Top Centaur executives Wilmot and Potter fall on their swords

May 15, 2013

Geoff WilmotIt’s a dry, spare document. But beneath the dense, printed undergrowth of Centaur Media plc’s Interim Management Statement 7464E – out on City desks first thing this morning – lies a rich speculative mulch.

Take this, for example:

Geoff Wilmot is stepping down as CEO but has agreed to remain with the business until the end of the financial year in order to implement a smooth handover to Mark Kerswell, who is now interim CEO.

Tim Potter, MD of the Business Publishing division has decided to leave Centaur. The process to appoint his successor has commenced.

Wilmot (above) has been the CEO since 2006, a relic from a bygone era called Print. Kerswell is the group finance director, imported relatively recently from rival publishing house Informa. And Potter? He’s been at Centaur almost as long as I was – which means forever. Or to be more precise, over 25 years.

The clue to the Centaur story is in the departure dates and the word “interim”. This is no carefully planned succession strategy, but a hastily cobbled boardroom putsch designed to appease the moneymen’s ire once they discover (as they now have) that all the high falutin’ promises of earnings growth predicated on Centaur’s transformational but risky £50m acquisition of Econsultancy last summer will not come to pass. Not, at any rate, in the near future.

Here’s another understated gem from the selfsame IMS:

May and June represent two of Centaur’s most important trading months, typically generating in the region of 45% of full year EBITDA.  Visibility of advertising revenues for this period still remains limited and delivery of corporate training revenues is also volatile.

Or put another way, an earnings disaster is on the way. No wonder Centaur’s share price troughed from about 47p to just over 31p this morning on receipt of the news. At all events, we doubt the dip was because share-traders were in deepest mourning for the two departing executives.

What’s gone wrong? Well, undoubtedly Econsultancy, the paid-for content acquisition, has failed to delight. Investors were promised digital steroids. What they’ve got instead is brewer’s droop: some mealy-mouthed excuse about losses in overseas operations.

Tim PotterMore seriously, disappointment over Econsultancy has formed a deadly cocktail with calamity in the print division, which is Mr Potter’s (left) peculiar fiefdom. The wheels have been coming off this vehicle for some time. No amount of penny-pinching and management delayering has been able to disguise a simple truth: the emperor has no clothes, or for that matter, coherent strategy. The promised uptick in print advertising, particularly cycle-sensitive recruitment advertising, is stubbornly refusing to come through. Scarcely surprising, really, given that the economy is dancing around the abyss of a triple-dip. But that’s no consolation for Messrs Wilmot and Potter, who must now play the role of official scapegoats.

Wilmot will be allowed to retire gracefully, through the front door, around the end of June. Potter, however, has been forced to scuttle with immediate dispatch through the dark hole of the tradesman’s entrance, clutching his P45 and the no-doubt-handsome rewards of failure. Such is corporate life.

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Why Aberdeen Asset Management wants to be the Intel of financial services

May 7, 2013

Piers Currie - Aberdeen Asset ManagementWhat’s the biggest, most successful, company you’ve never heard of? Impossible to say, of course. But a good candidate would be Aberdeen Asset Management.

It’s in the FTSE-100; it’s genuinely global. And it’s very profitable indeed, judging from its latest interim figures. Just to make the point: profit before tax increased 37% to £223m; earnings were up 43%, while the dividend increased 36%. And it manages financial assets of £212bn.

Yes Siree, the people at the top of this company are heading for deferred bonus payments that will make Sir Martin Sorrell’s look like a storm in a teacup. And, do you know what? There won’t be a squeak of dissent from shareholders.

