Ketchum: Agency Business Report 2006

Ketchum began the year determined to make it a great one, though it was hit hard by the Armstrong Williams/Department of Education (DoE) issue that had even NBC's Tim Russert invoking the agency's name.

The fighter

Ketchum began the year determined to make it a great one, though it was hit hard by the Armstrong Williams/Department of Education (DoE) issue that had even NBC's Tim Russert invoking the agency's name.

"It was an extremely challenging year for us in terms of the issue," says CEO Ray Kotcher. "But I'm just so proud of Ketchum and our people and the brand."

The firm implemented ongoing educational programs on its ethical disclosure guidelines, not to mention maintaining and strengthening its client relationships, while the issue continued to play out in the headlines with government rulings and ongoing scrutiny.

Despite the problems, according to the agency's fiercely buoyant leadership, Ketchum went on to have its strongest year in the company's 80-year history. While financial results are not forthcoming, the agency points to other indicators, such as growing in aggregate its top 30 client relationships by more than 20% over 2004 and retaining all of these clients.

Also in 2005, it expanded 38 of its 50 top accounts over 2004, and improved its employee turnover rate over 2004 by six percentage points. "By every metric that I look at, every vital sign for the agency is strong," Kotcher says. The firm launched its Ketchum Personalized Media offering in 2005, in keeping with its long-term dedication to excellence in media relations.

With the opening of a new office in China and the expansion of its affiliate offices in Europe in 2005, Ketchum anticipates doing more work overseas in 2006, particularly in Central and Eastern Europe and the Middle East, as well as expanding in Germany, Spain, France and the UK. So far this year, there has been one senior departure in Mark Cater, formerly Ketchum's director of global healthcare, who returned to London to join APCO Worldwide in February. Memories can be annoyingly long for organizations that have faced crises.

But while Ketchum hasn't always taken the most assured steps in dealing with media interest in the DoE problem, the firm's success in rolling out internal procedures, as well as moving the business firmly ahead, is proof that its priorities are in the right place.

Name of parent division/company (enter both where applicable)
Diversified Agency Services, a division of Omnicom Group Inc. (NYSE: OMC)

Name of subsidiary companies
Concentric Communications
Ketchum Entertainment Marketing
Stromberg Consulting
The Washington Group

Has your ownership status changed in the past year? If yes, please explain.
No, Ketchum's ownership status has not changed during the past year. Ketchum was acquired by Omnicom in 1996.

Name of global CEO and US CEO (or most senior equivalent)
Raymond L. Kotcher, Senior Partner/Chief Executive Officer

Name of person, if any, the most senior person named above reports to
Thomas Harrison, President, Diversified Agency Services

What is your current headcount, and how has it changed from this time last year? What was the percentage of staff turnover?
Unfortunately, due to Sarbanes-Oxley, we are not permitted to disclose the agency's current head count or staff turnover percentage. Ketchum increased staff in 2005 and experienced a significant reduction in employee turnover (improving by six percentage points) over 2004. As an additional signal, more former employees returned to the company in 2005, having left to gain corporate-side experience, than ever before. In total, 25 "boomerangs" decided to rejoin the agency this year.

Did you make any senior hires in 2005 (VP and higher)? Please state name, title and previous company.
In 2005, Ketchum focused on building its talent reservoir to meet the growing and diverse needs of its clients. This year Ketchum made strong efforts to obtain key talent from non-traditional backgrounds who have expertise in specific areas. For instance, the agency brought in Bill Delaney, an award-winning television correspondent, producer and bureau chief with CNN, to serve as SVP of Media Strategy, and Emmy-award-winning TV anchor Carmine Gallo as Director of Media Relations for Ketchum West. Additionally, Mark Owens joined the agency from Davie-Brown Entertainment as co-Managing Director of Ketchum Entertainment Marketing, and Roy Edmondson, who has expertise in integrated marketing and many years on the corporate side, joined Ketchum in New York to serve as the Global Account Director of the Eastman Kodak business. Rhonda Harper, a 20-year marketing communications veteran who held key marketing positions at Wal-Mart, VF Corporation and Nabisco, joined as Director of Ketchum South. And Mary Tosline, formerly an HR professional at GE, Fidelity Mutual Life Insurance Company and Keystone Foods Corporation, joined the agency as Chief Talent Officer.

