HANGING TOUGH IN RUSSIA: `NO TURNING BACK' FOR MULTINATIONALS, BUT LOCAL AGENCIES ARE SUFFERING

[moscow] The estimated $2 billion Russian ad market is being pummeled by the nation's worsening economic and political crisis, though multinational marketers and agencies insist they won't abandon the country. Many multinationals have made significant financial and time commitments in Russia, which has a smaller economy than the Netherlands, and are not yet ready to bail out. "We are advanced with our plans and there is no turning back for us," said Tore Kristian Bu, Coca-Cola Co.'s director for the Nordic and Baltic countries and Russia. "The crisis is significant, but we believe Russia has the willpower and the means, with the help of G8 partners, to find its way out of this." `OUR COMMITMENT REMAINS' "Russia is a relatively small market in the Unilever sense, but our commitment remains," said Mike Hayes, London-based head of press relations for that marketer, which has a major presence in Russia. However, Vladimir Evstafiev, one of the heads of the Moscow's Maxima advertising group and president of the Russian Association of Advertising Agencies, does not foresee much future growth in Russia's ad market. "All the business generally in Russia was mostly based on foreign investments and this was followed by advertising," he said. "Now there is no new investment and Russian importers and exporters have been practically ruined by the crisis." A DIFFICULT PERIOD "We are aware and prepared that the coming 12 months will be very difficult ones," Bernd Michael, CEO of Grey Middle Europe, said after a recent trip to Moscow. "But despite decreased budgets, we plan to offer our big international clients Procter & Gamble, Smith-Kline Beecham, Canon and B.A.T the same quality service as before." Only 10% of Grey Moscow's business is from local clients. Not all product introductions have been stopped yet, said Johan Hofstra, president of Europe, Middle East and Africa at D'Arcy Masius Benton & Bowles. The agency's main clients in Russia -- Mars Inc., P&G, Coca-Cola, Fiat and B.A.T Industries -- have made long-term commitments to Russia. Caution, however, is the watchword. "The mood on the market is evaluate, evaluate and see," said Colin Mills, chief executive and managing director of BBDO Worldwide, Moscow. GETTING PAID BBDO has not experienced any real problems with payments because the company works with state-owned Sberbank, which is viewed as more stable than commercial banks. "Where we have wanted to be paid there has been no problem in collecting payment," Mr. Mills said. Others have had enough. Wolfgang Slupetzky, chairman of Ogilvy & Mather Central and Eastern Europe, said: "Some clients have already stopped their business and also their advertising." Local, independent ad agencies are suffering. There are reports that some have cut staff and salaries by as much as 60%. The immediate problem for marketers is the inability of retailers to pay for goods. Late last month, Unilever said consumer product sales had almost stopped and retailers were not restocking, but things had changed by later in the week. "The situation is very fluid. We are selling into the trade, and restocking has started again," Mr. Haynes said. The crisis is causing some companies to think twice about investing in new projects, while other are pushing ahead. `RUSSIAN VOGUE' LAUNCHED While Conde Nast Publications proceeded with its September launch of Russian Vogue, Hachette Filipacchi Medias postponed the Russian debut of weekly celebrity magazine Paris-Match, originally slated for September. A spokeswoman for the Paris-based publisher said there had been "no problem" in securing advertising but the company believed it unwise to embark on a major launch of a weekly "in an economic context that is not clear." September advertising for Hachette's other publications in Russia -- the monthlies Elle, Parents and Premiere -- has held up. "But," the spokeswoman added, "we need to take a long-term view. We don't know if that advertising will be there in six months." Contributing: Dagmar Mussey in Duesseldorf; Bill Britt and Suzanne Bidlake in London, Gerard O'Dwyer in Helsinki.

HANGING TOUGH IN RUSSIA: `NO TURNING BACK' FOR MULTINATIONALS, BUT LOCAL AGENCIES ARE SUFFERING

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