Anonymity – outside the global capital markets – has served Aberdeen well these past 30 years. It has had little need to trumpet its wares through the megaphone of mass-media publicity, since what it does – trade in equities, fixed income instruments, properties and multi-asset portfolios – is mainly aimed at the wholesale financial market (other people sell the product on), and has little resonance with the punter on the street – unless that punter happens to be reasonably wealthy in the first place. True, Aberdeen has spent some trifling amount on a corporate ID (it looks a bit like a mountainous ‘A’) and does dispose of a £20m annual global marketing budget (peanuts for any equivalently-ranged consumer products company). But most of that money goes on getting a word in the right, expert, ear – via the rapier of PR and that trusty old ambush-marketing technique, the roadshow, rather than the blunderbuss of advertising.

Not any longer, however. This week Aberdeen is launching a global corporate branding campaign – its first since 1983. “Simply asset management”, the strap line, may not sound like rocket-science but, in fact, it is shrewdly timed. And for that, presumably, we must thank Aberdeen’s long-serving head of marketing (now group head of brand), Piers Currie (pictured above).

At a time when interest rates on deposit accounts are near zero (after inflation is factored in, you effectively pay the bank, not the other way round), investors are finding it increasingly difficult to gain a reasonably safe return on their financial investment. They must therefore turn to more risky asset classes – fixed income instruments and, more fashionably, shares. Who to trust in this treacherous financial world, however? Certainly not the universal banks – discredited bancassurance conglomerates that were yesteryear’s financial toast – who have comprehensively fleeced us of our savings, through rank incompetence, downright fraud or a combination of both.

Aberdeen’s modest proposition is that it is a narrow specialist; but within a field where it has gained great expertise and evidence-based returns. Stuff that isn’t going to be lost in the miasma of a bank’s balance sheet, and is there for all to see – should you wish to. There’s been an element of luck here, but also a good deal of judgement. When chief executive Martin Gilbert set up Aberdeen (it was a management buyout from an investment trust, which owed its name to its physical location in Aberdeen), he deliberately targeted emerging markets, and in particular the Far East, as the company’s area of fund management expertise. At the time, ‘emerging markets’ were the financial equivalent of  the Wild West. Today, they’re mainstream. Anyone without a decent chunk of his or her portfolio in China, Brazil, India, Hong Kong or Singapore is probably suffering from asset imbalance.

Aberdeen’s sweet-spot won’t, of course, last forever. But while it does, it has – on the evidence so far – a reasonable claim to being regarded as the Intel of financial services.

Which is what this corporate makeover seems to be about.

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It’s the Age of Google and Sorrell has no time – or money – for Twitter

April 29, 2013

Martin SorrellThe most interesting thing about WPP Group’s first quarter financial results were not the numbers, but its chief executive’s obiter dicta.

The numbers themselves were a curate’s egg. They beat the revenue forecast, bizarrely enough they delighted in Britain, but they disappointed in the United States. Which is just about the only part of the world economy currently showing signs of dynamism.

The obiter dicta, on the other hand, were curiously memorable. WPP CEO Sir Martin Sorrell used the occasion (well, near enough: he was actually speaking at the FT Digital Media Conference the previous day) to highlight a singular phenomenon. So far as his company is concerned (and it  is, after all, the number one spender of advertising money in the world), Google will soon become a bigger destination for his clients’ money than the biggest traditional media owner in his stable, News Corporation. Google is currently in receipt of $2bn of WPP’s quarterly spend; while NewsCorp gets about $2.5bn. But, given the Google figure represents a 25% increase year on year, it can only be a short time – Sorrell assures us – before the search giant moves into pole position.

I say “search giant”, but that of course is history. Sorrell’s underlying point is that Google – after some initial fumbling – has made the transition from a techie company, peopled by nerds, into a multi-media corporation with global reach. He calls it  ”a five-legged stool”: there’s search (of course); display advertising; social media (google+); mobile (via Android and AdMob); and video through YouTube.

Note well where Sorrell places his chips, however. From an advertising point of view, the Age of Google (as he calls it) is primarily defined by video. YouTube has made big inroads into what traditionally would have been television viewing. He’s bullish about mobile, too: Android is now the most popular smartphone platform and in some developing markets, like China, it accounts for two-thirds of all mobile sales.

