Sorrell Says Heinz-Kraft Merger is 'Cost, Not Revenue-Driven'

WPP CEO Also Warns Not to Underestimate the Chinese

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Martin Sorrell
Martin Sorrell Credit: Dario Pignatelli/Bloomberg

WPP CEO Martin Sorrell said that the proposed merger between Heinz and Kraft Foods is "cost-driven, not revenue-driven," and suggested that short-sighted marketers are "focus[ing] on their boots, not on horizons," during a session at Advertising Week Europe in London today.

Mr. Sorrell said, "Growth is tepid and clients don't have pricing power – in the U.K. we are down to zero inflation. In those circumstances, cost is king and efficiency is king. We need to try and get clients to focus on potential growth opportunities."

In answer to a question about his rivalry with Publicis Groupe Chairman-CEO Maurice Lévy, who earlier this week compared Mr. Sorrell to a scorpion, the WPP leader said of his rival, "I think it's becoming an obsession from his point of view and that's probably unhealthy... Last year was a really difficult year for him in the sense that he lost out on a grand vision."

In his wide-ranging remarks, Mr. Sorrell warned the Advertising Week Europe audience never to underestimate the power of Chinese technology companies, including mobile operators Huawei, Xiaomi and OnePlus.

He said, "We think Chinese companies borrow and steal technology," but that this is not true. He said such companies are adapting more quickly than the West to the changes brought about by the internet. "They are leapfrogging straight from traditional to online," he said. "We'd better watch out."

Mr. Sorrell said, "Somewhere a Chinese bureaucrat has a drawer with a list of companies that are strategically important," and that "fortunately" this doesn't currently include foreign agencies.

Speaking about the growth of domestic competitors in China, Mr. Sorrell added, "[They] are starting to get aggressive abroad," using BlueFocus – which last year bought Vision7 in Canada, Fuseproject in the U.S., and London-based network We Are Social -- as an example. "We might see them being much more prominent, so again I would say, 'Watch out'."

The Ad Age DataCenter added Beijing-based BlueFocus Communication Group to its ranking of the world's 50 largest agency companies last year for the first time. BlueFocus ranked No.17, based on 2013 worldwide revenue of $579 million. Last week, BlueFocus announced a 67% jump in 2014 revenue.

Mr. Sorrell pointed out that WPP has two Chinese nationals on the company's board of directors. And WPP companies' growth in China was up 10% in January 2015, and is expected to remain in double digits this year, he said.

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