TOP EUROPEAN AGENCIES 1998: GROWING CONCERNS - Despite ever expanding networks the large groups still recognise the value of local players Photograph (Omitted)

There is no doubt that the power and presence of the owned groups is increasing across Europe. Continuing economic improvements in Europe’s key economies and the ever more international nature of many of their clients’ businesses have led a large number of the networks to open new offices or make acquisitions in the past year or so.

There is no doubt that the power and presence of the owned groups

is increasing across Europe. Continuing economic improvements in

Europe’s key economies and the ever more international nature of many of

their clients’ businesses have led a large number of the networks to

open new offices or make acquisitions in the past year or so.



While it would be overstating the case to suggest that all large clients

are looking for agencies with multi-country capabilities, enough are

doing so to fuel the expansion of the groups across the Continent. One

ramification of this is that medium-sized generalist agencies in various

national markets are being squeezed between the ballooning owned groups

at one end and the sector specialists at the other.



New Shandwick Europe CEO Michael Murphy says: ’Clients want pan-European

agencies, but still want us to understand the local markets.’ Shandwick,

which has recently added to its German operation with a new office in

Munich, has won a number of pan-European accounts, including Siemens,

Acorn and Nissan.



’The unowned groups are losing market share’, says Hill and Knowlton

president Europe, Middle East and Africa Paul Taaffe. ’The second issue

is that there is an emerging two-tier agency structure across

Europe.



I believe it is due to the size of the London market. Any agency that

doesn’t have strength in the UK will have trouble achieving strong

growth in the future.’



Certainly the actions of some other owned groups appear to bear this

out. Fleishman-Hillard is looking to add to its ’critical mass’ in the

UK through acqusition while fellow Omnicom-owned agency Ketchum has seen

its UK operation increase from 22 to 140 staff in 18 months following

the acquisitions of Scope in 1997 and Life PR this year.



But for others already well established in the UK, new ventures have

been springing up on the European mainland. Porter Novelli

International, which has the dominant agency in Germany and a top five

consultancy in the UK, has opened in France with Parmenide Porter

Novelli run by Jean-Baptiste Bellescize. Porter Novelli has taken steps

to strengthen its brand recognition - all its agencies now bear the

Porter Novelli name - and is striving to increase multi-country

assignments. One of the attributes about which it makes great play is

that it has achieved the ISO 9000 standard in six countries.



’We’re the only European group that can claim a quality position,’

claims Porter Novelli International chairman Peter Hehir. ’And I think

that international clients are going to demand higher quality standards

from organisations.’



Manning Selvage and Lee also opened an office in Paris last year after

tentative acquisition talks with one-time French affiliate Beaufixe came

to nothing. Clients served from that office include Rolex, Westin Hotels

and Western Union. Earlier MS&L also moved into Milan, with the

acquisition of Italian affiliate Mavellia. ’Our strategy is that we

intend to be in the top 10 in all the main western European markets’,

says MS&L executive vice-president, international strategic development

Alasdair Sutherland.



’But acquisitions are hard things to do’. MS&L is now believed to be

showing an interest in acquiring its affiliates in Belgium and Spain:

Interel and ACH.



In 1997 GCI Europe picked up work for aircraft giant Boeing on a

pan-European basis. It also harbours network expansion plans. ’We want

to become one of the top five agencies in the next three years,’ says

GCI Europe chairman Ralf Hering.



Gertrude Bakel will join the group on 1 August as vice-president

responsible for marketing the GCI brand in Europe. The agency’s next

wave of expansion seems likely to take place in Eastern Europe - GCI

already has offices in the Czech Republic and the Ukraine and is

terminating affiliate agreements with agencies in other countries with a

view to starting up its own operations in Poland, Russia and Hungary. ’I

am still fairly convinced that if you really want to distil the

challenge for networks down to its essence it is about who can integrate

their people and systems best and as result elevate their service to the

highest level of consistent quality,’ says Ketchum international senior

partner Jerry Olszewski. He goes on to add that European members of

staff are having a greater influence on Ketchum’s ’global thinking’ than

before, backing this up by pointing out that Marianne Friese, director

of the Munich office, is also director of the global brand marketing

practice group.



Fleishman-Hillard posted an 18 per cent growth across Europe last year,

with its Ireland operation doing particularly well. One trend that its

executive vice-president Europe Francois Giannesini identifies is the

development of crisis management planning.



’Corporations are realising that the corporate brand is really under

scrutiny and can be threatened if something happens,’ says

Giannesini.



’Companies are saying they want a full crisis and issues plan and are

prepared to invest in evaluating their vulnerabilities.’



Half of Hill and Knowlton’s European revenues now come from clients

represented and advised by two or more of its offices. Although much of

this is corporate work, Taaffe adds that consumer clients are beginning

to ’dabble’ more in multi-country assignments.



But despite Hill and Knowlton’s success in this area, Taaffe argues that

that type of work is not the be all and end all. ’Those networks that

focus only on the trans-national clients will die,’ he says. ’You have

to focus on all kinds of client. You collect your reputation locally.

And if you ever lose your local reputation clients will never use

you.’



This might be construed as a dig at Burson-Marsteller, which having

moved to a worldwide practice structure two years ago, is putting a lot

of resources into supporting its relationship with its 25 biggest global

clients. Fifteen of these ’key’ clients are aggressive in Europe and

between them account for about 40 per cent of B-M’s European

revenue.



The likes of Andersen Consulting and Unilever have increased their

activities substantially, but not to a blanket level across the whole

Continent.



