Will Unilever's savings encourage other brands to try in-housing?

FMCG giant claims in its report that it saved €500m on marketing last year.

Will Unilever's savings encourage other brands to try in-housing?

Another week, another story about in-housing and its potential threat to agencies. This time, the thorny topic was stoked by the launch of Unilever's latest annual report, which seemed to vindicate its more "efficient" approach to marketing.

The report revealed that the owner of Marmite, Dove and Hellmann’s saved more than €500m (£430m) on marketing last year by creating "more content in-house while making existing assets go further".

The world’s second-biggest advertiser’s total spend on brand and marketing investment dropped €400m to €7.16bn from €7.57bn in 2017, but a source close to the company said the decline was largely driven by currency differences.

The proportion that Unilever spent on brand and marketing also dropped by just 0.1% to about 14% of turnover, compared with 14.1% in 2017, suggesting that the company is continuing to reinvest some of the savings into its brand and marketing.

Unilever says it is increasing spend in areas driving growth, such as digital media and in-store, but decreasing production and promotional spend. Production costs are lower after the company turned to Oliver to run on-site agencies under the U-Studio banner. It has also slashed the number of agencies with whom it works.

In an opinion piece in Campaign last month, Keith Weed, the outgoing chief marketing and communications officer, wrote: "We found that having an in-house solution works for us because of the proximity it creates to our marketers. It means that the agency teams are better able to understand our marketers’ priorities and create high-quality work at increased speeds, delivering 'real-time' assets and agility while complementing our wider agency portfolio."

So should agencies be worried about this announcement turning other clients’ heads? Or will there be an inevitable dip in Unilever’s creative output that will end the in-housing experiment?

Yilmaz Erceyes

Marketing director, Premier Foods

Yes, I believe having potentially significant cost savings through in-housing will no doubt be attractive to marketers, particularly as this could enable reinvesting the freed-up funds back into media to further strengthen brands, rather than going straight against the bottom line. A key consideration for me is whether an organisation has enough scale and resource to create the right set-up to deliver exceptional creative quality in-house. Creative quality is one of the key drivers of marketing effectiveness and I would argue it is a completely different core competency to attract, develop and retain top-performing creative teams and also keep them stimulated so that they continue to generate great creative output. This will be difficult, if not impossible, to achieve in-house for many organisations in a way that actually generates savings versus buying the service externally."

Jo Coombs

Chief operating officer, Publicis Groupe UK

It might not be a question of in-housing or outsourcing, but about the "why" in the first place. Is the agency being brought in to provide new perspectives? Or is the agency being brought in to effectively deliver the brands’ perspectives? For me, it’s about working together seamlessly to offer the best solutions and talent, be that in-house or not. Through the correct partnership with an agency, you can reap the following benefits: greater diversity from a potentially broader range of talent; demand management and the ability to fix and flex more fluidly; and a bit of friction, which I believe positively correlates with improved creativity. Your agency is there to question, challenge and bring varied perspectives; and if they aren’t, it doesn’t really matter where they are based.

Jon Goldstone

Managing partner, The Brandgym; former global marketing vice-president, Unilever

I’m sure that the Unilever experience will encourage others to look closely at in-housing. Having worked with the U-Studio, managed by Oliver, I have experienced the pros and cons. The in-house model works best in very specific circumstances. It’s most effective where a brand has already established a creative idea and is looking to roll out creative assets over new markets and media channels. This adaptation work was once the source of high margins for the creative agencies, but can be managed more effectively in-house, saving both money and time. The Unilever model is less strong at creating breakthrough creative work. The talent isn’t there to do this. It’s an architects and builders situation. It’s still worth paying the creative agencies (the architects) a premium for the creative idea, but in-house functions (the builders) will do a perfectly good job of adapting that idea into various markets and media channels. 

David Miller

Chief executive, Red Brick Road

Unilever’s story isn’t as clear-cut as this headline suggests. Keith Weed implied a dissatisfaction with the quality of creative content at ISBA’s annual conference earlier this month ("We need to get back to doing great advertising"). In a rousing speech, he implored clients and agencies to have a renewed focus on developing big, insight-driven creative ideas. And the examples he shared paid credit to fantastic creative agency and client relationships, not to the achievements of in-housing. In a world where disruption increasingly comes from the most unlikely of places, we’ve all been schooled in professional restlessness, so of course every CMO should be reviewing their marketing ecosystem. But a focus on cost savings, which is to the detriment of brand-building and creativity, is not something I’d encourage my clients to try.

Chris Hirst

Global chief executive, Havas Creative

The most common misconception about our business is that because it isn’t complicated, it must be easy. The truth is the opposite – doing it well is very difficult. As evidenced by how few in reality manage to do so. Warren Buffet once said of the stock market that in the short term it is a voting machine and in the long term a weighing machine. I’m sure Unilever’s eye-catching announcement has won it some votes. But whether it adds to its mass – only time will tell.

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