But social media: Oh dear, what an advertiser’s no-no! Yahoo, though generally lacklustre these days, garners about $400m of WPP spend. Facebook, infinitely more successful with its audience figures, receives only $270m. And Twitter a lot, lot less. What’s the logic? Well, Yahoo “gets” the commercial need for a five-legged strategy (indeed, TechCrunch speculates it is about to buy Dailymotion, a smaller competitor to YouTube). Whereas Facebook and Twitter do not. Facebook, Sorrell reckons, is important for brands – but in a negative sense – absence of criticism, which has little to do with any advertising content. Twitter, on the other hand, is simply a PR medium with almost no value to advertisers.

“It’s very effective word of mouth,” Sorrell told Harvard Business Review last month. “We did analyses of the Twitter feeds every day, and it’s very, very potent…I think because it’s limited in terms of number of characters, it reduces communication to superficialities and lacks depth.”

Maurice Levy, CEO of Publicis, speaks during the Reuters Global Media Summit in ParisThat last may sound a little harsh. And is certainly not a universally accepted view among admen. Significantly, it is not shared by Sorrell’s deadliest rival, Maurice Lévy – chief executive of Publicis Groupe. Lévy has just announced a four-year pact with Twitter which will involve PG’s media planning and buying arm Starcom MediaVest Group committing up to $600m of client money to monetizing Twitter’s audience. Details, at this point, are sketchy.  It is clear, however, we are not just talking “pop-ups” here. Lévy makes specific reference to video links and “new formats” yet to be developed. He admits to there being “some risk” involved in the project, though whether this relates to his own reputation, clients’ money or both is not apparent.

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Press regulation: it ain’t over until the press barons sign up to it

March 18, 2013

Rupert MurdochOh Frabjous Day! Callooh! Callay! they chortled in their joy! The political class seems intoxicated with having finally, excruciatingly, achieved cross-party consensus on regulating the press.

Everyone, it appears, is a winner. Dave has gambled – with losing a vote in the House of Commons, and implicit in it a momentous amount of face – and won a few, paltry concessions on statutory regulation that can only be appreciated in their full complexity by a nit-picking lawyer. Ed, jubilant, with parliamentary plaudits ringing in his ears, has got what he always claimed he wanted: a Royal Charter backed by statutory regulation. And Nick’s just happy to be on the winning side (whichever that is, exactly).

But, resonant of the Cypriot banking crisis rumbling in the background, parliamentary accord in principle may be only the first, relatively easy, step in what promises to be an agonisingly long process.

Amid universal self-congratulation within the first three estates, what has been forgotten is the most important issue of all: the assent of the fourth. An eerie silence has settled over the land as the press barons – the mighty Murdochs, Rothermeres and Barclays – weigh up their options.

This is not the endgame they had in mind at all. The merest hint of statutory sacrament is abhorrent. And their objections to it are by no means groundless. Being men of the world, none expected to get away with a light slap on the wrist this time round (in other words, the moribund Press Complaints Commission being given a new set of falsies). What they have been served up, however, is enough to cause apoplexy.

Granted, the new press council will be self-regulatory in a manner of speaking: for instance, editors will still play a principal role in drawing up their own code of conduct. But the fact that this code is to be enshrined in law (however statute-lite) means – horror of horrors – the Street of Shame will for the very first time have to abide by it.

And there is worse. Newspapers are being expected to pay for this new regulatory body with their own hard-earned (and declining) advertising and circulation revenues. Yet they will be able to exercise no veto over those sitting in judgement upon them.

Now what is the point of self-regulation if you can’t game the system?

All sorts of humiliations beckon. For a start, there will be front-page retractions of a size and proportion equivalent to the original trumped-up story; in other words, no more “See page 94, bottom para, far right”. And then, if the press recuses? “Arbitrary” fines whose eye-watering size might actually get noticed by shareholders, and hit the owners where it really hurts – in the bank account.

