Unilever networks in fees ultimatum

Unilever has presented its global agency networks with 'take it or

leave it' proposals for overhauling the way they are paid as the fmcg

giant paves the way for a wholesale switch from commission to fees.



The ultimatum was delivered to senior executives of Interpublic and WPP

group agencies last week, the culmination of a series of fruitless

negotiations stretching back nearly a year.



Unilever's chairman Niall Fitzgerald's uncompromising stance is part of

efforts to make roster shops operate more efficiently.



More controversially, Unilever's chiefs want to reflect the fact that

media lies at the heart of their advertising - epitomised by their

communication channel planning strategy - by rebalancing the

remuneration system in favour of media shops rather than creative

agencies.



Meanwhile, the company is looking to reduce commission payments by

changing the status of some so-called markets, particularly in Asia and

Latin America, from undeveloped to developed, to attract less

commission.



'Unilever is a significant contributor to agency profits and anything

which impacts on that will not be palatable,' a senior manager at one

Unilever roster network said. 'This matter isn't resolved.'



The company's initiative is being driven by the much-publicised culling

of its advertising-supported brands and ensuring that marketing

initiatives behind those remaining work harder. Fitzgerald is attempting

to turn the company's static growth into a 6 per cent improvement by

2004.



Unilever believes that, with fewer brands on which to concentrate,

roster networks will be able to operate more cost-effectively while

producing better creative work.



Unilever is one of the last bastions of the commission system, which

forms the basis of almost all its remuneration to roster agencies. The

only exceptions are fees for new product development and performance

bonuses.



Now the company wants to retain a system of performance-related

payments, moving away from commission to fees. 'In many ways that's

good,' an agency source said. 'We'll be able to resource business more

effectively and avoid duplication of work.'



Unilever's core global networks are J. Walter Thompson, Ogilvy & Mather,

McCann-Erickson and Lowe Lintas & Partners. DDB joined when Unilever

bought Bestfoods, owner of Knorr and Hellmann's.



Unilever was unavailable for comment as Campaign went to press.



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