Bcom3 Group's Starcom MediaVest, Chicago and New York, prevailed in the media review against WPP Group's MindShare, True North Communications' TN Media, both New York, and Omnicom's OMD, Toronto.
With the win, Starcom MediaVest claims almost $6 billion in new billings this year. The agency estimated its billings at $16 billion in 1999 and had few losses this year. MediaVest already did the bulk of Kraft's buying; MindShare formerly had the lion's share of Kraft's media planning.
In the creative shift, the nation's largest food marketer moved an estimated $100 million in work. Kraft now has most of its U.S. and Canadian business set at three roster shops: True North's FCB Worldwide, Chicago and New York and WPP's Ogilvy & Mather Worldwide, New York, and J. Walter Thompson USA, Chicago.
Kraft also is considering a new tiered compensation scheme for creative. Under discussion is a commission paid to agencies based on a percentage of advertising spending over $5 million per product. If less than $5 million is spent on any brand, the agency will receive a flat fee. Also, according to an executive familiar with the scheme, Kraft is considering cutting in half advertising on any brand on which it spends less than $2 million, using half of that ad spending for redesigned packaging and in-store promotions.
"They hope this is more cost effective," said the executive. "By putting more money on the shelf, in the packaging, they save the other $1 million."
Lance Friedmann, Kraft senior VP-consumer insights and communication, declined to comment on compensation. But he said the agency shifts come back to one simple theme critical to building brands today: integrated communications.
RICH MEDIA MIX
"In the old days you could go on TV and reach consumers efficiently, but now it takes a rich mix of TV, print, Internet, direct response and creative media, and having a media AOR gives us tremendous opportunities to do more innovative things," he said. The streamlining of creative agencies will also allow Kraft to more easily navigate the new media landscape, he said.
Starcom MediaVest, Kraft's new North American agency of record, already handles part of sibling Philip Morris USA's $1.1 billion account.
Kraft's media account will be serviced from MediaVest's New York office, with MediaVest Senior VP-Media Director Bill Tucker dedicated to overseeing the business.
Starcom MediaVest was formed after the merger this year of MacManus Group and Leo Group created Bcom3.
In the creative shifts FCB was the big winner, landing an estimated $80 million in business. General Foods International Coffees in the U.S. and Jell-O in Canada moved to FCB from WPP's Y&R Advertising. Kraft pourable dressings in the U.S. and Canada and Velveeta in the U.S. shifted to FCB from Bcom3's Leo Burnett Co.
Ogilvy gets Crystal Light and Balance Bar from Y&R and Post kids cereals in Canada from BBDO.
Y&R's The Lord Group is expected to keep Breyers Yogurt and add Baker's Chocolate and Pectin brands. Burnett keeps Altoids' global creative.
Kraft in recent years has been migrating toward aligning its agencies by division. For example, Mr. Friedmann said that FCB now has responsibility for many of Kraft's meal and dinner-oriented brands, Ogilvy has the majority of hot and cold beverage brands and JWT has most of Kraft's cheese business.
The efforts help to better position the agencies as strategy partners in developing new products and creating broader strategies for the brands, he said.
With the completion last week of Philip Morris Cos.' acquisition of Nabisco Group Holdings, the portfolio of the new $35 billion Kraft Foods extends even further.
"With Nabisco has come the opportunity for greater efficiencies and that's what behind some of this," said Prudential Securities analyst John McMillin.
Although the media and creative realignment does not include the newly acquired Nabisco brands, Kraft will be meeting with Nabisco executives over the next few weeks to determine agency assignments for the brands. JWT and FCB, now two of Kraft's core agencies, have been roster agencies for Nabisco brands.
North Castle Partners, Stamford, Conn., also handles creative while True North has handled media buying and planning. Nabisco spent $187 million in measured media in 1999 and $188 million from January through August of this year, according to Competitive Media Reporting.
Given the moves to consolidate and align the Kraft business, Starcom MediaVest could be in position to pick up Nabisco's media.
Beyond its efforts to fold in Nabisco, Kraft is also gearing up for an initial public offering in early 2001 of roughly 10% to 15% of the newly combined food operations that will in effect make the Philip Morris unit more accountable for its actions on Wall Street. That increased pressure comes at a time of heightened competition in the food industry. The recent wave of mergers and acquisitions has created a handful of super-powerful food marketers, some of which-like the new Unilever Bestfoods-are placing a far stronger emphasis on food businesses for the first time.
"Five companies have disappeared recently, which means that the same amount of attention [on the food industry] will be focused on fewer companies," said Erica Long, analyst with J.P. Morgan Securities. With the industry consolidation, the analyst community had predicted a subsequent consolidation of products and services, among them advertising agency assignments, she said.
The media reorganization of Kraft, in the meantime, will continue in Europe. In October, London-based Kraft Foods International announced it was talking to media agency networks about consolidating its European media business. Kraft invited six agencies to pitch: MindShare, Media Edge, OMD Worldwide, Carat, Zenith and CIA. Kraft Foods International European Union region currently works with 14 different agencies for planning and six for buying.