Ad shops dodge P&G cuts

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Procter & Gamble Co. is expanding a program reducing relationships with suppliers of services such as promotion and package design to a core few, but ad agencies are escaping the ax.

Robert Wehling, senior VP-advertising, confirmed increased consolidation under the Core Supplier Program, noting: "We're concentrating on fewer suppliers. By collaborating more closely, we're able to . . . get better results at lower costs. However, this does not apply to ad agencies."

$5 BILLION QUESTION

For months, P&G agencies felt a consolidation was near; as recently as last summer, Mr. Wehling appeared to leave that option open for P&G, which spends more than $5 billion a year on marketing.

The expansion of the core supplier program comes as P&G pushes Marketing Breakthrough 2000, a plan meant to cut costs and boost effectiveness so P&G can double unit volume and hit $50 billion in sales by 2000.

In a June 1995 memo on MB2000, Mr. Wehling wrote: "We can't afford to continue spending about a quarter of net sales on marketing support. . . . It is not a project to reduce absolute market support spending. There will be year-to-year growth in spending."

The memo resulted in speculation P&G is chopping ad budgets.

P&G's core agencies include Leo Burnett Co. and Tatham Euro RSCG, Chicago; N.W. Ayer & Partners, D'Arcy Masius Benton & Bowles, Grey Advertising, Lotas Minard Patton McIver and Wells Rich Greene BDDP, all New York.

DEFENDS AGENCY NEEDS

"If we are to grow as rapidly as we hope, we will need all agency resources," Mr. Wehling said.

In the memo, he emphasized commercial production cost savings and expertise in non-TV media, a recommendation that coincides with an increased use of print in the U.S.

P&G denied there was any link between MB2000 and recent TV price negotiations in Europe, where everyday low pricing is being expanded. P&G next month will begin a campaign touting the strategy in Germany.

Copyright February 1996 Crain Communications Inc.

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