Leo Burnett has entered a pre-bankruptcy process in Greece, as the Publicis Groupe -owned agency struggles to stay in business in the country and keep clients and staff on board. Amid Greece's economic crisis -- and plummeting ad spending -- Leo Burnett was also caught up in the economic troubles of a local privately owned Greek TV channel called Alter that filed for bankruptcy in May.
According to local agency execs, Alter TV had been pre-selling big blocks of airtime to agencies. When Alter -- one of seven national free-to-air channels in Greece -- found itself struggling to service a debt estimated at half a billion dollars, the company tried to collect money owed by ad agencies.
Leo Burnett Athens last week filed article 99, which Publicis described as the equivalent of Chapter 11 in the U.S. bankruptcy code, to seek protection from its creditors. The agency said in a statement: "We submitted an application in Athens Multi Member Court asking the court to open the conciliation process for the company under Articles 99-106 of the bankruptcy code."
Mathias Emmerich, Paris-based senior VP of Publicis Groupe , has been making trips to Greece to try and sort out the situation. He said that Alter TV had "huge debts and small revenues." He confirmed that three top Leo Burnett execs in Greece -- Chairman Peter Venetis, General Manager Katerina Savva, and Financial Director Gogo Skliva -- have all resigned from their positions on the board of directors, but said they are still working for the company.
"They were worried about their responsibilities and didn't want to participate in discussions about what would happen if we go into bankruptcy," Mr. Emmerich said. "The 99 is a protection and it is also an alert. They preferred not to stay in board-member positions."
When asked whether Leo Burnett would close in Greece, Mr. Emmerich said, "I don't know yet. We are trying to find ways to assess the situation and see what is the next step. It's an unpredictable, complex situation and we are trying our best to understand what's going on. I'll be making repeated visits."
Mr. Emmerich, a former auditor, joined Publicis in 2009 and oversees internal audit and human resources at the group, and is also in charge of communication and sustainable development.
In Greece, the local Leo Burnett office is part of the Publicis network rather than Burnett's own international network, a strategy Publicis Groupe uses in some markets to save on the costs of running completely separate full-service offices for all its owned networks, which include Burnett, Publicis Worldwide and Saatchi & Saatchi.
There is speculation that Leo Burnett Athens' international clients, which include Procter & Gamble, Philip Morris and Kellogg's, will move to Publicis Athens. Mr. Emmerich said, "Some want to stay with us, some don't. We have a relationship with our clients but we don't own them -- they are free to evaluate the situation."
Local clients include the National Bank of Greece and the Greek Lottery.
A Leo Burnett staffer in Athens told Ad Age that a judge would decide in November whether the agency would enter bankruptcy, and said that employees are still working in the office. "This is a process," the local staffer said, "and we don't know where it will end. If clients leave the agency we can't survive."
Advertising spending in Greece fell by 15.2% in 2010 and is expected to plummet by another 23% this year, while Western Europe as a region grows by 3.3%, according to ZenithOptimedia forecasts. Although agency execs didn't want to speculate about which other agencies might follow Leo Burnett into bankruptcy or close down, there's concern about a domino effect given the dire condition of the Greek economy.
Greece's biggest agencies include, in addition to Leo Burnett and Publicis, Bold Ogilvy & Mather, Spot JWT, DDB, BBDO, and local shop Fortune. The country's top advertiser is P&G, with a $64 million budget in 2009, and Vodafone and Unilever are also in the top 5, according to Ad Age 's Top Global Marketers ranking.
James Nass, CEO of Lowe Athens, estimated ad spending has fallen by 30% in the first half of 2011 in Greece, but said he hasn't had to fire any staffers yet.
"The gloom across the board is unprecedented, but we are carrying on and our clients are still active," Mr. Nass said. "We're not sitting around swatting flies, but it's harder to make money and it's harder for our clients to make money."
He said that because TV airtime is inexpensive in Greece, his clients -- Unilever, Sony, PepsiCo and Kia cars, among others -- are continuing to advertise on TV. Greeks were already heavy TV viewers, watching an average of 220 minutes a day, and the economic crisis has kept people in their homes, and in front of their TVs, even more than usual. Online advertising is also keeping Lowe Athens busy.
"Greek consumers are no longer consumers," Mr. Nass said, "they are heads of families, brothers and sisters, trusting only what their families or closest friends say. Our job is to get brands into that tight circle, and make sure they are trusted."
Despite his energetic response to the crisis, Mr. Nass said, "I don't see even a pinprick of light at the end of the tunnel. It's very hard because nothing is being resolved and I don't think we've reached the bottom yet. We are all clutching at the railings, dreading the domino effect, but it's also a thrilling time to be an ad guy -- it's not just about getting clients to buy your creative, it's about getting them to believe that anything you do will have an impact."