This month a second group of countries began the long and tortuous
negotiation process to join the European Union (EU).
The countries in the first wave, which comprises Poland, Hungary, the
Czech Republic, Estonia, Slovenia and Cyprus, began negotiating in 1998
and are hoping to join up in 2003, which will have meant a five-year
transition period. However, few will be surprised if negotiations drag
on beyond the target date. While some countries will be ready by then,
others will not, and the aim is for them all to join at once so that
nobody ends up feeling left out or disenchanted.
Of the 13 countries which are applying to join the EU, ten are in
Central and Eastern Europe. PR agencies in this region, particularly
those with international networks, are watching the process of accession
They believe that the preparations needed for membership, and the
business climate once it has been achieved, will convince more and more
organisations and companies to use their services.
The PR industry in this region is relatively new. It began to emerge as
a discipline in its own right at the beginning of the 1990s when
agencies such as Burson-Marsteller, Dewe Rogerson and The Rowland
Company helped to promote aid agency projects and privatisations. For
the first five years the market was dominated by these players. The
Rowland Company built its business on the back of the European
Commission’s Phare Aid programme, and B-M on promoting the United States
Agency for International Development’s efforts.
However, two years ago, B-M, deciding to concentrate on the world’s
larger markets, sold its Czech and Hungarian offices to their local
managers, keeping only its Polish business. The agencies, which still
operate under the B-M name, continue to be major players in their local
markets, but other brands, including some strong local businesses, have
come to the fore in recent years.
Hill and Knowlton, which has been in Eastern Europe since 1991, has
built a significant network in the area. It has wholly-owned offices in
Budapest, Prague, Rega in Latvia, and Tallinn in Estonia, as well as a
network of affiliates. GCI also has five offices across the region.
A snapshot of some of the top agencies in the three main markets of
Poland, Czech Republic and Hungary shows a mix of international brands,
local agencies and advertising agencies. The larger players in Poland
include B-M, Sigma - which is local and part-owned by Shandwick - The
Roland Company, and local brands Partner of Promotion, Compress and
United PR. In the Republic, B-M is again big, as are Hill and Knowlton,
Eklektik Porter Novelli, advertising agency Ogilvy and Mather, local
business AMI and Interel, a branch of a Brussels-based network. Herald
Communications also has a Prague office. In Hungary B-M, Hill and
Knowlton, local agencies Heart and H&K (not part of Hill and Knowlton
although bearing an uncannily similar name), and ad agency BBDO
Income from these businesses is still fairly small. Shandwick’s fee
income across its offices in Poland, Czech Republic, Hungary, Slovakia
and the Baltics was pounds 4 million at the last count. This compares to
pounds 3 million in nearby Germany, for example. Hill and Knowlton made
a comparable pounds 3 million in 1999 from its four offices in the
Poland, with 38 million inhabitants and the land mass of France, is by
far the biggest market in the region. Its media, like its economy, is
thriving. Its public service broadcaster has two terrestrial stations
and one satellite channel, there are a number of commercial terrestrial
stations and between 50 and 60 cable and satellite channels.
The size of the TV industry means broadcast PR agencies, such as
Bulletin International, are able to execute relatively sophisticated
campaigns there. Anna Christofari, media relations manager at Bulletin,
says: ’The key thing about Poland is that thematic channels are going to
grow quite dynamically. With thematic channels broadcasters have got
more time to devote to particular items than terrestrial channels. And
you know you are reaching the audience your client wants you to
A few years ago the Czech Republic, which with a population of 10
million is a much smaller country than Poland, was seen as the
trailblazer: the eager reformer that would provide the most lucrative
market for the export of Western goods and services. But reform within
the country has lost momentum and it is now in recession. Now its place
as the great white hope of central and Eastern Europe has been replaced
by Poland. The faltering of the Czech Republic’s economy has taken its
toll on the local PR scene.
Pragma, a well established top 15 Czech agency closed at the end of last
year. Shilland and Co also shut its Prague office last year, and Saatchi
and Saatchi announced in January that it was winding down its Czech
Anthony Hemstad is the founder and majority owner of Eklektik Porter
Novelli, which has offices in the Czech Republic, Poland, Hungary and
Slovakia and is, as its name suggests, part owned by Porter Novelli.
He runs a successful agency, but the biggest fee he has ever earned was
dollars 250,000 (pounds 156,000). ’This is exceptional,’ says Hemstad.
’dollars 4,000 to dollars 10,000 a month accounts are far more common.
It is pretty difficult to get things up above dollars 10,000. Budgets
are becoming bigger especially in Poland, and a bit in Hungary, but the
Czech Republic has been in recession for two years and some companies
there are cutting back budgets.’
What tends to bring fees down is that many clients prefer to work on an
ad hoc basis rather than retaining agencies to work on rolling yearly
contracts. And few clients are prepared to hire agencies to run regional
programmes. For example, 80 per cent of Shandwick’s business is locally
generated. The rest comes from existing Shandwick clients expanding
programmes into the region.
According to B-M’s chief operating officer for Europe Jeff Hunt, the
central and Eastern European PR industry follows a pattern established
in many other emerging markets.
