FCB tries to regroup

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Life under the wing of the world's largest agency holding company has proved a mixed blessing for Foote, Cone & Belding Worldwide.

After FCB lost Chrysler Group's $800 million account last November, its parent True North Communi-cations was bought by Interpublic Group of Cos. One month after that deal closed, FCB in July lost AT&T Wireless' $400 million account to WPP Group's Ogilvy & Mather Worldwide, New York. Late last month, the agency learned PepsiCo was moving $350 million in PepsiCo and Quaker Oats Co. business to Omnicom Group (see related story, P. 1), while Blue Cross and Blue Shield Association of Illinois relieved FCB of a $15 million account.

That adds up to more than $1.5 billion in losses in 11 months, and FCB is trying to stave off another loss as it pitches the $70 million Boeing Co. review. FCB, Seattle, had the account, but the Chicago office is now defending since Boeing moved its headquarters to the Windy City.


While the losses stung, they were at least partially set off by victories. FCB won pitches for Samsung Electronics' global account, Kraft Foods' Jell-O and General Foods International Coffees, Circuit City Stores, New Zealand Dairy and several others in the last year, netting the company more than $1 billion in new business. Samsung, at $400 million, is now FCB's largest account.

FCB is the fourth-largest agency in the U.S. with gross income of $502.2 million in 2000, according to Advertising Age rankings.

In assessing its performance in the last year, a key question has emerged: was FCB an unwitting accomplice in its own losses, or was the 128-year-old shop the victim of circumstance and client whims?

Two former FCB agency executives familiar with the agency's inner workings make the same claim: In trying to facilitate a merger of True North with another holding company, FCB Chairman-CEO Brendan Ryan allowed basic client service and management to slip.

"There had been some real good senior-level relationships there that just fell by the wayside," said one of the executives. "Brendan was concerned-and there's certainly some merit to his concern-about a merger."

A fired-up Mr. Ryan replied: "That's total bull. We did not lose Chrysler, and we did not lose Quaker. Those accounts were essentially purchased by Omnicom."

"The contract we got on Quaker is the same contract FCB had," said an Omnicom spokeswoman, who declined further comment. She did not address the Chrysler account, in which Omnicom slashed its fees to win the consolidated business.

FCB has proved resilient.

"Yes, they were three huge losses," said Mr. Ryan of Chrysler, AT&T Wireless and PepsiCo. "But if you're not resilient you don't belong in this business."

"I think some of our business dissolved not because of some endemic problem at FCB, but because of client considerations that were part of it," said Jeff Tarakajian, president of FCB, New York. "We wouldn't be refilling the pipeline as rapidly as we are if there were a problem here."

VEXING losses

FCB lost out on Chrysler, its largest account, in a shootout with another Chrysler shop, Omnicom's BBDO Worldwide, when the carmaker decided to consolidate its creative and media. Just two days before DaimlerChrysler's Chrysler called for the review, True North turned down an acquisition overture from Omnicom. In the wake of the Chrysler loss, True North agreed to merge with Interpublic, creating the world's largest holding company in June.

When the review began on AT&T Wireless, a client of FCB in San Francisco, FCB defended the account with a new team in New York. It came in second, losing to Ogilvy.

The most vexing loss, though, may be FCB's PepsiCo assignments, given the strong relationship FCB, Chicago, had as it helped build three category-leading beverages. Interpublic, with longstanding ties to Coca-Cola Co., found itself serving rival PepsiCo after the True North deal and PepsiCo's August purchase of Quaker Oats Co.

Mr. Ryan labored last spring to put PepsiCo at ease. "Back in March, when the Interpublic [acquisition] became known, we were working together with the people from Quaker in particular, worked hard to have top Pepsi management to agree to this arrangement," he said. "That agreement was reached. There was a clear agreement between Quaker management, Pepsi, FCB that this would continue. ... Nothing in the intervening time on the part of FCB or IPG went against that agreement."

A Coca-Cola spokesman in August, however, said Coca-Cola had had "conversations" with Interpublic regarding conflicts and that "we think they will take appropriate action" (AA, Aug. 6).

Interpublic's efforts to manage two masters didn't last long. And it was PepsiCo that pulled the plug: The company Sept. 19 informed Mr. Ryan it was yanking $350 million in business-PepsiCo's Aquafina and Tropicana, Quaker's Gatorade and selected other Quaker products-from FCB. "The phone call to me ... was a total surprise," Mr. Ryan said. "It really was. It was not presented as a discussable issue."


"The agency business is full of raw deals," said Abe Jones, an industry analyst with AdMedia Partners in New York. "Foote Cone had been in an unstable environment for a long time.

"True North," he added, "was going through endless negotiations with various suitors and it's hard to keep clients universally happy."

Observers wonder if other FCB clients will be affected by FCB's tumult. Agency executives familiar with the fast-food business said Tricon Global Restaurants' Taco Bell, the account with nine lives, appears to be safe for now. Ailing Compaq Computer Corp. was FCB's second-largest account at $370 million, but it has significantly been pared back, according to an executive familiar with the business. Industry executives note that Compaq, which is attempting to complete a sale to Hewlett-Packard Co., has gone through three agencies in the last four years.

AT&T Business Services and AT&T Consumer are both happy with FCB, but with spin-offs expected at AT&T Corp., agency executives expect the divisions to leave the agency as their wireless sibling did.

Losses have been tempered by FCB's ability to win new accounts.

"What happens from here on in seems to be a question of Foote Cone being able to maintain its own identity and resources in a highly pressured environment," said AdMedia's Mr. Jones. "The Chrysler thing became a question of how much they were willing to pay for it. AT&T (Wireless) became an account that had to find its own agency. In regards to Pepsi and Coke, there had to be a calculation (after the merger) that it might be lost. It's to Brendan's credit that he was able to win new business during that time. They've got chances now."

Contributing: Alice Z. Cuneo, Tobi Elkin and Kate MacArthur

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