Luckily, there are a few time-honoured principles that can be trundled out to muddy the waters, promote dissension and avert the awful day of reckoning. A very good one is our old friend Juvenal’s Quis custodiet custodes ipsos? – which might be loosely translated as: who will watch over the watchdog itself? A question that near two thousand years of repeated interrogation has failed to satisfactorily answer.

Juvenal’s oblique point, as far as I can make out, was that the powerful invariably stuff organs of governance with officials who are like-minded, obligated, compromised or compliant – leading to all manner of corruption and tyranny. A fine contemporary example would be the PCC, the illustrious members of whose committee quite recently included Tina Weaver – former editor of the Sunday People – who is now helping police with their inquiries into phone-hacking.

However much fog surrounds the future workings of the new press regulatory body, one thing is beacon-clear: the regulator will no longer be guided by the wisdom of serving newspaper editors with an axe to grind. But if not editors, then who? That is the question. Friends of politicians? The Good and the Wise from the upper house? Well-meaning but naive members of the judiciary, like Brian Hutton who was walked all over by the Blair government? Former senior civil servants who, like most lawyers, are instinctively inimicable to the whole concept of “unauthorised” leaks of information into the public domain? The publicly-wronged but narrowly-focused, like the McCanns, Dowlers, John Prescott and, er, Hugh Grant?

Who, in short, can – hand on heart – present themselves as an uncompromised and objective judge in the court of press ethics?

Without the compliance of the three aforementioned proprietors, whose newspapers account for the vast majority of national readership, these new Leveson-spawned regulations are going to go nowhere. Should they choose to prevaricate, Murdoch & Co will have ample opportunity to rail against disguised censorship. Real, or imagined.

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Police arrest four, including Tina Weaver and serving Mirror Group editor

March 14, 2013

Tina WeaverWhatever took them so long? Plod has finally pounced on four miscreant Mirror Group journalists in a dawn raid conducted by the Weeting (phone hacking) team. And what a haul it has proved to be.

The four include the first serving editor to be arrested: James Scott of the Sunday People. Better known is one of the Street of Shame’s favourite hackettes, Tina Weaver – former editor of the Sunday People. The other two are Mark Thomas, former editor of the Sunday Mirror; and Nick Buckley, current deputy editor of the Sunday Mirror.

Senior Trinity Mirror Group management – notably chief executive Sly Bailey and her successor, ex-HMVite Simon Fox – have long been in denial about a phone-hacking scandal within Mirror group portals. A denial which, though oft repeated over the past two years – notably during the Leveson Inquiry – seems to have deceived no one but themselves.

Over 18 months ago, Louise Mensch – a former MP who sat on the House of Commons media select committee – openly taunted Piers Morgan – once editor of the Daily Mirror, but now the fabulously remunerated host of CNN’s prime-time talk show – with complicity in a phone-hacking scandal involving Ulrika Jonsson’s affair with former England football manager Sven Goran Eriksson. Morgan furiously rebutted the accusation, but was reduced to fuming impotence by parliamentary privilege – the one thing protecting Mensch from being on the receiving end of a colossally expensive and probably indefensible libel suit. Later, she did make a mealy-mouthed apology. Sort of.

Few doubted that Mensch was on to something: it seemed highly improbable that Mirror tabloids were entirely immune to the hacking contagion that had reduced Rupert Murdoch’s News International to its knees. What was lacking was context and a basis in fact.

Piers MorganWe now have that, at least in outline form. And it should be said straight away that the facts do not in any way implicate Morgan. The statement from the Metropolitan Police makes this quite clear: “It is believed [the conspiracy] mainly concerned the Sunday Mirror newspaper and at this stage the primary focus is on the years 2003 and 2004.”  True, that does not exclude Morgan by date (he was editor of the daily title from 1995 to 2004), but there has been no mention of – still less arrests of former employees at – the Daily Mirror so far.

