Bernstein-Rein Preps for Wal-Mart Loss

CHICAGO After helping build Wal-Mart into a global retail powerhouse over the past 32 years, independent agency Bernstein-Rein is now facing a future without its cornerstone client.

For his part, CEO Bob Bernstein is taking the impending loss in stride.

“We’re not having a post-mortem,” Bernstein said. “We’re proud of what we’ve done for them. They’ve given us a lot of opportunities.”

The Kansas City, Mo., agency took on the Bentonville, Ark., retailer when it was just a regional chain with $350 million in sales. Over the course of the relationship, the agency helped Wal-Mart grow into the dominant retailer it is now, with worldwide sales exceeding $315 billion. Along the way, the agency developed perhaps the client’s most iconic image: a bouncing smiley-face pledged to lower prices.

Handling Wal-Mart was a double-edged sword. While the shop worked on one of the nation’s largest brands, Wal-Mart’s breadth conflicted the agency out of several other business categories, Bernstein said. Among the areas the shop will now look to get into are: automotive parts and services, pharmacies, groceries, shoes, jewelry and electronics. “We’ve been totally locked out there,” Bernstein said. “Wal-Mart covers the waterfront.”

But luring clients in any those categories might be easier said than done, said Chris Colbert, chief marketing officer at consultancy Pile and Co. in Boston. “It’s not easy to do. The nature of the business is such that just because you worked for X doesn’t mean Y is going to talk to you,” said Colbert.

The status of another key Bernstein-Rein client is also in question, as NetZero has approached agencies about a creative project, though shop executives have asserted they won’t lose any business. “That’s what we’ve been told, and that’s what we believe,” Bernstein said.

NetZero would not comment on the review.

In its 32 years with Wal-Mart, the agency survived about eight chief marketing executive changes, Bernstein said. But the latest marketing team—and an advertising agency search led by former Chrysler marketing executive Julie Roehm—ushered in a new era at the company that doesn’t include Bernstein-Rein.

The shop was eliminated last week from the review to handle Wal-Mart’s $570 million advertising account. Moving forward are: Omnicom agency (and the company’s other incumbent) GSD&M in Austin, Texas; Publicis Groupe’s Saatchi & Saatchi n New York; WPP Group’s Ogilvy & Mather in New York; and Interpublic Group’s Draft FCB Group in Chicago and The Martin Agency in Richmond, Va. Select Resources International in Santa Monica, Calif., is running the review.

Sources said Bernstein-Rein (which at $560 million in billings was the smallest of the contenders) simply didn’t have the scope of services put forth by the other agencies. Sources also said the chemistry with Roehm never clicked.

As recently as the Friday before the cut, however, agency executives privately expressed confidence in their future with Wal-Mart, saying meetings with the new marketing team had been encouraging.

They also pointed to the projects they had recently been assigned—an organic food push, a rebranding of the pharmacy department and upcoming holiday work—as signaling the company’s confidence in the agency.

But the ever-diplomatic Bernstein would not admit to having felt betrayed by the search team. “There were some decision that needed to be made,” he said. “This is the right decision for where they want to be, and it’s the right decision for where we want to be.”

Though Wal-Mart was the agency’s largest client, Bernstein said it accounted for less than 40 percent of its nearly $60 million in revenue, though he wouldn’t provide specifics. He also said he did not anticipate any layoffs, noting the agency would continue working on the account through the end of the year.

Bob Walker, director of communications at Bayer Animal Health, a Bernstein-Rein client for 10 years, said he planned to maintain the company’s relationship with the agency. “They’ve done extraordinary work for us,” Walker said. “We’re getting great recognition.”

Another notable client, veterans’ insurer USAA, did not return calls seeking comment.

Bernstein said he had spoken to clients and assured them the agency’s future was sound.

“I told the clients that we’re the same agency that we were yesterday,” Bernstein said. “We’ve got the same capabilities that we always had.”