THE CLIENT CATALYSTS: FRANK CELLA - Nestle's top global marketing figure wants his agencies to think beyond the usual TV strategies

Frank Cella is famous for belting out Chicago and My Way at Nestle company events, and since singing along as his wife plays the piano is one of his hobbies, it is not done for effect. For a man who commands a global marketing communications budget of around $2.6 billion, he is remarkably sunny and cheerful.

We meet at London's Mayfair Intercontinental hotel, which Nestle has taken over for one of a number of roadshows it is holding all over the world. Cella has his trusty PR man at his side, as well as Tom Freitag, the former Ogilvy worldwide management supervisor on Nestle and SmithKline Beecham, who is Nestle's director of marketing communications. But there is no mistaking who's the boss.

The 61-year-old has filled the top global marketing job at Nestle since 1999, when Peter Brabeck, the chief executive of Nestle, appointed him.

For Brabeck, who is a keen advocate of globalisation, advertising and marketing are at the leading edge of the battle to sell the coffee, water, cereals, ice-cream, pasta, pet food and confectionery brands that drive its business.

Like Brabeck, Cella started as a sales rep. And like Brabeck, Cella has worked at Nestle for ages. Armed with a BA from the University of Pennsylvania, he has notched up 39 years with the 135-year-old Swiss company, the world's largest food and drinks group.

Pinning down what makes Cella popular with his agencies proves remarkably easy. He is highly intelligent, very experienced and, while delightful, civilised company, is objective and tough. He brings a sort of moral underlay to the interview that raises him far above the agency politics fray. Top it all with a considered calm and an infectious sense of humour and you have an impressive package indeed.

Cella made his mark in sales and brand management. In 1967 he was the brand manager who took the Taster's Choice freeze-dried coffee brand from test market into national distribution. (For those too young to remember, Taster's Choice versus Maxim from General Foods was the Coke versus Pepsi of its day.) He moved through senior positions with Nestle Canada until 1988, when he returned to the US. By 1992 he was back in Toronto as the chairman and chief executive of Nestle Canada. Two years ago, he was made executive vice-president, strategic business units and marketing for Nestle SA and he moved to Clarens, Switzerland, near Nestle's Vevey headquarters.

Nestle's unusual location is just one of the things that distinguishes it from other multinationals. Henri Nestle was a German with a social conscience who invented baby food as a way of curbing infant mortality in Switzerland.

But the American Page brothers, who founded the Anglo-Swiss Condensed Milk Company which merged with Nestle in 1905, had the same amount of influence on Nestle's early development.

Henri Nestle and the Page brothers realised early on that Switzerland's local market was too small. But while their competitors exported from their headquarters, Nestle built a network of foreign factories with strong local roots. Today, Nestle concentrates production in fewer, more efficient factories, but it knows that its decentralised marketing structure - which boils down to a focus on knowing the local consumer and working within their media environment - remains one of its greatest strengths.

"We are highly decentralised in terms of our marketing so I am not involved in executional terms at all,

Cella says. "Much of our communication is adapted from a broader framework provided by Vevey, adapted by the markets and executed there too."

A key concern for Cella is obvious: how to get the balance right between having local, empowered leaders and some degree of central co-ordination.

In that sense, Nestle appears to be looser, and therefore presumably more exciting to work for, than Coca-Cola or Procter & Gamble, where the influence of Cincinnati or Atlanta looms large.

On agencies, there is the usual tension that Nestle shares with all FMCG giants. That is, absolutely wanting global agencies on the crucial global brands while simultaneously wanting a decentralised marketing structure giving country managers and marketers maximum flex on the smaller local brands. But, however you cut it, six global brands are where it's at: Nestle, Nescafe, Nestea, Buitoni, Friskies and Maggi account for roughly three-quarters of the company's sales.

Unilever has an interesting balance on the carve up between Lowe and J. Walter Thompson, for example, on its major brands and categories, while using the likes of Mother and Bartle Bogle Hegarty on the side. Nestle has not followed such a bold route, but has reviewed its arrangements over the past year to establish lead agencies for the major categories (in most cases there is also an aligned back-up agency). While achieving more balance and clarity, this has required some stealthy diplomacy on Nestle's part for in the process a number of local agencies have lost business.

With Publicis and McCann-Erickson dominating in billings terms, the lead creative agencies have emerged as follows: McCann on Nestle and Nescafe, McCann plus Dentsu on Nestea and Publicis on Buitoni and Maggi. McCann and Lowe share Nestle's petcare business but the business is under review after the Purina acquisition. Ogilvy, separately, has lead status on other areas, including relationship marketing and "chilled

(yoghurt, for example).

Media is still determined locally by market and sometimes by region - Universal McCann for Latin America, for example. Apart from a few residual local agencies, Nestle works with Universal McCann, Mediaedge:CIA, Optimedia and MindShare, although sources suggest that the latter's alignment with Unilever is tesing Nestle's loyalty.