Other key new hires include:
Madhu Bhawnani-Dutta as a Vice President/Director of Food and Wellness in the New York office; Jon Paul Buchmeyer, formerly of Condé Nast, as a Senior Vice President of the New York Travel and Lifestyle team; Tim Gray, formerly of NBC and the National Cable Television Association, as a Research Director for Ketchum West;
Susan Newberry, a healthcare communications veteran, as a Senior Vice President and Associate Director of the Washington, D.C., Healthcare Practice; Chris Nguyen, formerly with the Associated Press, as a Senior Media Specialist; Jessica Bondy, a former Board Director at three different agencies, veteran of the Confederation of British Industry, and past journalist for the Sunday Times and The Independent, as Managing Director of the UK Brand Marketing and Corporate Practices; Richard Burger as a Senior Vice President in Taipei; Sam Xiang as the Director of the Chengdu operation; and Jimmy Xiao, a financial communications veteran who formerly worked at Van der Moolen and Shanghai Petrochemical Company Limited, as a Senior Counselor in the Asia Pacific Corporate Practice.

What senior staff have departed the firm?
2005 key departures include:
Paul Baverstock – Director, European Corporate Practice
Mike Hatcliffe – Partner/Senior Counselor
Teresa Henderson – Associate Director, Ketchum South

Other senior management changes.
Ketchum strengthened its geographic and practice leadership with the following leadership changes and new hires:

Partner Dale Bornstein, former Director of New York, was promoted to Director of Global Practices, with responsibility for five Global Practices in addition to serving as the Managing Director of the Global Brand Marketing and Global Food & Nutrition Practices.

Barri Rafferty
, a Ketchum Partner who had been Ketchum South's Director and before that, New York's Associate Director, moved back to New York as Director of the agency's flagship New York office.

Penny Burgess
transferred from London to Shanghai in order to serve as General Manager for that office.

Ketchum invigorated its management and infrastructure with the following changes:
Several new partners were added to the agency's worldwide management partnership:
Thomas Barritt, Partner/Director, Global Issues & Crisis Management Network;

Robert Burnside
, Partner/Chief Learning Officer;

Mark Hume
, Partner/European Commercial Director;

David Rockland
, Ph.D., Partner/Director, Ketchum Global Research Network; and

Karen Strauss
, Partner/Global Director of Creative & Strategic Planning.

Partner Paul Rand was named Partner/Global Chief Development and Innovation Officer.

Have you made any acquisitions in the past year or merged with another agency?
Ketchum acquired Karelekas & Noone, a Washington, D.C.-based lobbying firm, which was merged with The Washington Group in late 2004. The firm was successfully integrated with The Washington Group in 2005.

How many offices do you have globally?
Ketchum has a global network of 23 offices and 44 affiliate offices.

North America
Wholly-owned offices (9): Atlanta, Chicago, Dallas, Los Angeles, New York, Pittsburgh, San Francisco, Toronto and Washington, D.C.

South America / Central America / Caribbean
Minority-owned offices (2): Mexico City, São Paulo
Affiliate offices (11): Bogotá, Buenos Aires, Caracas, Guatemala City, Lima, Managua, Panama City, San José, San Juan, San Salvador and Santiago.

Europe / Africa / Middle East
Wholly-owned offices (5): London, Hamburg, Madrid, Munich and Paris
Minority-owned office (1): Milan
Affiliate offices (17): Athens, Bratislava, Brussels, Budapest, Cape Town, Copenhagen, Dubai, Dublin, The Hague, Istanbul, Lisbon, Moscow, Prague, Tel Aviv, Vienna, Warsaw and Zurich.

Asia Pacific / North & South Asia
Minority-owned offices (6): Beijing, Chengdu, Guangzhou, Hong Kong, Shanghai and Taipei
Affiliate offices (16): Auckland, Bangalore, Bangkok, Chennai, Hanoi, Jakarta, Karachi, Kuala Lumpur, Manila, Mumbai, New Delhi, Seoul, Singapore, Sydney, Tokyo and Wellington.

