TBWA & Hakuhodo expand G1

JV helping Nissan ahead of Z launch in China

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GUANGZHOU--Omnicom Group’s TBWA Worldwide and Hakuhodo, Japan’s second-largest ad agency, have strengthened their G1 partnership, a global unit dedicated to Nissan Motor Co., in China, by establishing a 50:50 joint venture in Guangzhou.

“We did encourage it and were thrilled that they raised the idea,” said Steven Wilhite, Nissan’s senior VP, global marketing in Tokyo about the new agency, TBWAHakuhodo China. “It gives us the opportunity to tap into both global networks, gain better access to some really bright people, and the opportunity to build upon some strong account relationships between our own execs and people at the agencies.”

TBWAHakuhodo China’s creation was partly a matter of logistics. Japan's second-biggest automaker moved its creative business in China to G1 after a two-way pitch with Dentsu at the end of last year. Previously, Nissan worked with both Dentsu and G1 in China on a project basis. Nissan’s media buying in China is handled by Omnicom’s OMD.

China JV more efficient
The G1 alliance was created by TBWA and Hakuhodo in Tokyo five years ago to manage Nissan’s global business, and recently produced a high-profile “Shift” campaign to unify the Japanese car company’s global image. Unlike other markets such as Japan and the U.S., where G1 is located within one of the partners’ offices, the China team was split between two offices in different cities, TBWA in Shanghai and Hakuhodo in Guangzhou.

“Putting everyone into one office that was jointly-owned by both companies made sense, it works better and is more efficient. In other markets, many people know G1, but in China, our brand hadn’t developed much awareness, so we created a new company under the name TBWAHakuhodo China,” explained the agency’s CEO, Paul Lee. The Guangzhou office’s 60-strong staff is supported by a servicing department in Beijing.

It also reflects how important the country’s car market has become for all Japanese auto companies, including Nissan, which imports cars and has a joint venture near Guangzhou with the country’s third-largest automaker, Dongfeng Motor Group Co. The JV, producer of models like Teana, Tiida, Bluebird and New Sunny, projects full-year 2005 sales of about 140,000 units, representing a 5% market share.

(Dongfeng, based in Wuhan in central China’s Hubei province, is also a joint venture partner with Japan’s Honda Motor Co. and France's Peugeot Citroen. Overall, Dongfeng controlled 11.9% of China's passenger car market in the first half of this year.)

China "massively important"
Including imports, Nissan’s sales doubled in China in 2005, compared to the previous year, making it the company’s fourth-largest market after the U.S., Japan and Mexico. Through the company’s new three-year “Value-Up” program, Nissan expects China sales to top 500,000 units, allowing China to overtake Mexico by the end of 2008.

“China is massively important for us,” said Mr. Wilhite. “I’m glad we found an excellent local partner in Dongfeng, it’s a very strong production relationship in a market that’s enormously important.”

However, Nissan faces “increasingly fierce competition in all categories from an ever-increasing number of new and refreshed models, rising material costs and continued deep discounting which are squeezing profitability,” said Mr. Lee.

Nissan is gearing up for an aggressive marketing push in 2006. In the first quarter of next year, it will roll out new ads for existing models, namely Teana.

“The theme for Teana will remain consistent but our intent is to update the work and talk about some of the changes that are taking place in the product and keep the brand fresh in people’s eyes. We will increase our communication investment under the banner of the ‘Shift’ campaign,” said Mr. Wilhite.

Nissan also plans to begin importing its Z model into China next summer with significant marketing support.

Higher level of integration
The G1 alliance will continue to oversee Nissan’s advertising in other markets, namely in Europe, but it is possible that the joint venture model developed by TBWA and Hakuhodo.

“It involves a higher level of integration and much more sharing of the business,” said Keith Smith, TBWA’s Hong Kong-based regional chairman, Asia/Pacific, will be extended to other markets in the future “where it makes sense.”

TBWAHakuhodo China, meanwhile, “may go after other clients, especially other Japanese companies, because we have experience on Japanese brands and relationships,” added Mr. Lee.

In the meantime, TBWA and Hakuhodo are investing in their independent operations in China. Hakuhodo established a joint venture with Shanghai Advertising in 1996, called Shanghai Hakuhodo Advertising, also with offices in Beijing and Guangzhou, and in 2003, the Japanese agency took a 25% interest in Shanghai Advertising. Also in 2003, it established Beijing Delphys Hakuhodo in Beijing and in 2004, it set up Guangdong GDAD-Hakuhodo Advertising with Guangdong Advertising.

"With continuing double-digit growth, the Chinese market is extremely important for Hakuhodo," said an agency spokesman in Tokyo, particularly working with Japanese companies "in industries like passenger cars, IT and consumer electronics, which are noticeably taking off in China among the wealthy."

TBWA, the largest Omnicom ad agency division in China, has 130 staff in Shanghai and 33 in Beijing, handling brands such as adidas, Pedigree, Whiskas, Skittles, Starburst, Haagen Dazs, Nivea, Michelin, Pernod Ricard's Chivas Regal and Martell spirits and Shangri-La Hotels.

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