Virgin Media, Budweiser, Uber: Everything that matters this morning

Good morning and welcome to Marketing Week’s round-up of the news that matters in the marketing world today.

Virgin Media and O2 merge to take on BT

Virgin Media and O2 are to merge to create one of the UK’s largest telecoms firms and a major rival to BT.

Liberty Global, which owns Virgin Media, and Telefonica, which owns O2, have agreed to a tie-up. O2 is the UK’s largest mobile phone company with around 34 million users, while Virgin Media has 6 million broadband and TV customers, as well as 3 million mobile users.

Telefonica chief executive Jose Maria Alvarez-Pallete says: “Combining O2’s number one mobile business with Virgin Media’s superfast broadband network and entertainment services will be a game-changer in the UK, at a time when demand for connectivity has never been greater or more critical.”

Mike Fries, chief executive of Liberty Global, adds: “Virgin Media has redefined broadband and entertainment in the UK with lightning-fast speeds and the most innovative video platform. And O2 is widely recognised as the most reliable and admired mobile operator in the UK.”

The deal is the latest sign of consolidation in the telecoms industry after BT bought EE. Telefonica had previously tried to sell O2 to Three owner CK Hutchison but the deal was blocked by the competition commission.

The ad industry launched new scheme in bid to improve inclusion

Industry organisation from across the advertising sector are coming together on a new initiative that hopes to improve diversity and inclusion.

‘Advertising Needs You’ offers an information and advice hub, and has been set up by ISBA, the IPA and the Advertising Association. It showcases industry organisation such as Creative Equals and BAME 2020 that promote and facilitate diversity and inclusion in areas including disability, gender, age, ethnicity and neuro-diversity.

Members include Channel 4’s CMO Zaid Al-Qassab, GSK’s EMEA media director Jerry Daykin, ISBA’s head of media Bobi Carley and Saatchi & Saatchi’s managing director Sarah Jenkins.

Stephen Woodford, chief executive of the Advertising Association, says: “We have long known that great creativity is integrally linked to great diversity of thinking and experience and we must do everything we can to build the world’s most diverse workforce. It is central to our future as a world-class advertising hub and we urge all employers to use the hub, both as a resource, but also as a showcase to share the work they are doing in this area.”

AB InBev ‘reevaluates’ marketing investment amid Covid-19

AB InBev, which owns beer brands including Budweiser, Corona and Stella Artois, is “reevaluating” its sales and marketing investments as it looks to cut costs amid the coronavirus pandemic.

The world’s largest beer maker says it is looking to cut marketing spend that “may not prove effective in the current circumstances” and renegotiate commercial contracts such as sponsorships where possible. It is also halting packaging renovations, as well as suspending discretionary capital spend.

AB InBev will, however, up focus on trends in digital sales, ecommerce and online marketing, in particular its Beer Hawk ecommerce site in the UK.

The move comes as the company forecasts a “materially worse” second quarter as lockdowns in countries around the world curb drinking. Its alcohol sales were down 9.3% year on year in the first three months of 2020 but it says this decline will worsen by about a third in April as bars and restaurants remain closed and beer production is halted in some markets.

Uber cuts 3,700 jobs as sharing economy hit by coronavirus crisis

Uber has become the latest company to cut jobs as the pandemic hits demand for its taxi service.

The company will reduce jobs by 3,700 – equal to 14% of its global workforce – in areas including customer support and recruitment. Its CEO Dara Khosrowshahi is also forgoing his $1m base salary until the end of the year.

“Due to lower trip volumes in its rides segment and the company’s current hiring freeze, the company is reducing its customer support and recruiting teams,” says Uber in a regulatory filing.

Uber is not the only company in the so-called sharing economy to be impacted by the pandemic. Fellow ride-hailing service Lyft has cut 17% of its workforce.

Elsewhere, Airbnb is making a quarter of its global workforce redundant as it forecast that revenues this year would come in at half the $4.8bn it generated in 2019.

ITV’s ad revenues slump 42% despite record audiences

ITV’s ad revenues fell 42% in April as brands pulled or held back campaigns due to the coronavirus crisis. However, the decline was better than the 50%-plus fall expected by analysts, causing its shares to rise.

A trading update from the broadcaster shows how rapidly the crash hit. It reported an 8% increase year on year in February and flat revenue growth in March before the slump.

ITV has furloughed around 15% of its workforce – the majority at its production arm ITV Studios. It has also been forced to cancel popular shows, including this summer’s series of Love Island.

“ITV has taken swift and decisive action to manage and mitigate the impact of Covid-19 by focusing on our people and their safety, and by continuing to reduce costs and tightly manage our cashflow and liquidity,” says the company. “We are also ensuring that we continue to inform and entertain our viewers and stay close to our advertisers.”

