A-B Shops May Feel Pinch as InBev Looks to Cut Costs

Agencies Can't Help but Worry, Despite Assurances

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CHICAGO (AdAge.com) -- What will Anheuser-Busch's purchase by InBev mean for its ad agencies? Quite possibly a revenue hit.

Even though A-B's new owner has taken pains to say it will spare the brewer's $1.3 billion budget, it's feared among executives at some of A-B's agencies -- and suspected by many at A-B itself -- that InBev will, at the very least, tighten agency compensation. It's also almost sure to put an end to some traditional A-B marketing practices that have been lucrative for agencies.

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A-B's lead shop, DDB, Chicago, is already hunkering down. President Rick Carpenter held a meeting with his entire shop last week in which he said that some cuts to media and marketing spending were a distinct possibility.

As staffers sipping Budweiser and InBev's Beck's listened in, Mr. Carpenter did his best to spin the sale as an opportunity for the Chicago shop and its siblings in Omnicom-owned DDB's global network.

He said InBev executives have repeatedly expressed admiration for A-B's marketing, and that they intend to bring Budweiser into new markets around the globe. "They want to turn Budweiser into Coke, and that could be good for us," said one executive who was at the meeting, paraphrasing Mr. Carpenter.

Brito 'full of it'
That's cold comfort to executives at some of A-B's domestic shops that don't stand to gain from more spending abroad. Those executives say they're having a hard time meshing InBev's promises to lay off the marketing budget with its corporate mantra of zero-based budgeting. "I think [InBev CEO Carlos Brito] is full of it," said one top executive at a longtime A-B shop. "He'll say one thing and do another."

The executive said he expected his shop's fees to be cut, although he didn't fear losing the business altogether as a result of the ownership change. One reason for that sense of security, he said, is that A-B's VP-creative and global industry development, Robert Lachky, is staying on.

Mr. Lachky manages A-B's agency relationships and has deep ties to many of the shops on its roster, including DDB, where he used to work, and Michelob agency Euro RSCG, where his former boss at DDB Needham, Ron Bess, is North American chairman and a key figure on the account.

Since its 2004 formation in the merger of Brazil's AmBev and Belgium's InterBrew, InBev has behaved inconsistently with regard to its agencies. In the case of Stella Artois, it kept incumbent Lowe Worldwide on the business.

Revolving door
InBev's other global brand, Beck's, has seen agencies come and go in a revolving door. InBev dumped Leo Burnett, the shop it inherited on the brand, for New York boutique Ground Zero in 2006. But that relationship lasted less than a year, and the account wound up shifting to Lowe.

Even if A-B's roster agencies are safe, it's unlikely they'll remain as lucrative as they have been. InBev is expected to push A-B to research ad concepts before shooting spots more than it does now, a change that will certainly hit agencies' bottom lines.

"InBev may be more disciplined in that regard," said the top executive at a longtime A-B shop. "All we know for sure is that the debt has to get paid down and that things are going to get cut quickly."

Beyond DDB and Euro, A-B's agencies include TBWA / Chiat / Day; Goodby, Silverstein & Partners; LatinWorks; Cannonball; Hill Holliday; and Momentum Worldwide, as well as a number of smaller agencies, many of which are located in its home market of St. Louis.
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