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WPP Drops As Major Client Unilever Slashes Advertising Spend

Published on Apr 6 2017 12:31 PM in A-Brands tagged: Trending Posts / WPP / Unilever / Dove / Ogilvy

WPP Drops As Major Client Unilever Slashes Advertising Spend

WPP Plc fell the most in a month after consumer-product giant Unilever, one of the advertising company’s biggest clients, said it would cut back on its marketing spending.

Unilever, which sells Dove soap and Hellmann’s mayonnaise, will produce 30 percent fewer ads as part of a cost-cutting drive, Chief Financial Officer Graeme Pitkethly said Thursday in a phone interview. WPP, whose Ogilvy & Mather agency makes ads for Dove, dropped as much as 4.4 percent, the most since March 3.

Unilever is also selling off its spreads business, it said Thursday, as it seeks to safeguard its independence after fighting off a takeover bid from Kraft Heinz Co. earlier this year. The blow came as WPP, the world’s largest advertising company, was already contending with a slow start to 2017 and a weaker-than-expected growth forecast. Business with Unilever likely contributes 3 percent to 4 percent of WPP’s revenue, according to Liberum estimates.

“Big advertisers are cutting their marketing spend,” said Claire Barbaret, an analyst at Invest Securities in Paris. “All of them are trying to cut their costs because we’re in a world where there’s not much growth.”

London-based WPP declined 2.1 percent to 1,703 pence at 10:14 a.m. in London, after dipping as low as 1,662 pence. French rival Publicis Groupe SA fell less than 1 percent to 64.21 euros in Paris.

Consumer-products companies like Kraft and Unilever are adjusting their lineups in response to shifting consumer tastes that favor fresh foods over packaged staples. The spreads business Unilever is selling includes Flora, Stork, Country Crock and other slow-growing brands.

Their decisions filter down to ad firms like WPP, which offer clients services that range from devising and creating marketing campaigns to developing the media strategies and buying up advertising space across formats like television, newspapers and magazines, and the web.

WPP also had a mix-up with Unilever in February when public relations agency Finsbury, majority-owned by WPP, was hired by Kraft to handle its U.K. strategic communications for the $143 billion takeover bid -- effectively pitting WPP against one of its biggest clients.

The conflict quickly ended after Unilever CEO Paul Polman complained and WPP Chief Executive Officer Martin Sorrell ordered Finsbury to drop the Kraft mandate, people familiar with the matter said at the time.

WPP had no immediate comment on the Unilever moves.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

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