The fall comes despite the increase in audiences, with viewing hours up 2% year on year in the 12 months to the end of March. Viewing on its on-demand platform ITV Hub were up 75% to 169 million hours.

Wednesday, 6 May

ASA upholds complaints against online fashion retailers

The latest ASA rulings judging whether an ad has gone against UK advertising dodes includes upheld judgements against Boohoo and I Saw It First.

A complaint was made about online fashion retailer Boohoo after a November 2019 ad offered “up to 60% off everything” for a limited time (shown with the use of a countdown clock), only for the small print to reveal it applied to “selected lines”.

A similar ad on the company’s homepage declared “up to 75% off absolutely everything” with an added 10% off using a checkout code. Small print again revealed it was only available for selected goods.

Complaints that the ads were misleading were upheld by the ASA, which also ruled that the use of a countdown clock suggested that the offer would end within a strictly limited time period, whereas in actual fact the clock would automatically reset as soon as it had reached zero.

Two advertisements for online retailer I Saw It First were similarly criticised and banned for use of a misleading countdown clock, in this instance offering free delivery and a discount.

However, once the clock ran down, it was replaced by the words “Ends soon”.

ASA challenged whether the offer would revert back to the normal price once the countdown was completed.

The complaints were upheld and the ads ordered to be amended and/or removed.

WeWork co-founder sues SoftBank

WeWork’s co-founder Adam Neumann has sued SoftBank after accusing it of breach of contract.

The Japanese bank withdrew an offer to buy $3bn of stock from Neumann and other shareholders.

The lawsuit, filed in the Delaware Court of Chancery, claims that SoftBank “reneged on their promise to pay for the benefits they had already received” and that the conglomerate had been “secretly taking actions to undermine” the deal.

Neumann stepped down as WeWork CEO last year after the company unsuccessfully tried to sell stock as an initial public offering.

SoftBank continues to invest in the office-sharing company, which has been hit heavily by the coronavirus pandemic, with many of its buildings around the world standing empty under lockdown.

SoftBank’s chief legal officer Robert Townsend said that it would “vigorously defend itself against these meritless claims.”

UEFA and Disney introduce At Home activities for children

UEFA and Disney have teamed up to create Play at Home with Playmakers, featuring characters from Disney and Pixar’s Incredibles 2.

The initiative is an extension of Playmakers, UEFA’s first-ever pan-European grassroots programme for 5- to 8-year-old girls, Playmakers, which uses Disney’s storytelling to inspire regular exercise and kickstart a love of football.

There are a number of Incredibles 2 themed activities available to download from UEFA’s Playmakers website that explore each of the film’s main characters through elements of reading, playing, creating and telling.

UEFA’s chief of women’s football says: “We are happy to have expanded our Playmakers programme to a ‘play at home’ series, where children and their families can be active and have fun together.

“During these unprecedented times we want to ensure that we can help provide great ways to keep young children entertained and motivated with play and football.”

Seven UEFA national associations (Scotland, Norway, Belgium, Poland, Austria, Romania, and Serbia) will roll out Playmakers sessions through schools, clubs and local communities later this year. More associations are expected to introduce the programme in 2021.

Didsbury Gin launches outdoor campaign

Manchester-based Didsbury Gin has launched an outdoor campaign to promote its gin amid the Covid-19 lockdown.

‘The Spirit of Life’ campaign was created with the help of Ocean Outdoor’s £10m advertising fund to help retailers and SMEs affected by the coronavirus pandemic. There are four different posters in the series, designed by Daniel Bickerton, which use the branding colours used for the different gin flavours.

The posters reiterate the government message but change it slightly to ‘Stay home. Stay safe. Drink gin’. The campaign comes after Didsbury switched its operations to produce hand sanitiser for public service providers, making it a beneficiary of Ocean’s fund.

Co-founder at Didsbury Gin Liam Manton says: “The last few months have been a whirlwind for us.

“Moving quickly to switch our operations to produce 1 million bottles of sanitiser in the space of seven days was no mean feat, but it’s really important in unprecedented times like these that we support one another.

“Now we’re grateful to have received this support from Ocean Outdoor in return.”

Pancake-flipping campaign raises money for vulnerable children

A campaign launched by Rude Health in association with Chefs in Schools aims to provide 80,000 meals for children missing out on free meals during the coronavirus lockdown.

#Flip2Feed invites participants to flip a pancake, donate £5 to Chefs in Schools and then to nominate another five people to do the same thing.

Chefs in Schools, which usually transforms school food by pairing restaurant quality chefs with schools in areas with high need, is now working with school staff, chefs and volunteers to provide meals to vulnerable children who no longer have access to free school meals.

Rude Health kicked off the campaign with a donation of £5,000 and it will donate a further £5,000 when it reaches a final target of £100,000, the equivalent of 80,000 meals.