What offices opened in 2005 or early 2006?
Ketchum opened an office in the industrial hub of Chengdu, China in early 2005. The agency did not close any offices in 2005 or in early 2006.

Is there a particular region, US or globally, that is growing right now? Is there a particular region, US or globally, that's shrinking?

North America:
Ketchum's North America showed its strongest growth in New York and Washington, D.C. In New York, the corporate practice and brand marketing practices helped drive growth with new business wins such as Bayer Healthcare (Alka-Seltzer), The Economist Group, Pepperidge Farm, UCB Pharma, Welch's and Weight Watchers. The New York office also formed a Travel & Lifestyle Leisure Group, headed by Jon Paul Buchmeyer, who joined the agency from Condé Nast, and it has been driving growth as well with new business wins such as Canyon Ranch and Hyatt. The office also expanded its assignment with the Absolut Company, and the agency's change management unit, Stromberg Consulting, won a major organizational change assignment from 7-Eleven.

In Ketchum South, Rhonda Harper joined the agency as Director. Many of the agency's leading accounts are headquartered out of the Atlanta office and continue to see success with account teams based there. Ketchum South also held its second annual 24/7 brainstorm, where it invites non-profit organizations into the office and work with them to build sound communications strategies. In addition, Ketchum South won new business with Direct Energy, CNN, Georgia Pacific, Jabil Circuit and Cadbury-Schweppes.

The Washington Group, Ketchum's lobbying unit, continued its momentum with wins from the Embassy of Panama, the State of Connecticut (BRAC) and the National Center for Genome Resources. Additionally, The Washington Group expanded its expertise with lobbying veterans Spike Karalekas and Jim Noone, who both joined the firm through the acquisition of Karalekas & Noone in late 2004.

Ketchum also picked up several global new business wins with Cadbury-Schweppes, National Geographic and Samsonite.

Europe/Middle East/Africa:
Europe continues to be the region where the agency sees significant growth opportunities. Ketchum Europe now has well-defined offerings in all major Western European markets. The agency sees opportunities for growth in Central and Eastern Europe and the Middle East, as well as expansion opportunities in Germany, Spain, France and the UK Healthcare and consumer sectors are particularly strong, evidenced by an increasing number of multi-office-serviced clients such as Whirlpool, Samsonite, Kodak, Roche and Procter & Gamble.

In 2005, Ketchum expanded its European network with new affiliates in Ireland, Austria, Poland, United Arab Emirates, Denmark and Portugal. Also notable for Europe in 2005 was the expansion of multi-national client engagements, including Procter & Gamble, Kodak, FedEx and First Data Corporation, as well as multi-national new business wins with Samsonite, Whirlpool and Tommy Hilfiger. Ketchum London was named among the top 100 best small firms to work for in the UK by the Sunday Times, and Ketchum Paris won the grand prize in the PR category of the 2005 Top Com Business Awards.

Asia Pacific:
In Greater China, Ketchum continues to lead the market with a strong staff of 160-plus public relations professionals. Additionally, Ketchum Newscan is celebrating its 25th anniversary this year. As more and more corporations expand their businesses westward in China, more opportunities will open and Ketchum will be poised to meet the growing needs of clients in this area. In 2005, one of Ketchum's first steps for this expanded regional growth was to open a new office in Chengdu, China – the region's most important commercial center with a market reach of 200 million consumers – bringing our total number of offices to six in the region. Additionally, Ketchum is carving a leadership position in Asia representing Chinese companies that are listing publicly for the first time; the agency also is developing and communicating corporate-social-responsibility initiatives. Plans to support growth in the region include the transfer of Penny Burgess from London to serve as the General Manager of the Shanghai office. And the region has been home to some of the agency's key account team leaders who include Denise Kaufmann, Paul Cohen and Kerrin Roberts who are now based out of the US The agency will continue its momentum of cross-border client assignments in the Asia Pacific region and continue its strong relationships with agency affiliates in Korea, Japan, Singapore and Australia.

