Peppercom: Agency Business Report 2007

Peppercom's reputation in the high-end corporate space might make the firm a tasty acquisition target, but firm principal, Steve Cody's ambitions are firmly client-focused.

Peppercom's reputation in the high-end corporate space might make the firm a tasty acquisition target, but firm principal, Steve Cody's ambitions are firmly client-focused.

"Harold Burson has always talked of getting very close to the client customer, and we're focusing more on that consumer decision-making space," says Cody. This means more integration between digital and traditional PR solutions, more blogging and podcasting, and creating unique services "that are in the embryonic stage, but predicated upon the impact digital has had on the way people obtain information and make purchasing decisions."

Key facts

Principals: Steve Cody, Ed Moed
Ownership: Independent
Offices: Two in the US (New York and San Francisco). One wholly owned London office, with a joint venture in Birmingham, UK

Staff
Total of 58 US staff and now six in the UK, a slight decrease from last year, with turnover of 11%. Gene Colter joined as editorial director; Debbie Spalding hired as CFO; Ann Barlow promoted to president of the West coast office; Maggie O'Neill promoted to senior director.

Regional performance
Posted 10% US growth in 2006. Billings in the UK declined slightly less than 5%.

Practice areas
The firm does not segment business by practice, but says clients are mainly corporate (16%), consumer (17%), financial (24%), CSR (6%), tech (9%), and b-to-b (28%). PepperDigital debuted in 2006, providing full-service digital counseling, crisis, and implementation.
 
Accounts
Wins included Whirlpool, Wall Street West, Valspar, J.H. Cohn, and TNS. Losses included Avaya, Shock/Hachette-Filipacchi Media, and Bayview Financial. About 80% of clients are on retainer.
 
Financial performance
Global revenue rose 8.32% to $9,097,323, with a 9.79% rise to $8,295,885 in the US. Peppercom had both top- and bottom-line growth in the past year. Anticipating only modest gains, Peppercom exceeded expectations on the strength of a surge in the second half of a year highlighted by being named AOR for Whirlpool.
 
Agency's full questionnaire follows below:

Name of parent division/company (enter both where applicable)    
N/A

Name of subsidiary companies    
N/A

Has your ownership status changed in the past year? If yes, please explain      
No

Name of global CEO and US CEO (or most senior equivalent)   
Steven Cody and Edward Moed

What is your current headcount?  Ho has this changed since FY 2005? 
58 in the US and 6 in the UK.
Our headcount has increased slightly in the US and decreased in the UK since 2005.

What was the percentage of staff turnover in 2006? 
Our staff turnover has been consistently low.  In 2006 our turnover was only 10.91%.

Did you make any senior hires in 2006 (VP and higher)? Please state name, title (and unique responsibilities, if applicable), and previous company. 
Gene Colter, Editorial Director (The Wall Street Journal)   
Debbie Spalding, Chief Financial Officer (Chandler Chicco Agency)

What senior staff have departed the firm? Please state name and previous title  
N/A

Please list any other senior management changes, including restructures and significant, senior-level  promotions.  Ann Barlow was promoted to the newly created role of President of Peppercom's west coast office. She will oversee all office operations, new business development and will continue to expand Peppercom's presence on the west coast and its ongoing focus in the technology sector.  In addition, Ms. Barlow will play an integral part in building on Peppercom's new practice area, GreenPepper, dedicated to helping companies market environmentally conscious initiatives.

Maggie O'Neill was promoted to Sr. Director.  Maggie joined Peppercom in 2001 and will begin her now role as a senior director by providing management expertise for the agency's overall direction and strategy and will focus on growing Peppercommotions, Peppercom's strategic events division.

Sara Whitman was promoted to Director.  Sara joined Peppercom in 1999 and has worked with some of Peppercom's largest clients.  She also spearheads major internal communications initiatives and mentors many of our professionals. 

Have you made any acquisitions in the past year, or merged with another agency?   
No.

How many wholly owned offices do you have globally?
- North America: We have two offices in North America, our headquarters in New York and a second office in San Francisco.
- Europe: We have one office in London and a joint venture office in Birmingham, England.

How many partly owned offices or affiliates do you operate globally? Please list agency names and cities under the following headings.   
N/A

What offices opened in 2006 or early 2007? (State when) 
N/A

What offices closed in 2006 or early 2007? (State when) 
N/A

Which regions, US and globally, are growing, and why?   
Our US operation experienced nearly 10% growth in 2006, but we don't view our business from a regional standpoint since the vast majority of our clients are national and international.

Which regions, US and globally, are shrinking, and why?  
Billings in our UK office declined slightly less than 5% in 2006.

How many practice areas do you have? Please list.
We don't segment our business by practices.  That said, our clients are primarily corporate, consumer, financial, corporate social responsibility, technology and business-to-business.

Which ones are new? 
PepperDigital was launched in 2006 and provides full-service digital counseling, crisis and implementation.  In addition, we are beginning to launch GreenPepper, which will be dedicated to helping companies market environmentally conscious initiatives.

Of those, which ones are part of the core strategy of the agency? 
All

Which practice areas have been phased out in the past year?
None

What practice areas showed the most growth? Please elucidate.
Corporate, crisis, corporate social responsibility, and digital.

Which practice areas showed the least growth? Please elucidate.
None

What is the distribution of accounts across practice areas? 
Corporate 16%, Consumer 17%, Financial 24%, Corporate Social Responsibility 6%, Technology 9%  and Business-to-Business 28%.

What key account wins did you have in 2006? If based outside the US, or are global, please state regions. 
Whirlpool, Wall Street West, Valspar, J.H. Cohn and TNS.

Of your 2006 wins, how many were across three or more countries?  
None

What key accounts did you lose in 2006? If based outside the US, or are global, please state regions. 
Avaya, Shock/Hachette-Filipacchi Media, Bayview Financial

Did you expand any existing accounts into new domestic or international markets or sectors? 
Steelcase and Tyco

What proportion of your clients are on a retainer? Has this changed over the past year? 
Aproximately 80% of our clients are on retainer
No.

What was your 2006 global (including US) revenue?
Our 2006 global revenues total $9,097,323.

What was the % change over 2005 global revenue. 
Our global revenues are up 8.32% over 2005.

What was your global profit margin in 2006?  
N/A

What was your 2006 US revenue?
Our 2006 US revenues were $8,295,885.

What was the % change over 2005 US revenue. 
Our 2006 US revenues increased by 9.79% over 2005. 

What was your US profit margin in 2006?
n/a

Did you experience top-line or bottom-line growth in the past year, or both? Please elucidate. 
Peppercom had both top-line and bottom-line growth in the past year.  We began the year with enough staff to accommodate most of the growth in business.  Therefore our top line grew with additional business, and since our expenses did not grow nearly at the same rate, we also experienced a growth in profit.

How much of your growth was organic, and how much was due to new business won?   
Approximately 50/50

How did your performance, in terms of revenue and growth, meet expectations you had for the year?
While we anticipated modest growth, we were extremely pleased by second-half growth and are on a current running rate to easily surpass ten million dollars for the first time.

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