It seems bathtime isn’t over just yet

If you’re a marketer at a US-based multinational, there’s some good news and some bad news about the forthcoming Presidential election.

First, though, let’s look at a few statistics. Sir Martin Sorrell, chief executive of the world’s second-largest marketing services company WPP Group, has in recent years earned a reputation for accurate forecasting falling little short of that of the Sage of Omaha himself, Warren Buffett. When Sorrell steps out of the bath, we all reach for the towel. So it is worth remarking the cautionary note that accompanies an extremely upbeat third-quarter set of WPP figures, announced this week.

In them we discover like-for-like revenue has shown its strongest quarterly growth since the beginning of 2001: 5.7 per cent. Most of that has come from the traditional economic powerhouse of the US, though Asia has performed strongly as well.

For WPP at least, the fourth quarter has started well with wins including Nestlé’s £600m global media buying and the first real fruits of HSBC. Yet Sorrell predicts a slowing of growth next year, marking down industry estimates of three to four per cent to two to three per cent.

A large element of this relative bearishness relates to the US economy. Any incoming president will face fairly intractable structural problems, namely a swelling fiscal deficit and shrinking dollar – problems which have just got worse on account of ballooning oil prices, with their threat of impaired corporate profits and – who knows? – resurgent inflation.

From a purely business point of view, president George W Bush looks a better bet here. Not only would he not be encumbered with the welfare issues which beset a Democrat president, he would also be looking for his ‘Place in History’. Whereas, arguably, president John Kerry would be looking at his next four-year term in power, with its very different policy implications.

But things aren’t that simple. While Kerry has not made international law a plank of his election manifesto, it’s certain that he favours more engagement with international institutions and, importantly, the European Union. Importantly because, for once, foreign policy seems to be having a forceful impact on certain areas of business.

According to the WPP scenario, major European economies, which have long been at a virtual standstill, are poised to take up some of the slack if the US falters next year. Unhappily, there is growing evidence that US multinationals are not well positioned to take advantage of this opportunity, particularly those such as Coca-Cola, Disney and McDonald’s, with a heavy international exposure. It’s not so much the specifics of US defence secretary Donald Rumsfeld’s ‘Old Europe’ rhetoric that is causing the damage – though that won’t have helped – as a growing disenchantment with US cultural values exacerbated by what is going on in Iraq.

And the good news? Kellogg, a US brand with a trailing European performance (sales were two per cent up in the quarter) has issued a profit warning. What’s good about that, you may ask? The reason for the warning is that it intends to spend heavily on brand-building as a means of combating the present doldrums. Let’s hope extra spend does not come at the price of a reduced headcount in the marketing department.

Stuart Smith, Editor

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