Latin America:
In Latin America, Ketchum's operations are very stable. The Brazil office plays an increased role in overseeing the Latin America healthcare business, in particular the Wyeth Tygacil account. Ketchum is increasing its investment in technology and online resources in the region and further developing its knowledge-sharing and best practices from around the global network.

How many practice areas do you have?
Ketchum has five global practices – Brand Marketing, Corporate, Food & Nutrition, Healthcare and Technology – that are part of the agency's core strategy. Special areas of expertise include: Issues and Crisis Management, The Washington Group (lobbying and public affairs), eKetchum (new media solutions), Ketchum Personalized Media, Women 25to54 (marketing to women), Ketchum Entertainment Marketing, Ketchum Sports Network, Ketchum Corporate Social Responsibility, Communications Training Network, Concentric Communications (sales force communications and meetings), Multicultural Marketing, Research and Measurement, Communications & Media Strategy Group and Stromberg Consulting (change management and workplace communications).

Which ones are new? Of those, which ones are part of the core strategy of the agency?
The agency has developed two new products that facilitate delivering breakthrough solutions and are all part of the agency's core strategy. These were introduced in 2005:

Ketchum Personalized Media (KPM) – Recognizing that the power of the press has been transferred to the masses, Ketchum leaped to the front of the industry this year with a suite of online media products created and delivered by a team of technical and creative experts.

The most popular offerings range from podcasts, blogs and blog monitoring, to Really Simple Syndication (RSS), search engine optimization (SEO) and mobile marketing. Since launch, the KPM team has handled six new blog monitoring assignments for clients such as ConAgra and Cingular Wireless; developed podcasts for clients such as IBM, Kimberly-Clark and Hyundai Motor America; conducted a mobile marketing program for Kimberly-Clark; created Web sites for 12 new clients; managed SEO for the Canned Food Alliance and Aetna; developed blogs for FedEx, Kimberly-Clark and the Canned Food Alliance; and implemented RSS for Best Buy Geek Squad and IBM.

In addition, Ketchum's new Blog Insights Service is enabling a number of Fortune 500 companies, including Cingular Wireless and Aetna, to understand, monitor and manage communications throughout blogs, message boards and Usenet groups. Also, Ketchum Personalized Media authors its own blog.

Women 25to54 – Based on the insight that women are "multi-minders," – with much more on their minds today than just five years ago as more of everything competes for their attention – the Ketchum Global Brand Practice designed a new communications product to reach this powerful demographic group of 53 million women with little time for commercial messages.

A four-phase communications program fulfills an unmet need in the marketplace through a strategy that delivers credible messages geared to quickly and completely connect – specifically, a "what really matters" credibility index; "quick-connect" messaging; "e-surround" programming; and "consistent confirmation." Women 25to54 already has made a difference for The Canned Food Alliance (

Ketchum not only launched this new offering to clients but has even coined the term "multi-minding" – the process of continually thinking about, and preparing for, the many aspects of a multi-faceted life – as cited in Brandweek, BusinessWeek and Fast Company.

Also in 2005, Ketchum launched a major initiative it calls "ReCreativity," an entirely proprietary and internal program. ReCreativity responds to the new ways that people access, control and assign credibility to information sources. Organized around the simple principle of tackling challenges in reinvented ways, every Ketchum brainstorm is now structured around "5Ms" – the message, the messenger, the medium, the moment and the measurement. Participants look at every client challenge from the perspective of the 5Ms, being coached to go beyond the obvious to find unexpected solutions at every critical point in the communication process.

In addition, Ketchum launched a new Communications Training Network and curriculum, a global resource that prepares clients for a broad range of high-stakes communications challenges – from media interviews, press conferences and crisis-management response to scientific symposia, speeches, legislative meetings and effective business writing and presentations. With a full-scale broadcast training studio in New York and instructors who travel to location on request, the Ketchum Communications Training Network has a complete offering of resources and expertise to help achieve corporate training and communications objectives.

Which practice areas have been phased out in the past year?
Ketchum has not phased out any practice areas during the past year.

