Incumbent BBDO Pulls Out of Pizza Hut Review

Chain Says Five Finalists Remain in $200 Million Bid

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CHICAGO (AdAge.com) -- Omnicom Group's BBDO, Pizza Hut's agency of 22 years, is bowing out of the marketer's $200 million review, leaving the field to what the chain identified as five finalists: Omnicom's Merkley & Partners; MDC Partners' Kirshenbaum Bond Senecal & Partners; Publicis Groupe's Saatchi & Saatchi; Interpublic Group of Cos.' Martin Agency and a team comprised of talent agency William Morris Endeavor and Momentum, a unit of Interpublic's McCann WorldGroup.

"Today BBDO made the decision to withdraw from the agency selection process," said Brian Niccol, Pizza Hut's chief marketing officer. "After 20 years of partnership, we are grateful for the work BBDO has done for us, which is among the best in the industry."

When Pizza Hut earlier this week confirmed it was conducting a creative advertising search, it said the chain is seeking an agency that can bring "innovative, consumer-insight led advertising." At the time, the chain said BBDO would defend the business.

Executives familiar with the matter said earlier this week that Pizza Hut had called reviews multiple times within the last decade, in conjunction with dipping sales, and never moved the business. There was rampant skepticism that it would shift this time, but then the agency subsequently withdrew from the review.

"After careful consideration, BBDO has decided not to participate in the U.S. Pizza Hut review," the agency said in a statement. "For more than two decades, BBDO has partnered with Pizza Hut to help create some of the most famous and effective advertising in the category. From the record-setting successes of the Big New Yorker and Stuffed Crust Pizza, to last year's launch of Tuscani Pastas, we are proud of helping to make Pizza Hut what it is today: the leading brand in its category. We wish them the best of luck in their future efforts."

The marketer, which has hired consultant Lee Ann Morgan & Partners to oversee the search, worked quickly, reaching out to major global networks and agencies. "We have a solid lineup of five agencies that have the expertise, creativity and consumer-insights-driven strategy that we are seeking as a company," Mr. Niccol said. "Over the next few weeks, we will be scheduling a briefing and issuing an assignment to the competitive agencies. We expect to complete the process and select a new agency by the end of the year. We are looking forward to a fresh perspective to our advertising."

Possible account conflicts
The list of shops set to pitch Pizza Hut's account raises questions of potential account conflicts, as Merkley has long handled advertising for Arby's. Representatives for the shops did not immediately return calls for comment. Either way, it's clear that Pizza Hut's criteria for a new agency includes fast-food experience. Saatchi & Saatchi and Kirshenbaum Bond & Senecal are past agencies for Wendy's.

The company will make its final decision through a panel, whose members include Mr. Niccol, as well as key stakeholders from Yum Brands, Pizza Hut and the franchise community.

Pizza Hut spent $239 million in U.S. measured media during 2008, a 20% jump over its budget of $199 million in 2007, according to TNS Media Intelligence. The boost in ad spending came as the company revamped its menu, focusing on items such as pasta and wings.

But the chain slipped within the Yum Brands portfolio last quarter, with a staggering 8% drop in same-store sales. Pizza Hut trumpeted its successful launch of Tuscani pastas last year, setting a high bar in a tough year for the entire restaurant industry. The chain has subsequently suffered as consumers cook more meals for themselves. Pizza Hut is also lagging competitors Domino's and Papa John's. Both chains have posted close to flat same-store sales.

"We're really struggling by growth in this more-discretionary, higher-ticket dinner occasion," Yum CEO David Novak said of Pizza Hut during the company's second-quarter earnings call. "This challenge is magnified as we lap strong results in the launch of pasta last year." The decision to move creative makes it unlikely that Pizza Hut has reversed the sales trend since, as parent Yum reports third-quarter results on Tuesday.

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