Advertising world has to learn the rules of conflict resolution

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Advertising age's Viewpoint page last week roundly criticized Interpublic Group of Cos. for working with both PepsiCo and Coca-Cola Co., and it exhorted Coke executives to force Interpublic to resign its Pepsi brands-although Coke was then to sweeten this bitter pill by handing Interpublic more business as a reward.

I take issue with that view

Until you read the headline on the editorial, "Interpublic's Pepsi challenge," you might not have known that Interpublic worked for both marketing giants. Obvi-ously, the Interpublic subsidiary McCann-Erickson Worldwide has a long and (in)famous association with Coke.

But Pepsi?

The approximately $119 million worth of PepsiCo business that Interpublic now holds came to it through PepsiCo's acquisition this summer of Quaker Oats Co. (and Quaker's market-leading Gatorade sports drink) and Interpublic's acquisition of agency holding company True North Communications earlier this year.

True North's Foote, Cone & Belding agency network, now part of Interpublic's FCB Group, not only handles Gatorade but also two other PepsiCo-owned market leaders, Aquafina bottled water and Tropicana refrigerated orange juice.

It also happens that no Interpublic-owned company currently handles any work for the three Coca-Cola-owned brands-Powerade sports drink, Dasani bottled water and Minute Maid orange juice-that compete directly with the PepsiCo bands

In one case, then, it was the client that caused the conflict; in the other, the agency holding company was responsible. In both, however, acquisition was the cause.

The march of consolidation is inexorable.

Today, previously bitter marketplace rivals can come together to form the likes of Daimler-Chrysler. Procter & Gamble Co. and Coca-Cola Co. can link together on joint marketing initiatives, and the likes of Sega, Apple Computer and Motorola seek to partner with erstwhile rivals to survive in the face of soaring development costs and falling sales.

The old rules no longer apply. The world is now too big, competition too cutthroat and the pace of technological change too fast for any corporation to believe it can go it entirely alone. Flexibility and partnership are the new buzzwords, with expertise and learning prized above competition.

This is taking place everywhere other than advertising. It is not just agency clients that are consolidating. Law firms, accountants and banks are, too. But it appears the issue of client conflict is an irrelevance in the development of these professions into major global businesses.

Conflict-that old chestnut. But if the issue is not addressed by the global ad industry, it will become its largest single impediment to growth.

Ad Age Global reports this month that, for the first seven months of this year, the average number of global and regional creative accounts that changed hands was 50% down year on year.

So, organic growth is simply not there to be had-not at a rate that will satisfy the advertising agency holding companies' real bosses on Wall Street, in the City and La Bourse.

How else, then, can publicly owned holding companies grow if not through acquisition?

Brendan Ryan, the American Association of Advertising Agencies chairman, addressed conflict during his inaugural speech in Naples, Fla., earlier this year. Ironically, it is Ryan who finds himself at the heart of this Coke-Pepsi issue as chairman-CEO of Interpublic's FCB Group.

We can be sure Ryan has already spent many hours trying to find a way that enables Interpublic to keep both these clients. After all, rival clients today do not seem to have such a problem sharing the roster of mega media-buying entities.

We should all hope Ryan succeeds. If agencies find their growth increasingly impeded by the complexity of global consolidation, clients surely do not want to cut themselves off from the best possible talent and proven expertise.

Surely it is time for a new, more realistic approach to conflict on both sides.

Stefano Hatfield is editorial director of Ad Age Global and Creativity magazines.

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