Venerable U.S. Ad Agency Leo Burnett Withers in Hands of French Owners
Another quarter goes by and it's another dose of bad news for Leo Burnett, the venerable Chicago ad agency that is conspicuous by its absence from the headlines: Its Greece branch filed for bankruptcy and its Brazilian management left en masse, taking 35 percent of the business with them. Meanwhile, Leo Burnett USA has won just one significant new account since Q3 2009.
Every quarter, Leo Burnett parent Publicis (PUB) lists all the new business its agencies -- which include Saatchi & Saatchi and Digitas -- have won. In Q2 2011, the only win listed for Leo Burnett was McDonald's, but that account has been with the Chicago shop for some time before the last quarter. Another Publicis agency, Razorfish, by contrast, won three -- Starwood, Disney and Microsoft.
Although Leo Burnett did win the $70 million Travelocity account in September, the "new wins" column on its scoresheet was conspicuously thin in Q1 2011, and all of 2010. In 2009 it picked up Aol and MillerCoors. (It's other wins since then, Sealy and White Wave, are too small to count.)
There are some signs of life. The shop got some attention for a new Facebook ad format it created and it opened a small New York outpost to service Procter & Gamble. But one of its biggest clients, Kellogg, looked elsewhere when it needed digital expertise in April.
Chaos abroad
The Greek mess is hardly CEO Tom Bernardin's fault -- the whole country is a writeoff -- but the Brazilian fiasco just seems like carelessness. The CEO and most of his team just up and left, taking clients with them, Mad Men style. Publicis CEO Maurice Levy was asked about it on his earnings call:
Regarding Brazil, the issue is very unfortunate. What happened is that, it has been published, and we have the CEO of Leo Burnett Brazil Renato Loes who is at the same time responsible for Latin America who left. It's not the fact that he left to has created the problem. It's the fact that he left with 70% of the management team. And we lost 35% of the revenue and that is the reason why we made the agreement which is tailor-made and we changed the structure immediately and we fixed the issue pretty quickly so we stopped the bleeding which is good. We are starting again to gain new revenues and things are going in the right direction. But we had to face a very tough situation in that one. And that is explaining why Brazil is not in the top countries in term of delivering growth.The big issue at Publicis right now is who will succeed Levy, who wants to retire. He told investors on the call that he was secretly pitting two of his underlings against each other in the race so his board could choose. This insane strategy will, of course, ensure that the disaffected losing candidate leaves Publicis taking his secrets with him (to hated rival WPP, if he really wants revenge).
The sensible money says that the successor candidates are probably all French: Arthur Sadoun, CEO of Publicis France, Publicis chairman Jean-Yves Naouri and nepotism pick Simon Badinter, son of board member/intellectual star Elisabeth Badinter.
Given that the U.S. forms about half Publicis' revenues, replacing Levy with an even more French Frenchman, one who has no profile in the U.S., would be a pretty good way to ensure that the Leo Burnett situation continues to go untended. C'est la vie!
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