuring of our teams,” read a new quote from an agency spokesperson.

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UPDATE: After this story ran, a Smithfield Foods representative disputed claims that changes in the global meat market led to large cuts in its marketing budget and subsequent layoffs at the Detroit headquarters of Doner, which is its primary agency partner.

According to a statement provided by Smithfield, the main reason for the change in its relationship with Doner appears to be the potential addition of “some complementary partners” to its agency roster.

“Our relationship with Doner is 100% unrelated to anything going on with the tariff situation or markets, and it is irresponsible to make that false connection,” the spokesperson wrote. “We are constantly evolving our marketing program in an ever-dynamic consumer landscape. With that, we are looking at some complementary partners who are on the forefront of disruptive communications and different ways to engage consumers in a meaningful way. Many partners have a place within our portfolio, alongside others we are exploring as we evolve our go-to-market strategy.”

Despite the client’s statement that the change is unrelated to markets, Doner’s official quote below attributes it to “unexpected global market forces.” And multiple reports in the past week alone have confirmed that the American pork sector, which relies heavily on exports, has been among those hardest hit by the tariffs. The Washington Post reported this morning, “The latest escalation of tariffs means that American pork will not be economically competitive in China.”

As noted in the original post, Smithfield is based in the United States but owned by a Chinese company, and its largest market is within the United States. However, like most American pork producers, the company exports large quantities of its product to other countries, including China. And again, multiple reports confirm that the entirety of the global pork trade has been affected by the tariffs.

Smithfield’s statement did not directly address the claim that it has “significantly cut back” its advertising budget.

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The Detroit headquarters of MDC Partners’ Doner parted with around 3% of its staff this week as a result of a large client cutting its marketing budget due to “global market forces.” At least one creative leader was among those affected.

“Unexpected global market forces led one of our clients to significantly cut back their advertising budgets, leading to a minor restructuring of our teams,” a Doner representative said in a statement. “We are doing everything we can to help support the people impacted by these circumstances. We continue to invest in building our business and strengthening our model, and we are well-positioned for the future.”

Sources close to the matter identified the client as Smithfield Foods, which Doner won in a 2012 review. While Smithfield has not ended its relationship with Doner, these sources claim it has dramatically reduced its marketing budget. The reasons for the budget cuts are changes in the global trade relationship between China and the United States, which has had a large impact on the trade of pork, as well as the recent outbreak of hog disease in China that has led the country to slaughter nearly 1/3 of all pigs.

Smithfield, which describes itself as “a $15 billion global food company and the world’s largest pork processor and hog producer,” is based in Virginia but wholly owned by Chinese conglomerate WH Group, which acquired the company for nearly $5 billion in 2013. Its brands include Smithfield, Eckrich, Nathan’s Famous, Farmland, Armour, and many more.

President Donald Trump’s ongoing trade war with China, which has included several rounds of tit-for-tat tariffs, rattled the stock market in recent months. The U.S. farm sector, which includes land used to develop pork, has been hit particularly hard by the escalating back and forth.

The tariffs have also affected brands like Columbia Sportswear. Jon Gold, vp of supply chain and customs policy for the National Retail Federation, told Adweek today that “The quick imposition of the tariffs does not leave companies enough time to make significant changes to their supply chain.” Columbia has had less trouble adjusting than many others thanks, in large part, to the fact that it has long faced such tariffs via the 1930 protectionist Smoot-Hawley Act.

Aside from this week’s cuts, Doner Detroit recently hired Jane Goodman as chief strategy officer and promoted Craig Conrad to president. It also won lead creative and strategy duties for auto chemical brand Prestone in March.

Patrick Coffee contributed reporting to this story. 

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