Fonterra is putting its media account up for pitch in New Zealand, with incumbent OMD and MediaCom thought to be battling it out for the spoils.
Fonterra Brands' marketing director Craig Irwin and OMD’s managing partner Andrew Reinholds were unable to be contacted. And MediaCom’s managing director Nigel Douglas was a firm no comment when asked about the pitch. But a source familiar with the account says the decision to put the business up for pitch was procurement-based and driven out of Asia in an effort to save costs through alignment, not because anyone’s done a bad job.
UPDATE: In a statement, Irwin said: "We regularly review our partnership arrangements and are currently reviewing our media agency requirements in New Zealand."
MediaCom won Fonterra’s $150 million media planning and buying business across ten markets in the Asia Pacific and Middle East after a five month review earlier this year, taking the business off incumbent OMD. And while OMD will obviously be keen to hold on to the business in these parts (as of mid 2012, Australia and New Zealand accounted for 22 percent of Fonterra's revenue, while Asia accounted for about 40 percent), like many big multinationals and many FMCG clients—which have generally been decreasing their marketing bugets over the past few years—there isn’t thought to be much of a margin in it for the agency and there isn't much strategy work to be done. So the source says losing it wouldn't be as bad as losing a bank, a telco or a consumer electronics brand.
Fonterra is one of the few New Zealand companies that has a high volume, low margin business model (although in these days of media commoditisation the same could possibly be said for some media agencies). But it is trying to increase the performance of its brands, which contributed about 55 percent of its total earnings and offer much higher profit than ingredients.
However, Nielsen's AIS figures, which are based on ratecard value, show Fonterra Brands has decreased its spend considerably in this market in the past few years, down from $31.4 million in 2010/2011 to $20 million in 2012-2013.
MAT (1/11/2012 - 31/10/2013)
MAT-1 (1/11/2011 - 31/10/2012)
MAT-2 (1/11/2010 - 31/10/2011)
Source: Nielsen Advertising Information Services
Fonterra launched a corporate video explaining its story a few months back (right in the middle of the botulism fiasco). And it's also spent a fair amount on the roll-out of its Milk in Schools scheme this year.
- This story originally stated the Australasian business was up for pitch, but the review is for New Zealand only.