Nevertheless, I imagine Morgan will be anxiously reaching for his lawyers, lest the net spreads further.

Ironically, Trinity Mirror has just reported better than expected results, showing Fox’s cost-cutting measures are doing their work. How much damage the arrests – and those likely to follow in their wake – will do to TMG’s share price remains to be seen.

UPDATE 19/3/2013: Morgan’s insomnia will not have been improved by the news that Richard Wallace, a former Daily Mirror editor (and long-term partner of Weaver), has also been questioned by the Weeting team.

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Telegraph Group joins Gadarene rush with folding of Sunday title into 7-day operation

March 13, 2013

Telegraph 7-day operationThe newspaper is dead, and the Telegraph’s decision to merge its daily and Sunday titles into a 7-day-a-week operation is yet another nail in its coffin. Long live the free press.

By “free press” I mean not the plutocratic oligarchy (absent the Guardian and Observer owning Scott Trust) that maintains a diminishing stranglehold over printed national news, but that other sense of free – “free of charge”. The internet, with Google algorithms in the vanguard, is slowly, inexorably, doing what no politician could ever do: it is breaking down the cartel.

No qualitative judgement is made or implied about this being a Good Thing for the advancement of civilised values. Indeed, on balance, it may well be a bad thing. Just as there is no such thing as a free lunch, so there is no such thing as free journalism. If we are all able, in a matter of moments, to find out what is going on by tapping a few words into a search box at virtually no cost who, exactly, is going to pay for the many hours of sweat, journalistic nous and training that went into crafting the news item in the first place?

It’s a conundrum that digital content strategists frequently explain away by reference to the woolly wisdom of “creative destruction”. Darwinian metaphor is highly misleading, however. Paper dinosaurs may well be on their way to destruction. But there is nothing inevitable about the evolution of a genus of fleet-footed digital mammals to take their place. The ways of evolution are multiform, mysterious and rarely linear. While it is entirely understandable that legacy media institutions should present themselves as the natural guarantors of smooth transition, the reality (with the possible exception of such venerable specialist titles as the Financial Times and Wall Street Journal) may be very different. More likely there will be a period of chaotic evolutionary stasis before something commercially semi-vertebrate emerges anew from the economic goo.

I mention all this after briefly reviewing the latest set of national newspaper circulation figures (ABCs). My, how the mighty have tumbled. The Guardian, for example, shed 5.31% in just one month (February) Admittedly this followed a price hike, but the circulation figure is now around 193,586 which – as MediaWeek reminds us – is The Guardian’s lowest headline figure since records began, in 1949. The paper is worried about having breached a psychological barrier, even after sales were pumped by a recent BBH ad campaign. Not so long ago, I seem to remember that psychological barrier was 400,000, not 200,000.

Guardian print circulation may be in freefall, but its trend is by no means atypical. The Sun on Sunday is down nearly 5% month on month, representing a 41% collapse since Rupert Murdoch phoenixed it last year out of the ashes of The News of The World. The Sunday Express has descended below 500,000; The Mirror is barely achieving 1 million; The Sun itself, not so long ago hovering around the 3 million mark, is now gliding towards 2 million. Only the i – a scarcely economic 20p news digest – managed an increase, and that a miserly 1.45% to just shy of 300,000. Those with a head for historical statistics might like to note that its host, The Independent, now boasts a circulation of no more than 75,000. Even The Sunday Times – psychological barrier once 1 million – is now drifting down to 875,000.

In light of this dismal picture, it is no surprise to find The Sunday Telegraph (February ABC: 429,346) huddling closer to The Daily Telegraph (541,036) for warmth. As with the Sun, Mirror and The Independent 7-day operations that have preceded it, the rhetoric of the Telegraph’s transformation is radical and upbeat. The grim reality – and ultimate rationale for the move – is jobs lost. And with them, irreplaceable experience.

