P&G Gillette deal hits media owners

As well as providing a likely windfall for Publicis Groupe's Starcom MediaVest, Procter & Gamble's $57 billion acquisition of Gillette is likely to further squeeze the margins of media owners.

P&G's media business is split between Starcom Group, which handles the bulk of the account, and Grey's MediaCom in the UK, while Starcom and Aegis' Carat share the business in the US. Gillette is globally aligned to MindShare but the WPP-owned network recently won the European media account for P&G's rival FMCG company Unilever.

It is likely, therefore, that P&G will shift the business out of MindShare and into Starcom if the deal is ratified, although WPP agency sources are optimistic that the company's new relationship, via MediaCom, might provide something of a lifeline.

In the UK, negotiations for the £22 million Gillette media account will shift from MindShare to P&G's associate director (media), Bernard Balderston, who trades directly with the media owners and keeps a tight rein on his agency deals. The move will increase his negotiational clout by 9 per cent.

With P&G striving for synergies and efficiencies of up to $16 billion, media expenditure is an obvious target and Balderston will seek to drive prices down further.

The future of Gillette's $442 million creative business is less clear.

P&G is increasingly relaxed about conflict issues among its roster agencies, evident from its loyalty to Grey after the agency's acquisition by WPP.

This has led to speculation that the account could stay with Omnicom's BBDO.