THE COLLAPSE OF CORDIANT
By John Tylee, campaignlive.co.uk, Friday, 27 June 2003 12:00AM
John Tylee charts the history of the Cordiant group and reveals how it all went so wrong for the group whose principal agencies were responsible for some of the most memorable ad campaigns.
The curtain is coming down on Cordiant, the marketing and advertising group led by the one-time wannabe actor David Hearn but whose aspirations to be a serious player on the world stage never seemed to go according to the script.
In a rapidly consolidating communications world now dominated by impresarios such as WPP Group's Sir Martin Sorrell - soon to be Cordiant's owner - there's little room for fringe performers.
How did it all go so horribly wrong? The harshness of the global recession had something to do with it. As relatively recently as 1988, the Cordiant-owned agency in London, Bates UK, had ranked number three. Egomania and hubris must also take their share of the blame. But, most crucially, the group suffered the effects of a late-90s spending spree that now appears reckless and never allowed Cordiant to replicate the scale and resource of behemoths such as WPP, Interpublic, Omnicom and Publicis Groupe.
Even the name of Cordiant's principal asset, Bates Worldwide, was a misnomer.
In reality, it never succeeded in breaking out of a Catch-22 situation in which it turned off so many global clients because it had so few of them in the first place.
What's certain is that Cordiant's demise marks the end of a proud heritage of famous work on both sides of the Atlantic. It was Bates in the US that gave the world the Unique Selling Proposition. And it was the Bates agency in London, previously Dorland Advertising, which gave UK consumers some of the most memorable TV campaigns of all time - from the Old Spice surfer riding to the music of Carmina Burana and the bead of oil, running straight as a plumb line, in the long-running "liquid engineering" series of ads for Castrol, to the spectacular "human house" spot for the Halifax.
Even up to the time of its parent's death, it was still successfully churning out the "You can do it if you B&Q it" films which have done much to sustain the DIY retailer's market leadership.
To understand what happened to Cordiant, it's necessary to go back beyond 1997, when it became a publicly quoted company in its own right, to July 1981 when Charles and Maurice Saatchi paid £7 million to make Dorlands part of their burgeoning stable.
Nakedly ambitious, the brothers planned to build an empire which would challenge the status quo where most of the global ad industry was under Madison Avenue's remote control. In Dorlands, they saw the chance not only to bolster their penetration of the UK market, but to help resolve the growing problem of account conflict with Saatchi & Saatchi.
Since its formation in 1906, Dorlands had a chequered history. Its worst period came during the early-70s when it was owned briefly by John Bentley's Barclay Securities, which stripped it of its property assets. It still managed to grow steadily throughout the 70s but by the end of the decade its then-owner, Eric Garrott, seriously ill and with no obvious successors, decided to sell. His patriotism ruled out a deal with a US group and the agency moved under the Saatchis' wing.
The brothers had been attracted by a distinctive and tightly controlled management system which hadn't always led to spectacular new-business wins but had allowed it to creep relentlessly up the rankings, earning it the sobriquet "the agency that rose without trace".
Dorlands' reluctance to ape the trumpet-blowing style of many of its rivals reflected the personality of its chief executive, Jack Rubins. A kindly man beneath his often gruff and intimidating exterior, he'd never worked anywhere else since joining Dorlands in the late-40s and was an outspoken defender of its independence. Even after the Saatchi takeover, he was insisting the agency's autonomy was in no way compromised and that neither Maurice nor Charles had even visited the Dorland offices. It was to prove a dangerous self-delusion.
The takeover also coincided with the emergence of the man whose management decisions were to play a critical part in Cordiant's fate. Michael Bungey's agency was teetering on the brink of bankruptcy when Dorlands bought it in 1984. But the experience in no way diminished the thirst for success of the one-time Nestle trainee. With Rubins ever more preoccupied with securing Dorlands' place on the international stage, Bungey, his deputy and an incurable workaholic, set about boosting his own influence and providing the agency's public face at client meetings, where Rubins wasn't totally comfortable.
Meanwhile, the Saatchis were about to pull off their most spectacular coup, which not only created the world's largest agency group but sowed the seeds of the financial crisis that was to be their undoing. Their target was Ted Bates, such a pillar of the US advertising establishment that the prospect of it falling into foreign hands seemed inconceivable.
Founded in 1940, its claim to fame was the USP, a concept in which ads were made to focus exclusively on one selling point.
Seventeen years on, the $450 million Bates acquisition looks the height of folly and, according to some observers, established the "loadsamoney" culture which eventually was to bring down Cordiant.
The acquisition marked a watershed in relations between agency networks and their giant US-based multinational clients, suddenly made aware it was they who were picking up the tab for such profligacy. Enraged by the pay-off to Bob Jacoby, the diminutive but ruthless cigar-chomping chief executive of Bates, who walked away with $110 million, RJR Nabisco, Michelob, Warner-Lambert and McDonald's stripped Bates of millions of pounds worth of business. By the summer of 1987, the Saatchis had recognised the need to bring some stability to their sprawling empire. Dorlands'
international affiliate, DFS Dorland Worldwide, was merged with Saatchi & Saatchi Compton in New York. Rubins quit in disgust, adamant he wouldn't report to Carl Spielvogel, the head of Backer & Spielvogel, which was about to be merged with Ted Bates.
