4As Management 2006

As David bests Goliath on Pfizer consolidated ad work, Carat wins Media Agency of the Year

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Carat USA, Advertising Age`s U.S. Media Agency of the Year for 2001, faced a do or die situation a scant 13 months ago.

The shop had been struggling to win the consolidated Pfizer/Warner-Lambert account, a piece of business estimated at $700 million in billings. The opposition was formidable-MindShare, a media mammoth owned by Martin Sorrell's WPP Group.

A ruthless competitor who succeeded in a hostile takeover of one agency, Ogilvy & Mather Worldwide, and later the conquest of Young & Rubicam, Mr. Sorrell had just hired as MindShare's CEO Irwin Gotlieb, the head of another industry leader, Bcom3 Group's MediaVest Worldwide. Mr. Gotlieb was a media agency legend and one of the chief architects of the modern media-agency giant, having overseen the unbundling of MediaVest from Bcom3 Group's D'Arcy Masius Benton & Bowles. MindShare already handled the Warner-Lambert side of the business, estimated at $450 million.

The client was said to be adamantly opposed to switching agencies. Messrs. Gotlieb and Sorrell were the Glimmer Twins-loaded, hard rocking and virtually unstoppable.

Carat, an independent media upstart in the U.S., held the Pfizer side of the account. The agency was led by loquacious babyface CEO David Verklin, 46, whose comparably modest resume included a prior stint as managing director of a respected San Francisco creative shop, Hal Riney & Partners.

Where the consolidated account would land was anyone's guess.

HIGH STAKES

In 2000, Pfizer had acquired Warner-Lambert Co. and merged the two companies. By year's end, the combined entity launched a review to consolidate its advertising at one agency. Arguably, the stakes were higher for Carat than for MindShare, which already had a substantial roster of blue-chip clients including Unilever, IBM Corp. and Ford Motor Co. If MindShare lost Warner-Lambert, it could survive.

Carat's client list, on the other hand, was pretty slim. Besides Pfizer, estimated at $250 million in billings, Carat had Viacom's CBS, Midas and RadioShack Corp. The shop had entered the U.S. market after parent Aegis Group, London, acquired a clutch of small media businesses starting with Media Buying Services International, New York, in 1996. One of the first Carat hires was not Mr. Verklin but a senior VP-media director at D'Arcy, New York in charge of a 46-person planning group for Coca-Cola Co. He was Charlie Rutman, and he was instrumental in Carat's first big win in 1998-Pfizer business.

It was said at the time that if Carat lost Pfizer, Aegis' U.S. operation would fold.

The tug of war dragged on.

"This was an opportunity to ... get the monkey off our back about winning against big competition," says Mr. Rutman.

The review consumed the agency from July 2000 into the following year. The Carat pitch emphasized the agency's strategic thinking and resources, the agency's "communications architecture approach," in Mr. Verklin's words, over its buying clout.

Last February, a decision was finally made. The result: Mr. Verklin and his operation slew Goliath, besting MindShare for the business.

POSITION SOLIDIFIED

This dramatic make-or-break win is one of the core reasons Carat is Advertising Age`s Media Agency of the Year. Pfizer solidified the shop's position in the U.S., and enabled it to move forward and conquer AOL Time Warner's New Line Cinema account (estimated at $200 million). After winning a half-dozen other accounts, last month Carat scored another coup when it won the $450 million media business for Hyundai Motor America and Kia Motors America. Carat replaced incumbent Bates Worldwide, owned by Cordiant Communications Group.

To pull off this impressive run, Carat USA relied on help from within Carat North America, say Messrs. Verklin and Rutman. The division is composed of Carat USA; Carat Freeman, a high-tech and business-to-business agency; Carat Canada; MMA Carat; Outdoor Vision; and Carat Interactive.

"When we pitch business," says Mr. Verklin, "some or all of these other business units get involved."

According to Mr. Verklin, the agency won five out of six formal pitches it entered last year, losing only in the Groupe Danone review to Grey Global Group's MediaCom. It didn't lose a single client in 2001. Carat's new-business wins in 2001 totaled about $1 billion. Carat USA's total billings are about $2.6 billion, while North American billings are $3.7 billion.

PFIZER, PHILIPS OFFSET CUTS

Carat North America did have layoffs in 2001. About 30 employees were cut, including some 30 from Carat Freeman as high-tech imploded. However, these were offset by about 120 new employees hired at Carat USA, on a base of 450, to handle the new Pfizer, Adidas and Philips accounts. One of those new hires was John Keanna, formerly VP-controller at Zenith Media, who's now Carat USA's chief financial officer. And Mr. Rutman was elevated from exec VP-managing director of Carat New York to president of Carat USA.

Besides the agency's win of the Pfizer consolidation, the other big news for Carat USA in 2001 was Philips. The account was won on a global basis by Carat International and Carat USA, and though the U.S. portion is small-last year the electronics marketer spent only $50 million on measured media from January to October, according to Taylor Nelson Sofres' CMR-the marketer not only handed the agency the account, it announced Carat would be the lead agency for the brand. That reverses a long-held advertising tradition in which clients have relied on creative agencies to lead brand strategies. Philips' creative accounts are handled by Omnicom Group's DDB Worldwide, which has consumer electronics and corporate, while D'Arcy has lighting and Norelco.

"We've always thought that media is more than a trucking business that trucks creative messages to its destination. That was the old definition of media," Mr. Verklin says. "The media side of the business has been reshaped in the last 30 months."

"Carat established a solid client base with Pfizer after a grueling [agency of record] review," says Donna Campanella, director, team leader-media at Pfizer. Now it is "winning blue-chip clients across the board in different industries. I have to say we are in fine company."

Though Carat is a force to be reckoned with, will it ever become a household name?

"When Charlie and I first joined this company, people pronounced it ka-rot and kaa-raaa," Mr. Verklin recalls.

What is the correct pronunciation?

"Cara," says Mr. Verklin, with a prideful grin.

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