WPP – still in limbo land
Despite appointing a new CEO and delivering reasonably positive results, there’s still no sense of direction at WPP, writes Dominic Mills. Plus: Lidl’s strange decision to ditch TBWA
As a WPP shareholder – and let me confess, that is a weird, albeit painful thing to write this morning – I’m not entirely sure how I feel about the puffs of smoke that emerged from WPP HQ yesterday confirming Mark Read’s elevation to CEO.
On the one hand I am happy a decision has been made. It feels like a long four months in limbo. Limbo for Read himself, limbo for staff, and limbo for WPP. That’s not good for anyone, least of all WPP at a time of crisis – both inside and in the wider industry itself.
Equally, however, you could take it as a sign that the process of choosing a successor to Sir Martin has at least been thorough.
On the other hand, there remains a lingering sense of concern. Did no outsider really fancy the job? Or did WPP take the easy option by appointing an insider? We’ll never know.
Nevertheless, I am surprised it didn’t take the outside choice. First, back in April, such was the sense of crisis surrounding the company, that you’d say the most important thing it needed was someone with an outside perspective, no legacy issues and a willingness to slay the most sacred of cows, whatever they turned out to be. And certainly someone untainted by any association with the previous regime.
Furthermore, recent corporate history suggests that when an institution replaces a dominant leader with an insider, it doesn’t go well. Take Tesco after Sir Terry Leahy. Or Barclays post Bob Diamond.
But Read it is, and you have to say the first four months have been relatively smooth. No nasty surprises, barring the likely fading away of Ford; dumping minority stakes in the likes of AppNexus, of which there are surely more examples to come from the long tail of recent acquisitions; and some positive news in the form of wins from Adidas, Mondelez and Mars.
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Which brings us today’s latest results, a mix of the not-so-good and the reasonably positive. They showed a decline in income of 2.1% over the full year, but a sense that a corner might have been turned with growth of 2.4% for the most recent quarter – the first since the bloodbath of 2017. You can read the fuller story here.
But there’s still no sense of a direction, other than the promise of a strategy review that won’t be complete until year-end. Well, FFS. Why the delay?
And I wonder if this ongoing period of stasis is the reason why the stock market reacted badly to the results. By 9.00am the share price was down 7.5%, a nasty fall.
Stock markets can be fickle beasts, and there may well be a bounce later once the results are fully absorbed. But they don’t like hesitancy or uncertainty. It seems like we have at least another three months.
Amidst all the coverage, trade press and national, one piece made me laugh out loud. Campaign (good for it) got Sir Martin to offer his thoughts – as if they could stop him sounding off from the side of the stage. You can read the full piece here, but the killer bit is this statement: “The last five months have been a complete waste of time, particularly when our biggest client [Ford] is in review.”
Did you see that use of the word ‘our’? It doesn’t seem quite right, even if he remains a major shareholder. He left, as I recall, although maybe he hasn’t fully checked out yet.
Lidl sense in chucking TBWA
I’m struggling to make sense of Lidl’s decision last week to chuck TBWA\London overboard, not least since, working in tandem over the past five years, the pair increased the German discounter’s share by more than two thirds to its current level of 5.4%. In a savagely competitive market, that is no mean feat.
But how bad must things have become that TBWA – left pretty much with just Nissan and maybe Adidas as marquee clients – has decided not to re-pitch? Have a look at this show-page of creative work on its website and you’ll see what I mean.
From what I understand, at least £2m in income has walked out the door without TBWA putting up a fight.
It is clear the relationship has faltered. This brilliant Lidl ad from November 2014 skewering the Morrison’s card represents a high point. It’s funny, it’s sharp, chippy and shows Lidl as a challenger brand unafraid to take risks.
As it was described to me at the time, then Lidl UK boss Ronny Gottschlich rang up the agency with no brief other than ‘We need to do something about the Morrison’s card’.
Hours later the ad was written, approved and booked into the following day’s newspapers.
Gottschlich, however, was ‘disappeared’ two years ago apparently in a row with HQ in Germany about shopping trolleys and baskets (yes, it really was as trivial as that), although not before signing off on the successful Lidl surprises campaign designed to challenge the perception that low prices mean low quality.
(There’s an interesting piece, by the way, from the former Tesco and Lidl planner John Lowery here about his experience of changing perception of the supermarket.)
One possibility is that, post Gottschlich, the gap between Lidl and its arch rival Aldi – once closing – has started to open up again. However stellar Lidl’s sales growth, Aldi’s is faster. And this despite Lidl starting in the UK several years before Aldi.
As Kantar shows, even Lidl’s sponsorship of the England football team wasn’t sufficient to pip Aldi in July: its sales grew 9.7%, but Aldi’s grew by 10.9%. Aldi’s overall lead is about 4 percentage points, four times what it was five years ago.
Meanwhile, two other threats lurk, potentially more serious. First, it is clear Tesco is rejuvenated, and its plans to launch its own discount chain soon loom large over the Germans.
Second, neither Lidl or Aldi has any kind of meaningful online shopping presence, a lack all the more glaring given Amazon’s attack on the market. Go online at Lidl and the most exciting thing you can do is sign up for an e-newsletter.
In this scenario, it is entirely likely then that Lidl was looking for a target victim. The ad agency seems as good as any.