In a stunning blow to Foote, Cone & Belding, PepsiCo Inc. on Friday pulled the plug on Quaker Oats Co.'s deep ties with the agency, moving more than $300 million in advertising billing to Omnicom Group, whose units handle most of PepsiCo's advertising.

The move will have a dramatic financial effect on FCB Chicago, the city's third-largest agency at $1.4 billion in billings, which has been responsible for top-flight advertising for Quaker's blockbuster Gatorade brand and all of the company's cereal brands, as well as this summer's campaign for Pepsi's top water brand Aquafina. Because Quaker overall accounts for nearly 20 percent of FCB Chicago's billings, experts said job cuts as a result of Pepsi's move may be inevitable.

Although Omnicom already handled the rest of PepsiCo's business, the firing stunned most FCB agency staffers, many of whom thought that the agency had successfully navigated a potential conflict between Coca-Cola Co. and PepsiCo, which completed acquisition of Quaker earlier this year. PepsiCo, in fact, made the switch over the objections of Quaker's marketing executives, sources said.

Finally, it appeared that Pepsi was not comfortable keeping the business with FCB, which is part of the same advertising agency holding company–Interpublic Group of Cos.–that handles much of Coca-Cola's business.

"It's as much an emotional loss as it is a financial loss," FCB Group's Manhattan-based boss, Brendan Ryan, said in an interview. "These are brands our people have sweated over for years and have consistently delivered great work and results for our clients. This was absolutely a total surprise.

"You hate to see such great work account for so little," he said.

Though it does not happen often, the move by one blue-chip client to fire an agency holding company that houses a competitor is not new.

And agency sources said that Pepsi executives grew more uncomfortable over the past few months as Interpublic further strengthened its ties with Coca-Cola, via Interpublic-owned McCann-Erickson Worldwide. Interpublic Chief Executive John Dooner has a strong relationship with several top Coca-Cola executives, and many industry executives had suspected that a move of Quaker's business from FCB might occur.

Ironically, Interpublic bought FCB's former parent, Chicago-based True North Communications, earlier this year in part for FCB's Quaker business. That was before Quaker was bought by PepsiCo. FCB has handled Quaker's business since 1996, when it bought longtime Quaker shop Bayer Bess Vanderwarker, which created some of the industry's most memorable creative, including the "Be like Mike" commercials with basketball icon Michael Jordan.

When asked if the Coca-Cola situation had anything to do with the move, PepsiCo spokesman Richard Detwiler Jr. said, "We were aware of it, but it was not the primary factor."

"The consolidation of our advertising within one company is one of many efforts across PepsiCo to take full advantage of our combined strength," said Robert Morrison, PepsiCo's vice chairman and chairman and chief executive of Quaker Oats.

Morrison is both a longtime client and personal friend of FCB Chicago President Brian Williams.

Though layoffs are likely, it is not clear how many of FCB's 700 staffers will be affected. A decision on staffing is not likely until after the review for the $75 million Boeing account; FCB is a finalist in the contest, which is scheduled to be decided early next month.

Sources say it is possible that Omnicom may also try to raid FCB for its Gatorade and cereals talent.

Insiders said both the Gatorade and Quaker cereals marketing and brand teams had wanted to keep the relationship with FCB, and that the move to consolidate was driven solely from PepsiCo's Purchase, N.Y., headquarters.

By: admin


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