Last year, B-M sold its offices in Hungary and the Czech Republic back

to their management teams, although retaining small stakes in them to

create what vice-chairman worldwide services Jeff Hunt terms ’super

affiliates’.



Burson-Marsteller’s concentration on larger clients has opened the way

for Cohn and Wolfe, which like Burson-Marsteller is owned by advertising

group Young and Rubicam, to develop its own European network.



At the end of 1997, Cohn and Wolfe opened a Frankfurt office under joint

managing directors Volker Klenk and Stephan Hoursch, in addition to its

London, Copenhagen and Milan operations. ’We realised that we were

probably missing opportunities to pitch for 10 to 12 bits of substantial

business every year because we did not have a European network,’ says

Cohn and Wolfe network director James Thellusson.



It has been a mixed year for Euro RSCG International Communications.



While its performance was satisfactory in the UK and France - where it

merged Euro RSCG Institutionnel and Hieaux Reus into an entity called

Euro RSCG Corporate - there were changes and setbacks in Germany. IPR&O

was merged into the ABC brand and work on the high-billing German

Government Aids Campaign was cut back drastically.



The fall in its German figures also reflects the fact that corporate

advertising revenue - which in the past ERIC chairman Graham Lancaster

argued should be included - has not been incorporated into the 1997

entry.



On the plus side, pan-European wins included the Euro Fighter

consortium.



Swiss-owned Trimedia, which has offices in France and Germany as well,

is considering expansion into Spain now that it is advising white goods

company Teka on its flotation.



Growth in cross-border pharmaceutical assignments and the impending

arrival of the European single currency has led some to speculate that

we will soon witness the rise of specialist healthcare and financial PR

networks.



However, at present, it is still the hi-tech PR companies that are

leading the way for the specialists.



Late in 1997, Text 100 added a Milan office - under general manger

Daniele Iannotti, once of Italian consultancy ImageWare - to those in

Paris, Amsterdam, Stockholm, Madrid, London and Dublin.



Herald Communications also opened up in Milan at the tail end of 1997

and appointed ex-Business Press account director Ariel Mafai Giorgi to

run the business. Then in June 1998 Herald set up in Prague under Sarka

Klofachova, previously of local hi-tech specialist MMD. Herald client

Computer Associates now uses all five of the consultancy’s European

offices.



’Things can hardly have moved more quickly or positively than in the

last year’, says Herald chairman Paul Mathieu.



- Burson-Marsteller, which held third position last year, was unable to

separate its EU and non-EU PR fee income. Its total European fee income

for 1997 was pounds 52,617,000, compared to pounds 46,884,000 the

previous year



- Shandwick opens a Munich office and picks up the pan-European accounts

for Siemens, Acorn and Nissan



- Ketchum’s acquisition of Scope and Life PR (formerly Lynne Franks)

sees its UK operation increase from 22 to 140 staff in only 18

months



- Half of Hill and Knowlton’s European revenue now comes from clients

represented and advised by two or more of its offices, although H&K

president Europe, Middle East and Africa Paul Taaffe stresses that

despite the trans-national trend networks should not lose sight of the

local picture



Growth in cross-border pharmaceutical assignments and the impending

arrival of the European single currency has led some to speculate that

we will soon witness the rise of specialist healthcare and financial PR

networks. However, at present, it is still the hi-tech PR companies that

are leading the way for specialists.



EURO CONSULTANCIES OWNED GROUPS

Rank Company                            Fee income (pounds)     % Change

97                                       97            96

1    Porter Novelli International    46,495,000    41,054,000         13

2    Euro RSCG Int Comms (ERIC)      42,621,000    45,281,000          6

3    Shandwick Europe                34,788,000    35,100,000          1

4    Hill and Knowlton               29,238,000    25,297,000         16

5    GCI Europe                      12,843,740     9,003,000         43

6    Trimedia International          11,503,000     8,160,000         41

7    Incepta Group                   11,433,494     8,133,248         41

8    Grayling Group                   8,649,600     8,375,000          3

9    Ketchum Public Relations         8,174,031     4,824,800         69

10   Text 100 Group                   7,977,000     6,492,000         23

11   Manning Selvage and Lee          7,859,500     5,531,000         42

12   Fleishman-Hillard Europe         5,924,669     5,231,623         13

13   Rowland Worldwide                5,400,000             -          -

14   Cohn and Wolfe                   5,190,138     3,960,386         31

15   Herald Communications            2,978,254     2,677,854         11

16   Sanchis and Asociados1           2,770,129     4,365,014         37

Rank Company                       Staff Clients Assoc Income   Location

97                                    97      97           96

1    Porter Novelli International    610     407   10,900,000   Oxon

2    Euro RSCG Int Comms (ERIC)      619     974            -   London

3    Shandwick Europe                590     975            -   London

4    Hill and Knowlton               483     635            -   London

5    GCI Europe                      228     222    3,185,300   Germany

6    Trimedia International          152     217            -   London

7    Incepta Group                   173     259            -   London

8    Grayling Group                  138     175    5,891,400   London

9    Ketchum Public Relations        136     140            -   London

10   Text 100 Group                  163     104            -   London

11   Manning Selvage and Lee         113     163            -   London

12   Fleishman-Hillard Europe         79     188    1,587,761   Paris

13   Rowland Worldwide                85       -            -   London

14   Cohn and Wolfe                   87      90            -   London

15   Herald Communications            62      64            -   London

16   Sanchis and Asociados1           35      75            -   Madrid

1 1997 fee income dipped for Sanchis and Asociados following the sale of

shares of Madrid-based company MBO.



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