What practice areas showed the most growth? Which practice areas showed the least growth?
Ketchum's Global Corporate Practice continues to grow and gain momentum. In 2005, Corporate Practice assignments accounted for one third of the work done in most geographies. In fact, the practice represents 46% of the New York office's revenue and it's increased in size by nearly 40% in Ketchum South, Ketchum West and in Munich. This growth is based not only on organic growth with clients like Fireman's Fund, Chase Card Services, FedEx, IBM and First Data but also due to some major new engagements. These new engagements include the Federated/May merger, the Wendy's crisis in San José, the successful joint lobbying/public affairs effort to keep open Groton Navy Base, and the SinoChem IPO in China.

Additionally, the Practice was strengthened through talent acquisition and realignment, including bringing in Jessica Bondy, a former Board Director at three different agencies, veteran of the Confederation of British Industry, and past journalist for the Sunday Times and The Independent, in London; Julie Ferriot, a financial services expert formerly of Bragman Nyman Cafarelli, and Chris Nguyen, formerly of the Associated Press, in Ketchum West; Kerstin Kraemer, a public affairs expert, in Munich; Jimmy Xiao, a financial communications veteran who formerly worked at Van der Moolen and Shanghai Petrochemical Company Limited, and Eve LaRosa, formerly of Burson-Marsteller and KPMG, in Shanghai; and transferring Paul Cohen and Kerrin Roberts, both Vice Presidents, from Shanghai and Hong Kong, respectively, to New York.

Last year, Ketchum named a number of its senior leaders, who were selected for their extensive corporate experience and ability to counsel clients on a broad range of corporate reputation issues, or for a deep expertise in a particular area, to the role of Global Corporate Strategist. This network remained strong in 2005 and continued to bring value to clients around the globe. Indeed, Ketchum received Silver Anvils and SABRE awards for account work done on behalf of the US Department of Health and Human Services and Fireman's Fund Insurance Company.

The Global Brand Marketing and Food & Nutrition Practices remained strong and showed growth with several new business wins, including Jim Beam Brands, Weight Watchers, Cranium, Ghirardelli Chocolate, Pepperidge Farm, ConAgra Ingredients and White Wave Foods. The Brand Marketing Practice launched a new offering focused on marketing to women – called Women 25to54 – and the Food & Nutrition Practice now has a more defined core offering surrounding health and wellness initiatives and marketing. Work for Best Buy Geek Squad, J.R. Simplot and Mattel received industry recognition at national awards programs like the PRSA Silver Anvils and the SABRE awards.

The Healthcare Practice experienced organic growth in New York and London as well as several new wins such as GlaxoSmithKline, UCB Pharma, Tibotec, Takeda (Ramelteon) and additional work with Roche (Mabthera and Tarceva). The Practice was recognized at multiple industry award ceremonies for the Hispanic marketing educational program (Sana La Rana) it conducted for Pfizer. The Healthcare Practice also supported and continues to support much of the work the agency does in conjunction with the World Economic Forum's Global Institute for Partnership & Governance and Global Health Initiative.

Concentric Communications worked with Merck and Schering-Plough to introduce Vytorin (a cholesterol-reducing agent) to their pharmaceutical sales force through an interactive broadcast training session; it was the largest product launch meeting in pharmaceutical history. Concentric also worked with SonoSite to help launch MicroMaxx, its new portable, state-of-the-art ultrasound machine, through a road show called "The Art of Performance" that featured gala openings at contemporary art galleries across the US. In addition to the road show, Concentric also helped SonoSite develop a national sales meeting in San Francisco and a national launch meeting in Newport Beach.

Ketchum Entertainment Marketing (KEM) continued to grow with new business wins such as Best Buy Geek Squad, Absolut Apeach, Kodak, Dockers and being named product placement agency of record for Jim Beam Brands. In 2005, KEM worked alongside the Brand Marketing Practice to develop a learning program titled "Paw & Order" for Merial. Patterned after the hit TV show Law & Order, the DVD used a fictional case of parasite infection transmitted from a puppy to a child to focus on important clinic procedures that ensure veterinary professionals are operating above the "normal standard of care." KEM also helped Absolut launch its peach-flavored vodka through a celebrity event.

What is the distribution of accounts across practice areas?
More than 40 percent of the agency's income stems from multinational, multi-practice accounts.

