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The Battle For Rediffussion

Published: Sep 23, 2010 06:35:47 AM IST
Updated: Sep 25, 2010 12:53:16 AM IST
The Battle For Rediffussion
Image: Vikas Khot
LAST MAN STANDING Arun Nanda's agency is one of the last, large independent advertising agencies in the country

If you’ve seen The Godfather, you know who Moe Greene is. For the uninitiated, he’s the man who plays a significant role in turning Las Vegas into the gambling hub of America. In doing that, he opened the doors of the city to five of the most powerful criminal organisations in the world — one of which is headed by Michael Corleone, essayed in the film by an intense Al Pacino.

The young Corleone doesn’t quite like how Greene treats his older brother. So, in a dramatic sequence of events, he asks Moe Greene to sell out from the Las Vegas casino he runs. A furious Greene retorts: “No, I buy you out, you don’t buy me out.” An equally furious Michael keeps quiet, but later orders Greene be assassinated in what eventually turned out to be among the more famous scenes in the film.

“Think of Arun Nanda as the Moe Greene of Indian advertising,” says a senior executive in the business who worked briefly with him five years ago. Cruel as it may sound, fact is, the metaphor feels appropriate. Since 2005, Sir Martin Sorrell, the 65-year-old CEO of WPP, the world’s largest communications conglomerate, has been trying his best to increase his stake in Nanda’s Rediffusion from the 26.7 percent he already holds.

Now, Sorrell is the kind of man who ruthlessly co-opts or competes with every trend, technology or competitor that stands in the way of his dream. In the late Eighties, he kicked off WPP’s expansion aggressively through a series of acquisitions beginning with JWT and Ogilvy. It’s taken him 25 years to get this far, turning a British company called Wire and Plastic Products that made wire shopping baskets into a communications company.

Sorrell’s reputation to spot trends years ahead of competition is the stuff legends are made of. He knows home grown Indian entrepreneurs have built enough muscle to spend as much on advertising as their counterparts elsewhere. So, while many grew their brands with domestic agencies like Rediffusion and Mudra, it is inevitable their spending powers will attract attention from global agencies and arch rivals like Publicis and IPG. Coupled with the formal approach and international reach of his agencies, Sorrell knows he can sew India up well before it evolves completely. The hitch? Arun Nanda.

“Not now, not ever,” Nanda famously said in 2007, when it came to selling any of the 60 percent stake he holds in Rediffusion Y&R with co-founder Ajit Balakrishnan, to Sorrell’s WPP. At 67, Diwan Arun Nanda, a gold medallist from IIM Ahmedabad, is impeccably dressed, alert and smooth of manner. The agency he presides over is one of the oldest (he started it in 1973) and one of the last, large independent advertising agencies in the country. There is a school of thought that believes Nanda didn’t sell out to Sorrell because he expected a valuation of Rs. 500 crore for his firm — a line Nanda rejects flatly.

The reason Nanda felt confident enough to resist WPP’s might was his theory that many Indian businesses would grow to a scale that would allow agencies like his to reduce their dependence on multinational clients. “Seventy five percent of our revenue has always been from domestic clients who do not have international affiliations with their international partners,” says Nanda.

The frosty relationships that exist between the two colourful men are fascinating. In 2007 for instance, Bates, a WPP arm, tried to take over Sercon, an Indian marketing services firm. This was around the time Nanda and former cricketer Ravi Shastri had floated Showdiff in the same space. For 18 months, Bates could not complete the acquisition because Nanda and Shastri invoked the provisions of Press Note 1, a government regulation, that says foreign investors with joint ventures in the country need a no-objection certificate from their Indian partners to set up independent ventures in the same field.

“I still hold true to the ‘not now’ part,” he says. “But it’s difficult to say the same of ‘not ever’. I may die and go away, and who knows what somebody after me will decide?” You suspect there is sadness in his voice, resignation as well perhaps.

Last month, Rediffusion lost the Airtel account to JWT India and Colgate-Palmolive to Bates 141 — both agencies controlled by Sorrell’s WPP Group. Airtel was its largest account by revenue and was estimated to bring in more than half of everything that Rediffusion’s Delhi office earned. It generated annual advertising and marketing spends in the region of Rs. 400-600 crore. Both the accounts put together accounted for more than a quarter of the firm’s annual revenues.

“Colgate was Rediff’s backbone and Airtel the star in its galaxy. Obviously, these are huge losses and not the kinds you can shrug off,” says K.S. Chakravarthy, former creative head at Rediffusion and now the same with Draft FCB Ulka. “Nanda is the father of Brand Airtel,” he adds. “I was upset when I heard Airtel’s moved and I share his personal hurt.”
Airtel and WPP declined to talk to us for this story. Colvyn Harris, CEO, JWT India too refused to confirm if his agency had indeed won the Airtel account. Funny thing is, everybody in the industry knows what’s really happened. But few seem willing to admit the long arms of Sir Martin Sorrell pulled a few strings.

What Really Happened
“Airtel’s ambitions are sky high. At some point, therefore, they will ask themselves: Have we outgrown our agency?” says Chakravarthy. Until very recently though, nobody would have ever imagined things would come to such a pass between Rediffusion and Airtel. “Nanda had a good equation with Sunil Mittal. Preet Bedi [former president at the agency] had a good equation with Manoj Kohli, I had a good equation with other senior management including those in charge of marketing. We had multiple senior equations that were strong,” says Chakravarthy.

Over time though, Sunil Mittal opted out of operations, Manoj Kohli moved to handle international responsibilities and eventually relationships either disappeared or weren’t as strong. Meanwhile, Airtel was increasingly becoming a global company with operations in Sri Lanka, Bangladesh, and more recently Africa through the Zain acquisition.

