DraftFCB Saw Writing on the Wall in SC Johnson Review

What Began as Confidence in Bid to Remain Incumbent Soon Turned Into Uncertainty

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Nearly eight months ago, when news came down that SC Johnson would launch a global review of all its marketing accounts, DraftFCB, lead marketing agency on the account, felt confident it would retain the business. It had deep ties within the client, a 58-year history and had built a global network of offices around the world, some just to service SCJ.

But by the time the contending agencies made their final pitches in early June, in what were said to be five- to six-hour-long presentations, that optimism had waned.

By late June, at adland's annual Cannes confab in the south of France, it became clear DraftFCB was far from a front-runner in the review. Talk swirled about Ogilvy and EnergyBBDO, both of whom had fruitful meetings with the SCJ execs. And DraftFCB Executive Chairman Howard Draft apparently even told executives both inside and outside his agency that there was no way DraftFCB would be able to walk away from the pitch without its SCJ business taking a hit.

Some people familiar with the situation point to SCJ exec Fisk Johnson's absence in the DraftFCB presentation as telling -- a move that struck some as a sign SCJ was not taking DraftFCB seriously as a contender. Other people familiar with the matter said that Mr. Johnson's absence wasn't a sign of anything.

But DraftFCB's Chicago office seemed to have made plans in the event of the SCJ loss. In a memo to Chicago staffers dated July 28, Chicago President Michael Fassnacht said: "With SCJ moving elsewhere, we will naturally be taking a close look at our staffing needs going forward. We closed many open jobs several months ago in the event that the SCJ decision did not go our way, and that should lessen the impact to a degree. We recognize that times like this are never easy, and the rest of our leadership and I are committed to making any staffing adjustments as swiftly as possible and keeping you apprised of future opportunities.

Mark Pacchini, the global head of the SCJ account at DraftFCB, said in a memo to the SCJ team on the same date: "And even with all the emotions that come with a pitch, you quickly realized that a 58-year relationship buys you (correctly so) little more than some brand knowledge in today's highly competitive global marketplace."

As soon as SCJ sent out a statement confirming it was done with DraftFCB, the agency had its own release ready, to remind people of the clients it continues to work with around the world (including Beiersdorf, Hewlett-Packard and Kraft) and attempting to minimize the blow dealt by the loss.

"It's important to keep this situation in perspective," CEO Laurence Boschetto said in the statement. "Our organization has grown significantly since our 2006 merger, and we've consistently been among the top-performing networks for IPG. That growth has allowed us to substantially diversify our revenue base, making SCJ an increasingly smaller part of our global business over the past few years."

While that 's true, it's obvious to anyone in adland that for any agency, a loss of this magnitude will spur employee layoffs and closures of offices in global markets that had been set up to serve the multinational client. It's also an emotional scar -- especially after enjoying one of the longest-running relationships with a client in the industry.

Just how many staffers will lose their jobs, and how many global offices could be shuttered, remains to be seen, but given the magnitude and scope of the account, hundreds of layoffs are likely. Spokesman Wally Petersen said of potential layoffs: "We are still sorting through the staffing implications for those offices where we handle SCJ. We will be doing all we can to find suitable positions for as many of the affected staff as possible, making any necessary adjustments with caring and dignity."

The agency has been dealing with several account changes in the last couple years. Various Kraft brands including A1 Steak Sauce, Bull's Eye barbecue sauce, Lunchables, Chips Ahoy, Cool Whip, Planter's, Jell-O and Macaroni & Cheese, have shifted away from DraftFCB. But the agency does still work on one of Kraft's largest brands, Oreo, out of the New York office and DraftFCB retains Kraft business outside the U.S. The agency also lost TV creative for State Farm, which went back to DDB after it left the agency for Draft. In April, DraftFCB lost the Homewood Suites hotel business after nearly 10 years.

DraftFCB has managed to mitigate some of that by picking up wins like Nestle's Tombstone pizza brand; digital duties for Taco Bell, which returned to DraftFCB after a stint at R/GA; Petco; Kikkoman; Valspar and global work for Beiersdorf. DraftFCB is also the lead agency for the Kmart brand, though the apparel and home businesses recently shifted to Petersen Milla Hooks recently; and still works with Yum Brands' KFC and Taco Bell. It also claims Coca-Cola's shopper marketing and Sony's retail and shopper accounts as key wins.

As for revenue, one executive said that globally SCJ accounts for an estimated $60 million, and an estimated $20 to $25 million for the Chicago office. Ad Age 's DataCenter estimated DraftFCB's global revenue for 2010 at $1.336 billion.

Losing SCJ would be a drag on parent company Interpublic, though not much more than an estimated 1% or 2% of IPG's worldwide revenue which was $6.532 billion in 2010. Interpublic said it would not be material on 2011 financial results. And despite being a huge account for DraftFCB, SCJ is not a top five client in the Interpublic roster. GM, J&J, Microsoft, Unilever and Verizon make up Interpublic's top five.

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