DDB Braces for Fallout From A-B Sale

Agency President Admits Marketing Budget Could Be Cut, but Sees Hope for Growth

By Published on .

CHICAGO (AdAge.com) -- Rick Carpenter, president of Anheuser-Busch's lead agency, DDB, Chicago, held a meeting with agency staff yesterday in which he acknowledged there could be cuts to the brewer's domestic media and marketing spending in the wake of its $52 billion sale to InBev.

But he also endeavored to put the best spin on the takeover of one of its most loyal and lucrative clients by the cost-cutting Brazilian/Belgian colossus, saying that InBev's intention to grow Budweiser aggressively around the globe would present growth opportunities for the agency and its network, according to someone who was in the room.

'Could be good for us'
At the meeting -- where InBev's Stella Artois and Beck's brands were served alongside A-B's Budweiser and Bud Light Lime -- Mr. Carpenter emphasized InBev CEO Carlos Brito's oft-expressed admiration for A-B's brand-marketing prowess. He also noted that the agency might be in a position to pitch for work on InBev brands such as Beck's and Bass Ale once the deal closes. "They want to turn Budweiser into [an international brand like] Coke, and that could be good for us," said the executive, paraphrasing Mr. Carpenter.

A DDB spokeswoman declined to comment.

During a conference call July 14 announcing the deal, Mr. Brito was indeed effusive in his praise of A-B's marketing and emphatic in his vow not to tamper with what's worked so well over time. "We intend to continue to support the marketing spend levels," he said.

But those words came as cold comfort to some other A-B agency executives, who said they simply don't see how InBev's philosophy of zero-based budgeting can mesh with A-B's free-spending approach to brand marketing.

Reluctant to spend
In developing markets, InBev has pushed its brands by cutting prices and growing distribution. In the mature U.K. market, however, where it took over leading brand Stella Artois in 2005, it at first cut media spending in half and then quickly restored it after sales struggled.

InBev has promised to cut $1.5 billion in costs from A-B during its first three years running the company. And Mr. Brito on July 14 provided details on more than $1 billion in cutting opportunities that didn't appear to involve marketing. But that didn't satisfy some. "I think he's full of it," said one top executive of a longtime A-B shop. "He'll say one thing and do another."

The executive said he expected his shop's fees to be cut, although he didn't fear losing the business altogether as a result of the ownership change.

One change he anticipates: having to research ad concepts before shooting them. In the past, A-B has commissioned production on more ads than it may have needed, and it took the finished products into focus groups to decide which ads to run.

That approach has been credited with aiding the brewer's dominance in the USA Today Super Bowl Ad Meter, which scored ads in a manner very similar to how A-B tests them, and it was a financial boon to its agencies.

Debt obligations loom
"InBev may be more disciplined in that regard," said the executive. "All we know for sure is that the debt has to get paid down and that things are going to get cut quickly."

Beyond DDB, A-B's agencies include TBWA/Chiat/Day, Goodby Silverstein & Partners, Euro RSCG, LatinWorks, Cannonball and a number of smaller shops.
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