DANONE POSES CONFLICT ISSUE FOR KRAFT SHOP Y&R

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Y&R Advertising will have less than a week to bask in its $250 million to $300 million win of Danone Group's global dairy business before it will have to answer conflict questions posed by longtime client Kraft Foods.

In the latest example of how globalization is weaving an ever-more complicated conflict web, Y&R's Danone business might well be perceived as a clash by Kraft when the marketer meets with Y&R this week.

There are two reasons: First, Danone's U.S. new-product efforts have focused on positioning its yogurts as desserts with companion dipping sauces and flavors like cheesecake. That broadly competes with Kraft's Jell-O puddings and cheesecake desserts handled in the U.S. by Y&R. Second, Danone plans to bring its European pudding line to the U.S.

STILL TALKING TO Y&R

Although a Y&R spokesman said there's no conflict, a Kraft executive said: "We are still talking with Y&R. We are aware of the situation and just don't know at this point how it will be resolved. We will have to learn more about this pudding assignment and we want to hear it from Y&R."

He said that a third potential conflict -- the fact Young & Rubicam subsidiary Lord Group handles Kraft's Breyer's yogurt -- isn't a concern because "that's a distinct enough agency to make us feel comfortable."

Agency executives are betting Kraft also will look the other way at the larger pudding conflict.

"The world has become more diverse and geography more confusing, and one of the results seems to be a loosening of conflict policies," said Abe Jones, managing director at Admedia Partners, New York. "It's not as tough as it used to be; not because advertisers are any less concerned, but because they are more realistic. "

Danone's review also included BDDP, Paris, and Grey Advertising, New York, and Saatchi & Saatchi.

`COHESIVE WORLDWIDE IMAGE'

Danone said "the move is the first stage in the group's drive to strengthen the Danone brand and create a cohesive worldwide image for Danone." But it has not said whether that will involve a global review of its bottled water business, handled in the U.S. by Messner Vetere Berger McNamee Schmetterer Euro/RSCG, New York.

"For the moment we are only talking about dairy products," said a spokeswoman in Paris, who declined to elaborate further.

Clay Timon, chairman of Young & Rubicam's Landor Associates, San Francisco, which already counted Danone as a client, said its "drive is to move the corporate brand to worldwide awareness. They want to stand for healthy, wholesome foods. . . . They very much have a desire to be as globally known as Nestle."

The intense focus on globalization hasn't made life easy for Grey, which had handled the U.S. yogurt business. Danone U.S. President Antonio Spagnolo joined less than a year ago and it currently has no VP-marketing here, after having gone through two executives in the last three years.

TESTAMENT TO GEORGESCU

Burt Flickinger, consultant with Reach Marketing, said the win for Y&R is testament to Chairman-CEO Peter Georgescu's strategy to reach out to current U.S. clients and expand the relationship globally.

That earlier paid off with Citicorp, which gave Y&R its $850 million global consolidation last year. Also, Y&R won United Airlines' international ad business.

Privately, however, rival agency executives maintain price is behind Y&R's new-business streak.

"Y&R has been underpricing and undercutting itself to get the new business," said an agency executive who asked not to be identified.

Executives at competing shops said the agency is accepting commissions as low as 5%.

Y&R wouldn't comment on that. But an executive, speaking on the condition of anonymity, said that the agency makes up for lower commissions with volume, charging less on a percentage basis.

ANOTHER BLOW FOR GREY

The move is yet another big blow for Grey. Last year, it lost the $80 million Red Lobster business and recently its California-based G2 unit learned that Mitsubishi Motor Sales of America was reviewing its $75 million contract. G2 also lost a pitch for the $50 million Mitsubishi Galant relaunch.

The agency also was dropped from Kraft's roster a few months ago, losing some $100 million in billings.

Contributing: Laura Petrecca, Mercedes M. Cardona

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