A senior executive at one of WPP’s Indian companies privy to Sorrell’s agenda during his visits to the country says, for close to five years now, Sorrell and Nanda have met Sunil Mittal, the ambitious founder of Airtel, together. The script at these meetings, he says, has remained unchanged: Mittal insists WPP provide Airtel with global talent, global integration and better creatives. Sorrell says Mittal can have access to all WPP talent in the network. Meeting over, Sorrell asks Nanda to take a hike or pay exorbitantly for access to talent within the network. “Fireworks always followed,” he recalls.

The Battle For Rediffussion

Sure, technically Rediffusion was part of WPP’s network because of the 26.7 percent stake Young & Rubicam, a WPP company, held in it. Normally that should have meant getting access to Y&R agencies and talent around the world depending on client needs. But that didn’t happen at Rediffusion because of the testy relationship between Nanda and Sorrell.

Even as Nanda’s relationship with Mittal was under pressure, Sorrell was cementing his relationship with Mittal by trying to get into the other businesses Mittal was betting on. As early as 2007, JWT India managed to snag retail and DTH — both new businesses for the Mittal empire. But what hurt was not having a large telecom client on his roster. It wasn’t for lack of trying. As late as September last year, JWT made a pitch to Airtel, but Mittal remained unconvinced.

Sorrell found his opening to dislodge Nanda from Airtel two months ago when he received a note from Sunil Mittal that said unless Airtel’s concerns were addressed immediately, Mittal would consider moving his account to an agency outside the WPP network.

He had three problems. The first was Rediffusion’s inability to maintain a talented creative team on the Airtel account over a long term. Between 2007 and 2010, Rediffusion had lost three national creative heads. The second was frustration at Airtel around what it perceived as a lack of fresh ideas to take the brand forward. For years, it was the undisputed leader in mobile telephony. But now it was under heavy attack by aggressive and creative competitors like Tata DoCoMo, Idea and Aircel. “If I can put this as bluntly as possible — there is a difference of viewpoint between us and Airtel on the way forward for the brand. This consequently affects the communication that needs to be done and the kind of customer you believe needs to be addressed. This will become evident to all of you six months or so down the line,” says Nanda. And finally, Mittal wrote that he thought Rediffusion’s unable to offer local talent and insights outside India, especially in Africa, which is Airtel’s next big opportunity.

Mittal’s letter jolted Sorrell and his largest agency in India, JWT (which had unsuccessfully pitched to Airtel less than a year back), into action. Frantic requests for insights were sent out to its international network, senior talent was hired (Swiss-born Adrian Miller was hired from Saatchi & Saatchi Malaysia as chief creative officer in July) and ideation sessions involving senior JWT resources from across India and other countries were offered to Airtel.

Be that as it may, Mittal’s perception of disconnect between Airtel and Rediffusion fuelled by Sorrell’s persuasive abilities culminated in Nanda getting the sack. “We’ve done well together, but from now on I want Sorrell to handle my brand internationally,” Mittal reportedly told Nanda.

Off-the-record conversations with people who played key roles at Airtel and Rediffusion over the last three years reveal that on most parameters clients use to measure their agencies — brand scores, imagery, awards, ability to drive sales growth — Rediffusion did well.

To be fair to Rediffusion, it got fairly conflicting signals from Airtel. “In the last 10 years there were seven different marketing heads at Airtel,” says Nanda. “Nothing went wrong in the manner work was done, the quality of work or results achieved, and yet we’re parting,” he rues.

The Sorrell Effect
“Sorrell does things for effect as well,” says the head of a large company in the media buying space. “The Rediffusion saga will also be an example to other entrepreneurs in Asia Pacific, where WPP has plans to buy more companies, to not take him on. It’s not that such an act would go unnoticed over cocktails at advertising parties,” says the creative head of a large agency.

The Battle For Rediffussion

Image: Dinesh Krishnan

On Nanda’s part, he will quickly need to ensure the losses of Airtel and Colgate-Palmolive don’t turn into body blows for Rediffusion. “I think the real danger in the near future will be retaining or attracting people. It has already gone through two complete sets of creative leadership in two years and unless it can improve the morale of its employees there’s the danger of more people leaving. Then will its other clients start wondering if something is wrong? It’s never the best of things to defend existing clients,” says Chakravarthy.

“The business that we lost, we’ll make it up. We may not make it up in six weeks or two months but we are confident that we will get the clients to make up that revenue and go far beyond that. Look at Parle, they’re the largest biscuit manufacturer in the world but they’re domestic. If there were 50 companies like them five years ago, there will be 500 five years from now,” says Nanda. The only problem is Sorrell will be waiting as well.

(This story appears in the 24 September, 2010 issue of Forbes India. To visit our Archives, click here.)

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  • Kojo Bonti Amoako

    Very Very Interesting story ...

    on Jun 3, 2011
  • Sudhakar

    It is time Indian corporates at both sides of the table take note of some plain and simple facts - 1) Indian Ad Agencies should grow up and develop internal talents to face the onslaught of International Ad Agencies which grow day by day by gobbling up other Agencies. 2) Companies like Airtel need to look inside and outside a) inside - how many marketing managers have changed and how has an agency behaved with these changes b) outside - what is the surety that tomorrow Sorrell will not hive off and sell JWT at a price which is profitable for him - if this happens, then Airtel will be back at square one to deal with a new management. It is time both Airtel and Rediffussion grow up and behave like mature adults and have long term vision.

    on Sep 27, 2010