Struggling P&G slashes $300m from agency costs

Consumer goods giant Procter & Gamble – the world’s biggest advertiser but currently bedevilled by flat sales and profits – is making its extensive agency line-up take the hit as it moves more money from agency fees into bigger media budgets.

Jon_moeller_86_500xCFO Jon Moeller (left) says the company has cut the number of agencies it works by 40 per cent globally, by half in the stuttering Brazil ad market. He says this has trimmed agency spending by 15 per cent or $300m. Earlier this year the company said it was trying to save $500m in agency fees. In one global beauty category (unnamed) Moeller said the company had cut agency spending by 75 per cent by consolidating into one agency.

So far, as far as we know, P&G has not actually tried to slash individual fees or imposed draconian payment terms, as Heinz has with its controversial 97 days.

CEO AG Lafley, who’s becoming executive chairman as David Taylor moves up to CEO, says: “We’re simply shutting down the unproductive non-working dollars and we’re converting it to working, and we’re getting a heck of a lot more out of our digital, mobile, search and social programs.”

P&G spends about $9bn on advertising annually so there is clearly scope for more savings. But, like many of its rivals and other big companies like the drinks giants, the fragmentation of media has led to huge rosters of specialist agencies. While many of these will lose business, the opportunities for those agencies able to offer a full suite of services – traditional and all the digital bells and whistles – are obvious.

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