He says: ’There are more clients spending less money. It’s a very
project-oriented kind of market. Developing markets all feel the same in
their opening stages. PR is viewed very tactically, and then you go
through a period of time and it eventually moves up the agenda. Where
the value seems to be the highest is in the areas of corporate counsel
and crisis. Marketing seems to be more tactical.’
While most agencies are happy to take on ad hoc business, Mmd Marketing
Marketing Communications feels confident enough to turn away clients who
will only work on this basis. Mmd is a UK-based agency which does most
of its business in central and Eastern Europe, where it generates about
pounds 2.8 million a year in fees from offices in the three main
markets, plus Slovakian capital Bratislava and Romanian capital
Bucharest. The agency runs multi-country accounts for Coca-Cola, Procter
and Gamble, Visa and Intel. A recent campaign was a promotional tour for
Malibu around Poland, the Czech Republic, and Slovakia.
Mmd chases big budgets because, according to chairman Alistair McLeish,
’Overheads and staff costs are just as high as in the UK’. Part of the
reason for this is that in Poland, for example, for each member of staff
the employer must pay the equivalent of their salary in tax. Salaries
have also been pushed up by the shortage of skilled staff, who are badly
needed in a market where standards of professionalism are getting
Although PR practice is becoming more professional, the industry is not
developed enough to support specialist agencies. ’It is still wise to be
a little bit diversified,’ says Hemstad at Eklektik, whose clients range
from SmithKline Beecham to Motorola. Shire Hall, for instance, opened an
office in Prague but had to close it because the healthcare PR market
was too small.
According to Terence Billing, Hill and Knowlton executive vice president
responsible for central and Eastern Europe, there are four main sources
of income for agencies in the region: aid projects needing PR support,
state-owned companies preparing for privatisation and re-orienting their
trade from Russia to the West, governments wanting to attract tourists
or inward investment, and foreign companies looking to sell consumer
From this year, the amount of aid to the ten central and Eastern
European countries applying for EU membership is set to quadruple. The
EU will pump 2.6 billion euros into the region between 2000 and 2006.
Agencies such as The Rowland Company which specialise in promoting EU
aid programmes are likely to see their business boom.
Some agency heads don’t think that EU membership will bring any major
changes but Martin Dubois, a director at Porter Novelli in Brussels who
co-ordinates pan-European accounts, says: ’EU membership will make those
countries, their companies and products a lot more visible in the West
and it will make them more visible as markets to Western companies.’
Hunt at B-M agrees. He says EU membership will promote optimism and
enthusiasm about the new members.
Another area of growth is likely to be public affairs.Lutz Meyer,
Shandwick MD for Europe with day-to-day responsibility for mainland
Europe, says: ’Where we see a lot of business potential coming up at the
moment is the public affairs side where not only private companies but
institutions and associations need to prepare themselves for dealing
Meyer adds: ’As deregulation gathers pace, as it must if countries are
to meet the EU criteria by the target date, there will be more merger
and acquisition and IPO work in the region.’
The benefits of EU accession will take time to materialise, as
negotiations have a long way to go yet. But the stability and increased
economic activity membership is intended to bring should help the
region’s PR industry not only thrive, but mature.
FOLLOWING THE STEPS TO EU MEMBERSHIP
The countries which have signed up to join the European Union (EU) will
need to meet tough criteria, agreed by EU members in 1993 at the
Copenhagen European Council in 1993.
There is a list of some 30 areas where the applicants must prove that
they match EU standards before being allowed into the ’club’. As well as
areas such as financial control, company law, taxation and free movement
of capital, applicants are judged on their handling of consumers, health
protection, education and training, and social policy and
The criteria are summarised as follows:
- The stability of institutions guaranteeing democracy, the rule of law,
human rights and respect for and protection of minorities.
- A functioning market economy as well as the capacity to cope with
competitive pressure and market forces within the union.
-The ability to take on the obligations of membership including
adherence to the aims of political, economic and monetary union.
-The adjustment of administrative structures, so that European Union
legislation transposed into national legislation is implemented
effectively through appropriate administrative and judicial
For PR agencies and their clients, the most important criteria are: the
creation of a functioning market economy and the conditions in which
home-grown businesses can survive in a deregulated and competitive
In a recent study of prospective EU members, PriceWaterhouseCoopers
(PWC) set out some of the things needed to get their economies into
They must liberalise trade and prices to find a balance between supply
and demand, and remove any barriers preventing the establishment of new
companies. The legal system must enforce property rights, laws and
Prices and public finances need to be stable. There should be a
well-developed financial sector so that people’s savings can be safely
There must be an adequate energy supply, telecommunications and
transport, and a certain level of education. There must be a healthy
number of small to medium-sized businesses because small firms tend to
benefit more from improved market access, and because larger companies
can be slow to adjust to new economic conditions. And applicants will be
better placed to enter the EU if they already trade regularly with
member countries. Since 1995 the current applicants have had virtually
free access to EU markets, except in certain areas such as agriculture
and textiles, where some of the countries are particularly strong.
PWC found that of the 13 applicant countries, Slovenia has come closest
to meeting these criteria, followed by the Czech Republic, Cyprus and
Poland. Hungary, Estonia, Latvia, Slovakia and Malta are next, and
Bulgaria, Lithuania, Turkey and Romania are trailing behind. Turkey is
the only one of these not in negotiations, because EU members are not
happy with its record on human rights.