Murdoch MacLennanTrue, the headline figure of 80 print jobs out of 550 editorial staff being culled is not the whole picture. It emerges that Telegraph Group chief executive Murdoch MacLennan (left) will offset some of these losses with 50 “new digitally-focused jobs” – including a new position, director of content who will sit over both editors – and inject £8m into his “number one” priority of completing “our transition into a digital business.”

No matter how many time he incants the mantra “digital business”, MacLennan is unlikely – any more than his rivals who have trodden the same primrose path – to extricate his titles from the financial doldrums. The damage to the brand – particularly the Sunday brand – with its more considered, investigative magazine-like approach – is likely to be considerable. The strategic upside, after an initial financial up-tick, on the other hand is doubtful. Expect to see more circulation decline once disappointed Sunday readers reject the graft.

On the face of it, digital global readers, in whose name all this 7-day stuff is being done, look a worthy prize. For a start, there are lots of them. In January, for example, The Telegraph’s website traffic (by no means the most voluminous among newspaper brands) grew 11% over the previous month to 3,129,599 – the sort of circulation figure that no UK newspaper has been able to boast of for a very long time. But it’s fool’s gold. Digital readers are fickle and rather more likely to be driven by search than brand loyalty. Advertisers have recognised this by tightening their wallets. As former Google CEO Eric Schmidt long ago observed, there’s no better way of turning advertising dollars into cents than migrating to digital publishing. Nor, for the aforementioned reason of declining brand loyalty, are paywalls a viable financial alternative. Unlike the customers of banks, digital readers do have a choice. And they’re using it.

On the other hand, senior newspaper management cannot be seen to be doing nothing. They must inject energy and excitement into a task which, increasingly, looks as suicidal as the rush of the Gadarene swine.

How long before The Observer and Guardian – estimated to be losing about £50m a year – follow the same headlong path?

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Mad Men Series 6 – and the trouble with Harry’s dress sense

March 8, 2013

Mad MenOK readers, who’s the dude in the middle with the tasteful mustard jacket, silk cravat and sideburns? None other than our old pal Harry Crane, head of media at Sterling Cooper Draper (we imagine the “Pryce” has been dropped after recent events, but you never know: Stanley Pollitt, of BMP, continued to perform miracles after he had been dead for years).

Anyway, back to Crane and the latest series of Mad Men, which returns to US screens (but not alas our own, unless we’re Sky subscribers) on April 7th. The trouble with Harry is he’s such a fashion victim – a weak personality seeking momentary identification with every passing sartorial trend. In the past, that’s mostly meant a new pair of outrageously over-emphatic adman’s glasses. But here, in series 6, the preppy-groovy look has completely taken over.

Not much sign of that in Roger, other than slightly lengthened sideburns. And none at all in Don, who retains a circa-1959 cool dress sense. Let’s hope he’s finally disposed of the fedora. We thought that went out with President Kennedy. But Don was still wearing his in 1966. It’s one of those few, painful, anachronisms that crop up in the meticulously researched Lionsgate series. Another solecism was the otherwise elegantly restrained Pryce’s table manners when he was (as he thought) wining and dining his future Jaguar client. Still more so Mrs Pryce’s faux pas when she uttered, in a perfect cut-glass accent, the word “gotten”. No one in England has used that word since about 1800; it’s “got”.

Still, let’s not quibble over what remains an excellent series. We’ll all be glued to the screen. Once, at least, the DVD is released.

Meantime, here are a couple more shots to emerge from the studio…Draper

Crane

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Aren’t some Outdoor Plus shareholders compromised by a conflict of interest?

February 22, 2013

Marc MendozaThere’s a lot going on under the radar in OOH – or posters, as we anciently called it. And I’m not simply talking of Omnicom’s Eric Newnham-fronted effort to crash the charmed circle of UK specialist buyers – namely WPP-owned Kinetic and Aegis-owned Posterscope.