Tuesday 6 May

Hotel Chocolat set to reopen some stores

Hotel Chocolat is set to reopen some stores despite seeing a surge in online deliveries.

The brand is planning to reopen up to five stores next week – for takeaways only – after restarting production at its UK factory to help top up dwindling supplies.

Hotel Chocolat saw a surge in online sales prior to Easter but this failed to make up for the damage caused by having to shut its shops in the face of coronavirus.

Hotel Chocolat chief executive Angus Thirlwell says: “Every day at Easter the online demand exceeded the quantity of orders we could accept, due to the requirements to ensure safe working, combined with the short adjustment period.

“With the plans we are putting in place over the next months, we aim to be able to switch the vast majority of demand to online should the need arise in the future.”

The chocolate shop closed all its high street stores on 23 March after the government ordered a lockdown of non-essential retailers.

In a statement, the company says closing its stores in March had a “material impact” on trading and that it has initiated a “broad range of actions to manage its costs and cash flow”.

The business also revealed it has secured a £35m loan with Lloyds Bank to strengthen its finances, and will replace a £10m overdraft it had.

Amazon VP quits over ‘toxic’ culture

A vice-president at Amazon has quit over its toxic culture, citing the retailer’s crackdown on protests.

Tim Bray, a senior principal engineer, and vice-president at Amazon, described the firing of protesters over coronavirus protection as “evidence of a vein of toxicity running through the company culture”.

Workers have criticised Amazon for not doing enough to protect warehouse staff against the virus. On 1 May, Amazon workers participated in a nationwide sick-out in the US, claiming the company failed to provide enough face masks for workers, did not implement regular temperature checks it promised at warehouses, and refused to give workers paid sick leave.

The firm also fired the organiser of a small protest about safety conditions at a New York warehouse.

Bray, who was a senior engineer at Amazon Web Services for five years, set out in a blog post why he had left the company, claiming that Amazon also fired office staff who had been organising another protest and had spoken out against the company on climate issues.

He wrote: “Remaining an Amazon would have meant, in effect, signing off on actions I despised. So I resigned.”

A quarter of employees in Britain are furloughed

Nearly a quarter of workers in Britain have been furloughed as a result of coronavirus.

HMRC said a total of 6.3 million jobs had been temporarily laid off by 800,000 companies, with claims amounting to £8bn by 3 May.

Official figures show the UK had a record employment level of 76.4% before the crisis, with more than 33 million people in the labour force, 27.9 million of whom were employees. However since Covid-19, 23% of these have now been furloughed.

The Office for Budget Responsibility, the independent body that has the task of forecasting the economy for the government, said last week it expected the cost to the exchequer to be £39bn between March and June. That does not include the cost of a separate scheme covering many of the 5 million self-employed workers that was announced later.

Despite the huge numbers of people needing the scheme, the chancellor Rishi Sunak told ITV News that it would have to be wound down at some point because of its steep cost.

Norwegian Air begins rescue deal

Norwegian Air’s shareholders have approved a £800m rescue plan, paving the way for the budget airline to get £320m worth of government funding.

Under the scheme, which was backed by 95% of shareholders, nearly $1bn of the company’s debt will be converted into equity.

Shareholders supported the scheme even though doing so will leave them with ownership of just 5.2% of the company.

Many had been sceptical about Norwegian’s chances of survival due to its large debt pile, which it accrued due to rapid expansion into the low-cost and transatlantic markets. However, the airline can now raise the equity it requires to access the government’s loans.

A spokesperson for the airline says: “With the significant contributions from lessors and bondholders, the company expects to convert more than 10bn krone in debt to equity.”

The low-cost carrier is currently only operating a small number of domestic flights, with all but seven of its planes grounded.

Last week it warned that the majority of its fleets could remain grounded until April 2021 depending on international travel advice with it aiming to ramp up services towards a normal level in 2022.

J Crew files for bankruptcy over Covid-19

Fashion company J Crew has filed for bankruptcy protection, making it the first big US retailer to fall victim to the coronavirus pandemic.

Under the terms of the filing, its main creditors are set to take control of the group in exchange for cancelling debts of £1.3bn. They are also providing about £320m of financing to keep J Crew’s operations afloat.

The retailer’s 500 stores have been closed due to Covid-19, with the retailer admitting that some will not reopen. However, it has not yet disclosed how many outlets will disappear. J Crew also has branches in Canada and the UK – where it has six outlets. It will also continue to trade online during the bankruptcy proceedings.

The brand’s chief executive Jan Singer described the move as a “comprehensive financial restructuring” aimed at allowing the business “to thrive for years to come”.

She says: ”Throughout this process, we will continue to provide our customers with the exceptional merchandise and service they expect from us, and we will continue all day-to-day operations, albeit under these extraordinary Covid-19-related circumstances.”

