The already over-supplied UK ad agency sector is about to get even more crowded. Amid more expected takeovers and mergers next year there will be at least four new “serious” players in the market – established overseas agencies, all with more than 15 years experience, operating in London for the first time. Some observers suggest the four, the US agencies Wieden & Kennedy and Fallon McElligott plus the Bates-owned Australian shop Campaign Palace and Scholz & Friends from Germany, could become top 20 agencies within just three years. That would represent the most dramatic shake-up in the middle rankings of the agency league table for a number of years. In truth, Scholz & Friends has had a presence in the UK since October, working with existing unnamed German clients, but is pursuing UK and international business from London as of now. Even minimum estimated start-up costs of between 1m and 1.5m is not deterring interest. “A lot of clients I have spoken to are interested in the new arrivals,” says AAR Group managing director Martin Jones. “They are new and different. Clients might not necessarily give them their accounts but they will place them on pitch-lists. Having them on a pitch-list could improve the reputation of the marketing director among his or her peers. “It is only a gut instinct but looking at the top 25 agencies in the next 12 months, some will merge to be replaced by two or three of the newcomers. Agencies like Scholz are coming to London to play on a larger European stage – London is still seen as a centre of excellence for advertising.” That is a view shared by Burtch Drake, president and chief executive of the American Association of Advertising Agencies. “London is clearly the advertising centre for Europe. The UK is the biggest market in Europe. All the big multinationals are doing business there.” Drake even suggests that the two US agencies making the trip are late into the market. “Wieden & Kennedy and Fallon McElligott are among the most famous agencies in the world. They have to do as their predecessors have done and go beyond home territory.” The motivation for that is clear. It is not just because these agencies see London as the “heart of advertising” or even as a “centre of excellence” – that is secondary. They are coming under increasing pressure from clients, globalising their accounts, to handle business beyond their domestic market. Not being able to offer that makes the domestic account in the US or UK or wherever, vulnerable. London is feeling the impact of that more than most markets because so many multinational companies site their European headquarters in the UK. Last year, Wieden & Kennedy lost $50m (31m) of US Nike business to Goodby Silverstein & Partners in San Francisco. It was determined that the same thing would not happen in Europe – a major factor in its decision to open an office in London. It is the same logic that is taking Bartle Bogle Hegarty in the opposite direction by opening a US operation later this year to service its Levi’s account. And it is significant that three of the four agencies moving into the UK share, with BBH, international reputations for creativity. But that is no longer enough for some clients. “I don’t know about Wieden & Kennedy but all of the other three agencies have previously been asked by clients if they have London offices and to handle business outside their domestic markets,” says Scholz & Friends London chief executive Kate Robertson. “We have had to pass up business because we had no London operation,” she adds. “But the step into London is a big one. It may not be easier, but it is simpler to go and set up in Prague, Moscow or Brussels. J Walter Thompson and others may have arrived over 50 years ago but for the latterday raft of agencies it is another story.” Of the new arrivals, two handle BMW work in their domestic markets. This should not trouble WCRS, which holds the car maker’s UK account plus its Land Rover business, too much because of chairman Robin Wight’s famously close relationship with the company. But there will be other agencies, perhaps those which are not picking up as much new business as their financial position dictates, which will be less pleased to see more entrants in the UK. This could accelerate mergers between some players. There is an element of coincidence in the fact that four established agencies, which previously have not had a London presence, are arriving within the space of a few months. But the moves should also be seen in the context of the changing face of the agency market worldwide. Some observers believe there will be just five worldwide agency networks in the future. That may be an exaggeration, but with the acceleration in the globalisation of accounts there will be a fall-out and fewer serious players will be able to operate. In that context, these agencies seem to be acting in the nick of time.
Wieden & Kennedy
Although it intends to open its London office on April 1, Wieden & Kennedy is nobody’s fool. Of all the agencies entering the UK market this year it is arguably in the strongest position, as it already has a 9m account in the bag courtesy of one of its leading clients – Nike. The sportswear company’s decision to move its UK business out of TBWA Simons Palmer (MW November 27 1997) was made specifically on the basis of Wieden & Kennedy finally setting up shop in the UK. There have been rumours about a move to London almost since the agency, with estimated 1996 billings of $625m (390m), set up in Portland, Oregon in 1982 but now it is real. While Wieden & Kennedy director of client services Dave Luhr attributes the opening of the London operation entirely to winning the Nike account, it can also be seen that there is a defensive element to the agency’s expansion. Last spring, it lost $50m (31m) of US Nike business to Goodby Silverstein & Partners, a San Francisco agency. The loss sent shockwaves through the agency and inspired a staff shake-up. It is no surprise, in the light of this, to find the agency investing in Europe, where Nike is experiencing massive expansion. Its global sales are estimated to be worth 5.6bn. With Nike as its signature account, Wieden & Kennedy is under pressure to maintain an international outlook or face more reviews of the business in the future. The London office will initially employ ten people and is expected to be led by one of its senior US creatives – Susan Hoffman or Jim Riswold. However, it will have to diversify out of the Nike business if it is to become a significant player. It will look closely at opportunities from existing major accounts including Microsoft, for which it handles global corporate work, and Coca-Cola. Unlike Fallon McElligott, Wieden & Kennedy already has some non-US offices. Amsterdam employs 115 people and it also has agency relationships in Spain, Italy, Germany and France. It has entered an alliance with McCann-Erickson in Tokyo to service the Microsoft and Nike accounts. “We are not looking to expand elsewhere. We have a few core offices in a few core cities,” says Luhr. Francesca Newland
