MEDIA WEEK CONFERENCE UPDATE


Levy: Publicis Is ‘Not Cookie-Cutter’

NEW YORK — Publicis Groupe CEO Maurice Levy on Monday detailed the Paris-based holding company’s alliance with Dentsu, as well as the restructuring and cost-cutting initiatives now underway following its purchase of Bcom3.

That acquisition, which closed in September, made Publicis Groupe S.A. the fourth largest communications company in the industry with offices in more than 100 countries, $4 billion in revenues and $34 billion in billings.

Levy’s remarks came in a speech at UBS Warburg’s annual Media Week Conference in New York.

Japan is the only country where Publicis is not among the top five agencies – and that situation is addressed, Levy said, by Publicis’ alliance with Dentsu, which helps handle Publicis clients in Japan and other parts of Asia. Dentsu will also help handle media buying in Japan for the company’s international clients by the end of 2003.

The holding company plans to take on new accounts in Europe and North America for Japanese advertisers by the end of 2002 and is in discussions with Dentsu about forming joint operations in “a number of European countries” by sometime in 2003, Levy said.

Chief among the post-merger, cost-cutting initiatives is the integration of D’Arcy Masius Benton & Bowles and its client base into the holding company’s three other major global networks, Levy said. “While the plan is very ambitious, there are limited risks. It has been carefully managed and we think (client defections) will be minimized or avoided. Our objective is quite ambitious. We want to have zero fallout of accounts.”

Publicis Groupe is also closing Bcom3’s New York and Chicago offices and eliminating redundant jobs at the holding company level, Levy said. In addition, Publicis Groupe is looking for opportunities where agencies can share back office functions, such as information systems, accounting, legal services and human resources. As a result of the restructuring, Publicis Groupe expects achieve savings of at least $60 million (which will reach their full effect in 2004) and incur costs of $90 million.

He said the final decisions on client moves and the new structure will be worked out in two to three weeks.

During his presentation, Levy stressed the differences between Publicis Groupe’s three global agency networks, Publicis Worldwide, Saatchi & Saatchi and Leo Burnett. “We are not a cookie cutter company,” he said. “We have three networks that are very, very different.”

He said what differentiates Publicis Groupe from the other big three holding companies (Omnicom, Interpublic Group and WPP) are the distinct cultures of its three big agency brands: Leo Burnett is a decidedly U.S. culture and considered one of the best shops in North America; Saatchi & Saatchi has a British culture with “a history of giving a lot of work to journalists,” Levy said jokingly, referring to its storied past under the founding Saatchi brothers. Now the agency is “fueling its strength instead of fueling the press about its life.”

He described Publicis as having a European culture. Although French in origin, the agency is used to the challenges of delivering messages in varied markets within Europe, Levy said. While calling such agencies as BBDO and DDB (Omnicom), JWT and Ogilvy (WPP) and McCann and Lowe (IPG) “excellent,” Levy said there isn’t much distinction between them culturally for prospective clients.

Through the Bcom3 merger, Levy said Publicis Groupe “reinforced” Saatchi with Pillsbury and Procter & Gamble business, “reinforced” Leo Burnett with General Motors business and within Europe; and strengthened Publicis in Latin America, the U.S. and Asia Pacific regions.

One analyst asked him about how Publicis Groupe was handling McDonald’s recent demand to cut its agency fees. Levy said he could not comment on any of his clients’ business except to reiterate what has been published–that yes, McDonald’s is pressuring agencies to reduce fees. Publicis is trying to restructure and lower its fees for McDonald’s but also wants to implement an incentive-based fee structure in which its agencies (in this case Burnett) receive higher fees for improved retail sales.

Levy said that in January 2003, Publicis Groupe SAMS (Specialized Agencies and Marketing Services) CEO John Farrell will outline a plan to restructure Publicis’ health-care communications companies (Nelson Communications, Medicus Group, Klemtner Advertising, Saatchi & Saatchi Healthcare and Publicis Wellcare) into one entity called Publicis Healthcare Group (PHG).

Targeted acquisitions of direct marketing, CRM and public relations companies will also continue for SAMS, Levy said.

–Ann M. Mack and Kathleen Sampey

WPP, IPG Seek Margin Improvement

NEW YORK — WPP Group’s top priority next year is to improve its operating margin while a main focus at rival Interpublic Group will be “rigorous financial discipline,” top executives from the respective companies said on Tuesday.

IPG, which this year has been beset with revenue and accounting problems, also is striving for margin improvement in 2003, as well as a “strong” balance sheet and “superior” organic growth, said CEO John Dooner, during a presentation to industry analysts at the 30th annual UBS Warburg Media Week Conference in New York.

IPG hopes to accomplish those goals by cutting costs, reducing debt and maximizing cash flow, said CFO Sean Orr. For 2003, the company has set a margin target of 13 percent.

Failing to meet its margin goal this year is WPP CEO Martin Sorrell’s greatest “embarrassment,” said CFO Paul Richardson. Halfway into 2002, WPP reported a margin of about 13 percent and indicated that it would end up lower by year’s end. Whatever that number turns out to be, WPP hopes to increase it by 1 percent next year, Richardson said.

Neither WPP nor IPG is expecting much growth in organic revenue next year. Orr is anticipating flat revenue, while Richardson expects an increase between 0 and 3 percent.

The two companies also outlined their offerings, top clients and philosophies during dueling one-hour presentations, each of which allowed for a handful of questions.

–Andrew McMains