Monday 5 May

Sports Direct accused of breaching furlough rules

Sports Direct and House of Fraser have asked store managers to work at least once a week while on furlough, The Guardian reports.

Staff have reportedly been asked to volunteer to go into stores one day a week after the entire store team were furloughed last month. This is in breach of the government scheme, which pays 80% of employee’s wages but stipulates that staff must not work for their company while on furlough.

According to The Guardian, two managers were told not to clock on when they worked in stores while on furlough. They were allegedly asked to pack store stock so it could be returned to the group’s warehouse and sold online.

Managers at Sports Direct and House of Fraser had also been asked to return to work – on 90% pay – on Monday, but the idea was scrapped after The Guardian published details of the plan.

Employees had been told they would be required in stores 10 hours a day, at least five days a week, to return stock to the group’s warehouse ready for sale online and to prepare stores for physical distancing measures, after Frasers Group saw non-food stores reopening in mainland Europe.

However, managers have told The Guardian they do not want to return to work on less pay and fear contracting coronavirus as they believe they would not be provided with sufficient protective kit or that social distancing measures would be in place.

McDonald’s seeks rent cuts ahead of reopening

McDonald’s is seeking a rent cut from landlords ahead of the possible reopening of 15 outlets in the UK for delivery on 13 May.

The fast food giant, which temporarily closed all its UK sites due to the pandemic, paid its rent bill for the previous quarter in full but is now in talks with landlords for support “given the unprecedented situation”.

“We have opened dialogue with some of our landlords to discuss how they might offer support on rent and service charges for a short period due to our restaurants not trading,” says a spokesperson.

Last week, McDonald’s reported that like-for-like sales had fallen by 3.4% during the first quarter due to the coronavirus outbreak. While roughly three-quarters of its outlets worldwide have remained open for drive-throughs, delivery or takeaway, the chain temporarily closed all its sites in the UK, France, Italy and Spain.

Sponsor BP cut out of judging for top portrait prize

BP will not judge an illustrious portrait award it sponsors for the first time since 1997 amid pressure from artists and campaign groups to end the oil company’s involvement in the prize.

The National Portrait Gallery, the award’s organiser, confirmed that for the first time BP will not be involved in the judging of the £35,000 portrait prize announced tomorrow.

A spokesperson from the gallery told The Guardian: “The judging panel is refreshed each year to ensure new perspectives are brought to judge the entries. The gallery and BP jointly agreed not to have a sponsor representative on the judging panel this year.”

While the National Portrait Gallery claims its decision was not a result of recent campaigns to end oil companies’ association with the arts, cultural institutions have been under severe pressure to stop their reliance on sponsorships from the likes of BP and Shell.

Last year a campaign, backed by 78 artists, called on the gallery to end BP’s sponsorship of the portrait prize entirely. Elsewhere, in October last year the National Theatre and the Royal Shakespeare Company ended their sponsorship deals with Shell amid mounting pressure from actors and campaigners.

Virgin Media and O2 edge closer to merger

Virgin Media and O2 are reportedly in talks to join forces to create a TV and mobile business bringing together millions of customers across the UK.

The Guardian reports that Virgin Media owner Liberty Global, which also holds a 10% stake in ITV, is in talks with O2 parent company Telefonica to form a joint venture. A deal would combine O2’s 34 million customers with Virgin Media’s 5.3 million broadband, pay-TV and mobile users.

As Liberty Global is ITV’s largest shareholder, there is speculation that the company may be open to bringing the broadcaster into any possible deal.

In 2015, a previous attempt by rival telecoms company Three to acquire O2 for £10.25bn was blocked by the European Commission on competition grounds.

O2 owner Telefonica is concentrating on the UK, having announced in November a major global restructuring plan to focus on four main markets including Britain, while selling off assets in Latin America.

BBC launches new idents reflecting lockdown life

BBC One has launched a set of new idents reflecting how communities are coming together during lockdown.

The eight idents, created as a collaboration between BBC Creative and BBC Marketing, showcase a range of different activities people have been doing to stay connected during lockdown. They include an ‘isolation disco’, where residents within a community have a party every night at the same time in their separate homes.

Another ident features a Sunday league football team who are still practising despite social distancing by doing kick-ups in their gardens. The whole production was carried out remotely, with the films being self-shot by the contributors at home and edited together by the BBC.

The idea is to build on the original ‘Oneness’ idents, shown on-air since January 2017, which depict people coming together around common interests across the country.

“Our ‘Oneness’ channel idents are about demonstrating BBC One’s unique ability to bring large and disparate groups of people together through their shared passions and interests,” says head of marketing at BBC One, Chris Hooper.

“During this unusual time of isolation, the BBC is helping to bring the nation closer through entertainment, information, education and culture, and so it felt right for BBC One to reflect the way our audiences are still finding ways to connect in new and unique ways.”