Scholz & Friends
If we are not in the top 30 in the UK within 24 months, I hope Scholz will get rid of me.” It is the sort of statement journalists have a nasty habit of returning to after 23 months. But that is the task set by Scholz & Partners London chief executive Kate Robinson for an agency which now has 16 staff, some business from existing German clients, a wish list that includes retailers and IT companies and which is looking to land its first piece of UK business within the month. It is the first international office the German agency has opened which will not break even from day one – instead setting a break-even target of September. Scholz & Friends, part of the Bates network, began life 15 years ago in Hamburg and became part of the then Saatchi & Saatchi-owned Bates in 1993. It has opened 11 offices – including Moscow and Prague – in the past two years. Its London operation opened with the recruitment of executive creative directors Steve Spence and Trevor Kennedy in October. Robertson was most recently executive new business director for Bates Europe and Dorland. The group has links with the Far Eastern agency group Batey to handle business in the area and also has a wholly-owned operation in Singapore. It has further expansion plans in France and other East European markets and claims total billings of $350m (219m). Its biggest clients are: BMW, which it handles in Germany while also producing all the brochures and sales literature worldwide; Reemtsma, the cigarette company which includes the West brand, a sponsor of the McLaren Formula One team; the top German newspaper Frankfurter Allgemeine; DHL; Deutsche Bank; and also the Coca-Cola roster, on a project basis. Ironically, it originally joined the Bates network to serve its Mars business only for Bates to lose the account in the fall-out that saw the Saatchi brothers, Maurice and Charles, leave to set up their own agency. Similarly, its international expansion has followed its Reemstma client into Central and Eastern Europe. It has the biggest single advertising office in Germany, based in Hamburg, where there are over 300 employees, but it only entered Germany’s top ten in 1996 and is now ranked eighth. Tom O’Sullivan & Jon Rees
Last year, Campaign Palace managing director Reg Bryson demonstrated the importance of his agency’s creative reputation by launching a public attack on Saatchi & Saatchi, then a sister agency, and a former client Sanitarium. Bryson claimed that the food company had pinched a Campaign Palace idea for a Weet-Bix ad and used it without any payment or credit. In view of that spat, Bryson may welcome the demerger of the Cordiant group because Campaign Palace and Saatchi are no longer “sisters”. More significantly, the demerger has spurred the Bates Group into making a substantial investment in the future of Palace, acknowledged as one of Australia’s top creative agencies. Underlining that investment was the decision last July to shift Andy Bryant, Bates Dorland client services director and the key account person on its 17m Heinz business, from London to Campaign Palace as one of the agency’s five-strong management team. Bryant will presumably be advising on the London start-up. The brand is being rolled out not just in the UK but also in the US as part of an effort to boost the Bates network’s reputation for creative advertising. Both Bryson and joint chairman and group creative director Lionel Hunt have spoken to the new London operation of Scholz & Friends – also Bates owned – about opportunities in the market. With a client list that ranges from Daewoo to the Australian Football League, Australian Meat & Livestock Corporation and Olympic sponsor the Westpac Banking Corporation, the agency records estimated billings of $160m (Aus). By comparison with other agencies entering the London market this year, its work on international accounts is fairly minimal. But the expansion plans are designed to change that. “English advertising has been the benchmark for some years and it is natural that we would therefore consider London as a possible destination for opening our first Northern Hemisphere office,” says joint chairman and chief executive Des Speakman. “While we are, at this end, very interested, there’s much work to be done before any firm go/no go decision is made. It is too premature to talk about opening dates, costs and people. If any opening was to take place in 1998, it would most likely be in the second half of the year. Tom O’Sullivan
For almost 20 years Fallon McElligott has set itself the same objective: “To be the premier creative agency in the worldÃÂ¤” That is the opening line of its mission statement and is the first thing all employees see when they turn on their computers each morning. But, realistically, to achieve that the company has to have more than its two offices in Minneapolis and New York. As a consequence it plans to open its first non-US office in London and, if all goes well, take on the rest of the world in the next millennium. “London is an interesting market because our brand means something there,” claims director of communications Janet Northern. It means “creativity” because even those in the UK who have never seen a Fallon McElligott ad know that the agency has a reputation for creative work. It has appointed UK headhunters and it is understood that any pan-European business will be co-ordinated from London. Founded in 1981, it now has estimated US billings of $500m (312m) and a client list that includes BMW, United Airlines, Timex and Miller Brewing. It could be argued that Fallon McElligott should have come to the UK earlier. Despite denials, it is believed to have come under pressure from clients to develop an international network. Clearly the agency, which bought itself out of WPP Group in 1993, sees opportunities for new business in the UK. But unlike its US rival Wieden & Kennedy, which has already secured the 9m UK Nike account to support its London opening, Fallon McElligott has no UK business at the moment. It shares the 70m global United Airlines account with Young & Rubicam – the latter responsible for all non-US business. Speculation in the US suggests that Fallon tried to land the full account in 1995 but that United was unwilling to be “the guinea pig” for the agency’s international expansion. Shortly afterwards, Fallon began to look more seriously at a UK venture.
The company set up Fallon McElligott Berlin (FMB) in New York in 1996, which won the $10m (6m) Bankers Trust Business in April of that year – its first international account. The move was viewed as the first step towards international expansion – a test to see if the company’s brand could be exported to a different culture. However, last November an attempt by Andrew Berlin to buy FMB failed and he left the company taking several senior staff and some big clients. Francesca Newland