No, what caught my eye recently was something entirely different. It concerned premium digital site owner Outdoor Plus and its opening of yet another of the landmark London locations in which it specialises – in  this case The Spire, a 20 metre-high construct unmissably situated on the A40 exit from London.

The PR spiel, as conveyed in MediaWeek, was suitably gushing: access to a dedicated commuter and business audience; balanced male:female ratio; 60% ABC1; capable of targeting traffic both in and out of central London. What more could an advertiser ask for?

Very little, according to an excited Grant Branfoot, Outdoor Plus’s sales director: “The potential for advertisers is vast and through the addition of The Spire to our expanding digital portfolio (it includes The Eye in Holborn, the Euston Road Underpass and Vauxhall Cross), we think we can help advertisers exploit the immediacy, the creative possibilities and the opportunity for highly targeted messaging which is associated with large format outdoor digital screens.”

The potential for advertisers is vast, is it Grant? More correctly, the potential for some, carefully selected, advertisers is vast. Many will likely get scarcely a sniff of a placement. The reason is somewhat complicated, and to do with Outdoor Plus’s curious shareholding structure. But don’t go away, readers. It’s worth the wait, really.

Outdoor Plus is a reasonably sized, reasonably well-run private company founded in 2006 by Jonathan Lewis – who remains its managing director. Turnover was about £15.42m in the year to December 31, 2011 – the latest financial figures recorded in Companies House. Group operating profits – of which Outdoor’s comprised the vast majority – were £1.8m, allowing the six directors to award themselves collective “emoluments” (or fees) of about £770,000.

The roll-call of these directors makes interesting reading. Among them are Philip Andrew Georgiadis, daytime job: chairman of Walker Media; and Marc Sydney Benjamin Mendoza, better known as head of Havas Media UK. In other words, principals of notable media-buying organisations whose job it is, inter alia, to oversee without fear or favour the negotiation of the most advantageous placements for their clients on UK OOH sites.

Turn to the share structure of the company and things get even more interesting. It emerges that Georgiadis is also a 5.3% shareholder in Outdoor Plus. Mendoza (pictured) owns just a shade more. And then there’s Mendoza’s cousin and, technically, his boss, Havas Media UK group head Mark Craze, who owns 3.2%. But we’re not quite over yet, because Stephanie Gottlieb, wife of Colin Gottlieb – the EMEA chief executive of Omnicom-owned OMG – also owns 1%.

Now I’m not suggesting anything illegal is going on here. At one level, you have to tip your hat to Lewis, who has been extremely shrewd in persuading these media luminaries to come aboard, thereby – shall we say – reinforcing his revenue stream.

Indeed, even if the shareholding of the Havas, Walker and OMG representatives were to be combined, they could hardly be accused of concert-party style manipulation.

None of that, however, quite expunges the whiff of conflicting interest surrounding this cosy media buy-side/sell-side coalition. Clients whose accounts are not held by Havas, Walker or OMG may well be the losers. And those whose accounts are need to be assured that they are getting the very best deal for all the right reasons.

Senior media executives, like Caesar’s wife, should be above suspicion.

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Supermarkets should remember the consequences of the Perrier scandal

February 18, 2013

Malcolm WalkerDuring the early part of 1990, health officials in North Carolina, USA, made an alarming discovery. Some Perrier bottled mineral water, whose purity was so legendary they had used it to benchmark other water supplies, was found to be contaminated with minute traces of benzene.

Benzene is a natural component of crude oil. Ingested in sufficient quantities, it can cause cancer in humans. Of course, there was no question of that happening in North Carolina. As a Federal Food and Drug Administration official drily observed at the time: “At these levels there is no immediate hazard. Over many years, if you consumed about 16 fluid ounces a day, your lifetime risk of cancer might increase by one in a million, which we consider a negligible risk.”

