Rare Case of a Second Office Going Gangbusters: Deutsch L.A. Is Hot

Better Tactics, Local Hires, Focus on New Business Raise Firm out of Slump

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NEW YORK (AdAge.com) -- In the fall of 1996, a procession of limousines carrying Donny Deutsch and the equivalent of a small production company's worth of equipment proceeded into Hollywood to pitch what could have been the anchor for his fledgling Los Angeles shop, the $125 million Acura account. The display of New York-style flash put off the down-to-earth Acura marketing team, which ended up giving the account to an agency whose pitch consisted of some scribbling on a marker board.
Eric Hirshberg
Eric Hirshberg

The lesson wasn't lost on Mr. Deutsch. In a move that appears to have reconciled east with west, he hired two West Coast executives, Mike Sheldon and Eric Hirshberg, now agency co-presidents who have raised the shop to new heights. Deutsch LA, now with over $1 billion in billings, has won the last three of its competitive pitches, most recently picking up the estimated $45 million Dr Pepper account that had been at Y&R for more than 40 years.

Some executives say the recent new-business surge has helped the West Coast operation overshadow Deutsch's New York headquarters. However, in an e-mail, Deutsch CEO Linda Sawyer said the agency doesn't look at the offices separately and that the two share some departments. She wrote: "2007 was a very robust and balanced year, new business-wise, for both offices. Rounding up, each office pulled in over $400 million in new billings."

L.A. owns the buzz
Still, the fact that it's even worth talking about is a testament to how far Messrs. Sheldon and Hirshberg have moved the needle at what could easily be a lifeless L.A. outpost of an intensely New York company. Winning accounts such as General Motors' Saturn and Sony PlayStation have helped power Deutsch out a devastating period a couple years ago when it suffered a string of major client losses and there was speculation about its demise. To be sure, New York has also pitched in, with recent wins that include USAA, Tylenol's media-planning business, Olympus, Under Armour and Vineyard Vines. Nevertheless, L.A. owns the buzz.
Mike Sheldon
Mike Sheldon

"They have worked to perfect the agency story," said Catherine Bension, president and CEO, Select Resources International, consultant for the PlayStation pitch which Deutsch won in December. "They had the strongest creative, smartest strategic thinking and added value in areas the client didn't ask for," she said. But the key, she said, came at the end of the pitch process. "There is an art to closing, and they are good at it," she said. The win showed, she said, that Deutsch Los Angeles is becoming a destination shop. Another consultant remarked that the shop fields eight or nine of "the smartest people you'll meet."

"It doesn't matter whose nameplate is on the door; it's the people who work on the business," said Jon Gieselman, senior VP, advertising, DirecTV. Deutsch has been able to help the marketer "respond on a national level and fight on a local level." The results have been that DirecTV last year signed up 10 times more customers than all cable companies combined, he said.

The Deutsch strategy also involves the agency's focus on new business with a dedicated new-business department. "The agency business is a leaky bucket," Mr. Sheldon said. "You have to be able to sell and attract new business or you can really languish out here."

The shop also has a very integrated component. For Tesco's U.S. launch of its Fresh & Easy stores, for example, it worked upstream, even designing products on the shelves.

What's in Store for Dr Pepper?

Dr Pepper's shift to Deutsch, Los Angeles, could be the first of several shakeups as Cadbury Schweppes spins off its Americas Beverages unit.

Industry experts said WPP Group's Y&R, San Francisco, could stand to lose the remainder of the beverage portfolio. "I wouldn't rule out other changes going forward," said Tom Pirko, president of BevMark. "When you look at the portfolio, it doesn't jump up and sing. Take away Dr Pepper and what is left? We'll see what [Y&R] can do with it."

When asked about the prospect of further shifts, Greg Artkop, a spokesman for Dr Pepper, said, "That's pure speculation. Y&R, San Francisco, will continue to lead the advertising for the Diet Dr Pepper, Sunkist, 7UP, A&W and Canada Dry brands, and we look forward to our continued partnership."

Thus far, Americas Beverages has moved its $150 million media account from WPP Group's Mediaedge:cia to Initiative. That January shift, paired with last week's announcement, more closely ties the country's third-largest beverage business with Interpublic.

Another question is whether Dr Pepper, handled by Y&R since 1969, will change direction under Deutsch. "Overall, the carbonated-soft-drink business has been declining over the past several years. So revisiting their creative, revisiting their strategy to at least reverse some of that to gain share in the market place probably makes a lot of sense," said Joe Pawlak, VP at Technomic.

In recent years, Dr Pepper has performed relatively well against competitors, ranking sixth in market share last year according to Beverage Digest. In 2007, the brand increased its share by 0.1 points, while category leaders Coke and Pepsi declined by 0.1 and 0.3 points respectively. Share for other flavored soft drinks were flat year over year. -- Natalie Zmuda