Nestle rings death-knell on agency commission

Nestle has opened talks with its global agency networks about

ditching commission in favour of fees and incentive payments.

At present the Swiss-based confectionery-to-catfood giant, which spends

£1.5 billion a year on advertising, is confining the changes to

the US. But industry sources expect it to be extended to the UK and the

rest of Europe if they are seen to be successful. "To call this a 'test'

would be an understatement," an insider said.

From January the company, which still pays its roster shops up to the

full 15 per cent commission, plans to link fees in the US to the hours

agencies invest in developing ads. Nestle will pay bonuses to agencies

if the work enables its products to gain market share or higher

sales.

"Our goal is not to reduce what we pay but to get better performance,"

Nestle said.

Nestle's roster comprises Interpublic's McCann-Erickson and Lowe Lintas

& Partners Worldwide, WPP's J. Walter Thompson and Ogilvy & Mather,

France's Publicis and Japan's Dentsu.

Some senior agency executives believe Nestle may be taking advantage of

the weakened state of the US ad scene to force through the changes.

"I've not heard of a client in the last three years switching to a

remuneration system that rewards agencies better," one executive

said.

However, Nestle is expected to face problems in extending the scheme

beyond the US because of its lack of global brands, Nescafe being the

only notable exception.

A spokeswoman for Nestle in the UK said: "We constantly review our

agency remuneration policy but this change applies only to the US."