But no one was listening to the FDA’s voice of reason. Panic broke out all over the USA – and not just there. Perrier, at that time world leader in the mineral water category, was obliged to withdraw its entire global inventory of 160 million bottles. Brand integrity was further compromised by the discovery that the “natural” bubbles in the bottled potion were actually added back later. Perrier never fully recovered: it lost its leadership and became just another branded mineral water, albeit still a famous French one. Commercially, the crisis was if anything even more disastrous. The independent Perrier bottled water company was, within two years, sold to Nestlé.

I think you know where I’m leading with this. Fast-forward 23 years, to a full-page ad that appeared in yesterday’s national newspapers. It was inserted by Malcolm Walker, founder and chief executive of  leading UK food retailer Iceland. Its purpose was to divert responsibility for the horse meat scandal now engulfing our supermarkets by pointing the finger of blame at cheapskate procurement in local government, the National Health Service – and its equally unscrupulous counterpart in the catering industry – which has connived at bringing down processed food costs to their lowest possible denominator. Doubtless, judging from the ensuing squawks of indignation, the Iceland boss has a point – though how exactly his tirade exonerates the supermarkets from their own ruthless manipulation of supplier lines is not entirely clear. However, Walker does not stop there. Having scored some points on behalf of his sector, he then goes on to trash it by adopting a “holier than thou” approach:

“Iceland does not sell cheap food. We sell high-quality own label frozen food that is good value. We do not sell – and never sold – ‘white pack’ economy products.” Unlike, he carefully does not add, Tesco and Asda. And, just to ram the point home, he goes on to claim that “no horse meat has ever been found in an Iceland product”.

Well, almost none. At the bottom of the ad there is a mealy-mouthed admission that 0.1% of equine DNA was indeed found in two Iceland Quarter Pound burgers. But these don’t count, because the test, carried out by the Food Safety Authority of Ireland, was not an “accredited” one, and the discovered traces of horse were “well below the current accepted threshold level” of 1%. So, yaboo sucks to any critics.

Nice one, Malcolm. You’ve managed to spread, or at least smear, the blame far and wide, and thrown into the processor just a hint of xenophobia. Ireland, Romania, France – these horse-eating monkeys, they’re not like us – not to be trusted, whatever their professions of rigorously adhering to EU-wide standards. But, leaving aside the lowly populism of his message, Walker, in waxing eloquent about the infinitesimal amount of contamination in his own burgers, has committed a revealing tactical blunder.

Perrier logoThe current food scandal is not about parts per billion contaminants found in horse meat; it’s about trust in the brand. Just like the benzene found in Perrier all those years ago, consumers would have to ingest an awful lot of horse burger infected with “bute” equine painkiller (over 500 250 gram ones, to be precise) before experiencing any appreciable side effect. But that won’t prevent them passing summary judgement on those august brands – at the head of the supply chain – that have allowed this scandal to happen: namely the UK grocery multiples.

Possibly with devastating consequences for future sales.

One interesting aspect of this scandal is that its ramifications have now moved on from cheap lines of processed meat – in short, “poor people” – to ready-made meals. In the other words, the sort of thing consumed by affluent and articulate members of the middle-class. That’s bad news even for elite purveyors, such as Waitrose and M&S.

In all probability there’s nothing to worry about. But that’s not the point, is it? My local butcher tells me business has gone gang-busters over the past couple of weeks. And for good reason. In the past, there was a perception (false, as it happens, in many cases) that local businesses could not match supermarket fresh meat prices. Now, understandably, people seem a lot more concerned about local provenance. If you must have lasagne, it’s as well to see the meat being minced while you wait, rather than trusting the word of some supermarket about the integrity of its supply line.

1 Comment | Advertising, Brands, Finance, Food, Issues, Legal, Media, Politics, Public relations | Tagged: , , , , , , , , , , , , , | Permalink
Posted by stuartsmithsblog

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