CLOSE-UP: LIVE ISSUE/KELLOGG - Is Kellogg's US consolidation a prelude for Europe? JWT has cause for nerves after losing Kellogg in the US, Camilla Palmer writes

Last week J. Walter Thompson lost dollars 100 million of its flagship Kellogg business to roster rival Leo Burnett, which grabbed the entirety of the US account formerly shared between the two.

Last week J. Walter Thompson lost dollars 100 million of its flagship Kellogg business to roster rival Leo Burnett, which grabbed the entirety of the US account formerly shared between the two.

In the UK, the split between the two agencies remains unchanged - for now. JWT continues to handle the key brands Corn Flakes and Rice Krispies among others, while Burnett deals with All Bran, Pop-Tarts, Start, Rice Krispies Squares, Coco Pops, Honey Nut Loops and the Nutrigrain brands.

But while JWT will continue to handle the business in Asia-Pacific, Canada, Europe and Latin America, the change can hardly be seen as reassuring for the agency.

The move to consolidate the US account at Burnett means all brands currently handled by JWT in the US will be transferred in the next few months. Interestingly, these include the Kellogg flagship brands Corn Flakes and Special K, which were moved from Burnett for JWT to handle globally in May last year.

In return, Burnett picked up the global accounts for brands such as Frosted Flakes - known as Frosties in the UK.

The Frosties account was a pounds 3 million loss for JWT in the UK, and although Kellogg stressed at the time the agency had done nothing but 'an outstanding job' on the brand, JWT admitted it was disappointed at its loss.

Kellogg said at the time that the strategy was to build Corn Flakes and Special K into worldwide brands, and saw fit to give JWT the creative task to do this in all regions. 'We see this as a natural alignment of our business and as consistent with our global strategy,' the company said at the time.

But last week's activity seems to negate that - with the two brands once again split between JWT's global brief and Burnett's US account.

Kellogg, marketing director for the UK business, Guy Longworth, claims that this U-turn is nothing of the sort. 'It's the nature of our changing business and strategy,' he argues. 'Our US management believe the brands would be best managed by consolidating there, but continuing as planned in the UK.'

And while Kellogg claims the reshuffle does not affect the rest of its advertising strategy, it is reluctant to comment further.

'The decision to consolidate into Leo Burnett is purely a US one,' a spokeswoman said. 'It does not effect Kellogg's relationship with its global agencies, and a US shake-up is not a prelude to a review of JWT's account in the UK and Europe.'

Some close to the client think the increased competition between the two agencies makes for better campaigns and more dedicated support as they vie for the business. They claim a roster shared by two dominating agencies means more scope for moving brands around and finding the best creative and strategic solution.

So, what better way to keep the two long-timers on their toes than by calling a review and making them pull out all the stops?

Longworth is having none of this, saying the company's advertising strategy should be looked at in the context of its relationship with the two agencies.

'We've worked with JWT and Burnett for 50 and 60 years, respectively - it is a major decision to reshuffle brands as big as Corn Flakes. If there was any further realignment, I think it would have been done by now,' he adds.

Burnett is said to have been a stronger choice for the US business since Kellogg bought Keebler Foods in the US - another of the agency's clients.

It makes financial sense for Kellogg, currently roughing it out in a declining market, looking for diversification and for ways to save cash, to pool its business within Burnett.

Although the company is still safely in the number one spot in the UK, with a 42.2 per cent share of the market, it was recently forced to concede it had been overtaken by rival General Mills in the US.

Market share slipped to 30.7 per cent compared with General Mills' 32.2 per cent stake in the US cereal market last year.

Kellogg's president of morning goods in the US, Jeff Monte, explains: 'The decision means we can have the best creative and client relations, leveraging the agency structure over a larger base of our business.'

For JWT, though, the US account move means the loss of its point of contact with Kellogg executives based at the cereal manufacturer's head office in Battle Creek, Michigan. While the official line remains that the worldwide business will not be put up for review, there can be no doubt that a lack of relationship at the most senior level can be disastrous for agencies.

JWT must also be distracted by the knock-on effects of the recent resignation for health reasons of its worldwide chief executive Chris Jones, who was close to the Kellogg business.

This is an issue with which UK agencies are becoming increasingly familiar.

Lowe Lintas currently faces a similar situation over its Burger King account, which it retained in the UK, while a review in the US saw the agency lose out to McCann-Erickson.

Longworth, however, denies a lack of personal contact will affect the senior decision-makers in the US, and maintains that the close links between Kellogg and both JWT and Burnett will continue.