With Rubins gone, the spotlight fell on Bungey. By 1988, he was heading the merged Dorlands and Ted Bates agency in London and was on the verge of leading the operation into a period of success which was to last until the mid-90s.
Up until then, the agency had been regarded as a safe haven for labour-intensive and demanding retail clients such as Woolworths and B&Q. Suddenly its work for Heinz was winning the Grand Prix at Cannes while the innovative "back to front" commercials for Tennent's Pilsner were getting the agency talked about. Even the loss of its £20 million Rover account in controversial circumstances to a new agency set up by Kevin Morley, Rover's former managing director, seemed not to hinder its progress.
However, cracks in the group edifice were starting to appear. Not only were client defections beginning to cause the Saatchi group serious financial problems but Bates' flagship New York agency was defying all Bungey's best efforts to make it the conduit by which big-spending US multinationals would be fed into the network. Bungey's critics claim he never successfully made the transition from account man to running an international business and shied away from the tough calls. A revolving-door management at Bates UK, including acrimonious disputes with the likes of Andrew Cracknell, Paul Twivy and Graham Hinton, are cited as evidence.
Yet even Bungey was powerless when, in February 1995, Mars vented its anger on the Saatchi group for Maurice Saatchi's ousting by pulling £260 million- worth of global business from Bates, ending a relationship going back more than four decades. Mars was Bates' global "glue" and its absence ensured the group which was to evolve into Cordiant would perpetually lack global credibility.
The Cordiant name was originally adopted by the Saatchi group but was taken over by the new Bates holding company after the 1997 demerger, an event greeted with euphoria by Bates senior managers long frustrated at being seen as the Saatchi "poor relations".
Who is to blame for the subsequent litany of profits warnings, job losses and a plunging share price will be the subject of lingering debate. What's certain is that, once demerged, Bungey, now Cordiant's chief executive, had to sell or rebuild. He chose a voracious acquisition programme aimed at making the group less dependent on above-the-line advertising by diversifying into higher-margin and faster-growing marketing services.
Unfortunately for Bungey, his timing couldn't have been worse. The ad sector boom was at its height and worthwhile targets were commanding premium prices. One was the Lighthouse Group, including the branding and sign specialist Fitch and the City PR company Financial Dynamics. Cordiant paid $540 million. By last year the value of the acquisition had dropped by more than two-thirds.
At Bates, the news was equally bad. Hyundai and Wendy's International defected and attempts by senior managers to evolve regional accounts into global ones were having little success. By now, Bungey's reputation as "Teflon man" - the result of his ability to escape all manner of nasty messes - seemed to be deserting him. Cordiant was more than £200 million in the red and angry shareholders were demanding change.
By the start of the year, Cordiant was under the command of Hearn, an ebullient, stocky six-footer who once considered a career as a professional actor but ended up as the managing director of Del Monte Foods in the UK and, more recently, as the boss of the Australian food manufacturer Goodman Fielder.
His strategy was to dispose of Cordiant's peripheral operations and focus on core businesses - the Bates network, Fitch, 141, its integrated marketing operation, and Healthworld, its healthcare specialist. "For sale" boards were put on Financial Dynamics, George Patterson Bates, Australia's second-largest agency, and Scholz & Friends, the Germany-based network which never successfully expanded beyond its domestic market.
Within weeks, his plans were in tatters. As if the loss of the Woolworths and Royal Mail flagship accounts at Bates UK wasn't bad enough, the drinks giant Allied Domecq dealt a lethal blow in May when it dumped the group from its roster.
Now Cordiant, which a few months ago had hoped to present itself as the antidote for major advertisers dissatisfied with the service provided by the communications "supergroups", has been forced to join what it miserably failed to beat.
COUNTDOWN TO COLLAPSE
1981: Saatchi brothers buy Dorland
1984: Saatchi group pays $450 million for Ted Bates network
1988: Dorland merged with Ted Bates in London
1993: Michael Bungey, Dorland chairman, made chief executive of Bates
1995: As punishment for Maurice Saatchi's ousting, Mars rips out more
than £260 million of business from Bates. Saatchi group changes
name to Cordiant
1997: Bates and Saatchi group demerged. Cordiant adopted as name of new
Bates holding company
2000: Cordiant buying spree ends in $540 million acquisition of
2001: Cordiant issues series of profit warnings. More than 1,000 jobs
2002: Bungey steps down in favour of David Hearn
2003: Bates UK loses Royal Mail and Woolworths. Allied Domecq dumps
Cordiant from its roster. WPP beats Publicis Groupe for control of
A PROUD HERITAGE OF FAMOUS WORK
1976: Old Spice ... surfer rides the waves to the music of Carmina
1985: Castrol GTX ... the memorable 'liquid engineering' TV ads
1991: Tennents ... the 'back to front' commercials were innovative
1992: Heinz ... Bates' work won the Grand Prix at Cannes
1997: Halifax ... the spectacular 'human house' commercial
1997: Royal Mail ... Bates UK counted the cost of losing the account
2001: Woolworths ... a one-time flagship account at Bates UK
2003: B&Q ... ads did much to sustain its leadership in the DIY market
This article was first published on campaignlive.co.uk
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