What key account wins did you have in 2005?
2005 has been a remarkably successful new business year, with a 51% global win record and 213 new business wins globally. Some of the noteworthy new assignments include:

Cadbury-Schweppes Americas: ongoing corporate reputation work

Cranium: awareness-building work for a line of mind-enhancing games

Federated Department Stores/May Company Merger: communications around the merger

National Geographic and IBM: the launch of the world's largest DNA collection and analysis project

Novartis (Enablex): public education campaign for those suffering from overactive bladder

Pepperidge Farm: promoting its line of whole-grain products

Samsonite Luggage: a global product repositioning and launch

Other important US new business wins include First Data Corporation, 7-Eleven (Stromberg Consulting), Genworth Financial, GlaxoSmithKline, The Economist Group, Ghirardelli Chocolate, Canyon Ranch, White Wave, ConAgra Ingredients, Wyeth (Primatene, DVS and BZA), Weight Watchers and Pokémon.

A select list of US new business wins for 2005 includes:
Absolut (Level Vodka, Apeach)
Altana Pharma (Daxas)
Bayer Healthcare (Alka-Seltzer 75th Anniversary)
Boehringer-Ingelheim (restless-leg-syndrome treatment)
Canyon Ranch
Centers for Medicare & Medicare Services
College of American Pathologists
ConAgra Ingredients
The Economist Group
Genworth Financial
Georgia Pacific Building Products
Ghirardelli Chocolate Company
GlaxoSmithKline (cardiovascular drugs)
Gordon & Betty Moore Foundation
Jabil Circuit
Jim Beam Brands (DeKuyper, Peachtree Schnapps)
Matchbox Cars
National Geographic (genome project)
Pepperidge Farm
The Securities Industry Association
Seeds of Change
Takeda (Ramelteon)
US Department of Health and Human Services
UCB Pharma
The Walt Disney Company
Weight Watchers
White Wave Foods
Wyeth Pharmaceuticals (Primatene, DVS, BZA)

What key accounts did you lose in 2005?
Ketchum did not lose any key accounts in 2005.

Did you expand any existing accounts into new domestic or international markets? Did any dormant clients start to spend with you again?
A source of pride has been the great loyalty and faith that longstanding clients showed Ketchum in 2005 by expanding their relationships with the firm. Out of the agency's 50 top accounts, 38 increased their budgets over the year prior, with blue chip companies that include JPMorgan Chase Card Services, The Clorox Company, FedEx, Fireman's Fund Insurance Company, Kimberly-Clark, Kodak, Nokia, Novartis, Procter & Gamble, Roche, Solvay and Wyeth Pharmaceuticals, all entrusting Ketchum with significant new work. Indeed, Ketchum grew its most significant ($1 million-plus) client relationships by 20.5% over 2004 and retained every one of these clients. And many of these clients are serviced by more than one geography and practice.

2005 proved to be a great year for award-winning and recognized account work. Whether it was helping to launch a landmark global research project on genetic mapping for National Geographic or an overactive bladder treatment with Novartis, keeping a naval sub base open in Connecticut, working with Aetna to help women take control of their health benefits planning, helping Fireman's Fund launch a new employee cause-related program, working with long-time client Wendy's successfully to navigate a crisis in San José, working with Federated Department Stores on its acquisition of May Company, helping Chase Card Services launch its new "blink" card, or working with Kodak to launch its EasyShare-One camera, Ketchum was there in 2005. The agency also continued its work with the World Economic Forum's Global Institute for Partnership & Governance and Global Health Initiative.

Did you experience top-line or bottom-line growth in the past year? How did your performance, in terms of revenue and growth, meet expectations you had for the year?
Unfortunately, due to Sarbanes-Oxley, we are not permitted to disclose this information. All in all, the agency exceeded all of its financial goals in 2005. As mentioned above, Ketchum won 213 new pieces of business, expanded 38 of the agency's 50 top accounts over the year prior and grew in aggregate its top 30 client relationships by over 20% over 2004 and retained every one of these clients, and improved its employee turnover rate over 2004 by six percentage points.

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