Sticking to a more traditional agency structure than Unilever does not mean Nestle is unsuccessful. Cella is approaching communications off the back of sparkling results - Nestle achieved a 16 per cent rise in net profit to 6.68 billion Swiss francs (£2.82 billion) for 2001, while analysts expected a rise of "only

11 per cent. Also Brabeck has predicted that he will meet or exceed the 4 per cent volume growth target for 2002. Not bad in the middle of a so-called recession.

In the 70s and 80s, Nestle was accused of pushing powdered baby milk in poorer developing countries that allegedly caused illness to millions of infants. The main problem, it emerged, was the use of unclean water.

Learning from this damaging debacle, Nestle has embarked on more open relationships - both with the investor relations community and with its agencies. Unlike his predecessor, Helmut Maucher, Brabeck is a regular figure at Nestle's investor road shows.

The P4 Forums, which are currently being held all over the world, are an indication of this openness. They also indicate that Nestle thinks it has a problem communicating with its agencies.

There are ten global roadshows in all - five in what Cella calls "zone Europe", all in and around London. They are genuine forums, he insists, and the aim is to seriously improve Nestle's communications: "We're not bringing in gurus to give us Ten Commandments, the objective is to stimulate and inspire our agencies. And all the Nestle people here have the responsibility and accountability to say yes."

P4 refers to the four strategic pillars that Brabeck expressed in his blueprint for the future of Nestle when he took over in May 1997. With an overall objective of sustainable, profitable growth, he set out four ways, or "pillars", which could help to achieve it: being a low-cost operator; concentrating on innovation and renovation; having products that are available everywhere; and, finally, consumer communication.

On this last topic, Cella's main objective is to get his agencies to shift budgets out of TV and into non-traditional communications. Currently Nestle spends about $1.6 billion a year with its six aligned agencies, and a further $1 billion with non-aligned agencies. The budget is split roughly 60/40 in favour of above-the-line media and a key priority is to convince the operating companies not to have a line anywhere. Total communications, in other words, is the mantra.

"Buying gross rating points and cost per thousand and presenting with pride our share of voice - all these days are becoming irrelevant. These statistical measurements are not doing anything to measure the effectiveness of our consumer communications. They only measure what we spend,

Cella says.

"Television is still the majority of our spend, which, frankly, is a frustration. It doesn't mean that TV spend is wrong - in some countries, Russia being a good example, it's the right route because the TV market there matches developed markets of 30 years ago. But in developed markets TV is becoming less effective. We want to encourage people to look at other forms of media - the package, the packing crate itself, digital media, CRM and so on. All these forms are too often dismissed by the senior managers at Nestle and within our agencies because they say there's no way to measure them."

So the P4 forums are designed to inspire agencies to broader, media-neutral thinking. It's hardly a new thought, so how successful have Nestle's agencies been in responding to the rallying cry?

"I don't think they've done well,

Cella says, glum for once. "But it's not all on their shoulders, I don't think we've done well either. And I don't think the problem is unique to Nestle, it's FMCG thinking in general that's entrenched. We're living with brand management structures that go back 50 years or more ... the same with our advertising agencies."

Cella, rather neatly, has his brands spread across WPP, Interpublic, Bcom3 and Dentsu. What's his view on his agencies in the context of the continuing consolidation of the communications business? "The problem is that what drives these companies, whether it's WPP or Interpublic, is the traditional advertising agency. They have bought in other expertise, but the driver remains the traditional model of broadcast advertising."

Remuneration has a big part to play in this. Until recently, Nestle clung to the commission system with agencies making their money on what they produced and what Nestle spent, which has nothing to do with how effective either side is. Now the company is testing two models of fee plus performance with highly quantifiable objectives related to growth, profitability, quality of growth and some softer measures - quality of work, strategic thinking and so on. "It shares the risk and the reward," Freitag says.

Early tests in the US and Australia were successful and the fee payment was implemented throughout those businesses. Now it's being considered by Andrew Harrison, the ambitious and vocal marketing director of Nestle Rowntree. "Out of the five agencies we use in the US, two got significant bonuses, one got a reasonable one and only one did not achieve its target,

Freitag says. "Contrary to my experience in the agency world where clients find a way not to pay the bonus, we would love to pay it. We are not in the business of squeezing our agency partners. We want to squeeze them to do better work, but not financially."

Such statements are typical of a client which is considered to be one of the most loyal in the business, too loyal perhaps. Does Nestle give its agencies a hard enough time? "I think we could be more demanding," Freitag says. "It's one of the messages coming from our agencies." "Demanding within a context that invites openness,

Cella adds. "Firing agencies every other Wednesday doesn't make you a better client."