NEW DELHI, December 28
In the face of it, it's a pretty innocuous development.
Korean consumer electronics giant Samsung has reorganized its product portfolio between its two agencies, Mudra Communications and Triton Communications. The result? Mudra has lost Samsung's washing machine and microwave oven accounts to Triton, although it has managed to retain the refrigerator and colour monitor accounts. For its part, Triton has retained the air-conditioner and cellular phone accounts, but has had to forfeit Samsung's CTV, DVD player and laser printer accounts to Mudra.
Yes, pretty innocuous. Both agencies are more or less happy, with no new agency in Samsung's roster nibbling at the pie. Except that Mudra has been awarded the CTV and DVD player account.
The speculation mill has been working overtime ever since Dutch major Philips NV announced that it was parting ways with its global agency Euro RSCG in favour of DDB Needham (for consumer electronics, semi-conductors and components) and D'Arcy Masius Benton and Bowles (for home appliances, lighting and medical systems). In India, Mudra, which is DDB's partner, stands to get the bulk of the Philips business, while Ambience D'Arcy will get the rest. Internationally, the new alignment comes into effect on June 20, 2001.
Hypothetically speaking, for Mudra, the ideal thing would have been status quo ante. That is, it continued handling Samsung's white goods accounts, with Triton servicing the CTV and DVD player account. That way, by acquiring Philips - which is not into whites - Mudra would have been in a win-win situation.
Which is not to be. So what are the options open to Mudra?
A look at the size of the two conflicting accounts suggests that making a choice shouldn't be too much of a problem for Mudra. Rough estimates put the Samsung business that Mudra handles at Rs 45 crore - of which CTVs and DVD players account for approximately Rs 25 crore. The Philips account, in contrast, is valued at Rs 60-70 crore.
Then there is the issue of Samsung's penchant for keeping its agencies on tenterhooks by constantly calling for pitches. "One can never be too sure with Samsung," says an industry source. "You might be fiercely loyal [to Samsung] but that wouldn't prevent it from showing you the door."
The general opinion is that the 'safe' route for Mudra is to go with Philips. "An international alignment is always dicey," points out one industry veteran, "but considering that DDB has just won it, Mudra will be secure with Philips for a longer period." Interestingly, FCB is Samsung's agency in the US and Europe, and unconfirmed reports insist that FCB-Ulka has been trying to elbow into Samsung India's roster.
So Philips it will be? Not so fast. A fact not known to many is that all is not hunky-dory between DDB and Mudra. DDB has been trying to up its stake in Mudra from the current 10 per cent for quite some time now, but it's just not happening. Not because Mudra is not selling, but because DDB finds Mudra's terms quite unacceptable. So much so that not long ago, DDB was actively looking for another partner in India.
"This is a fantastic opportunity for Mudra to tighten the screws on DDB," says one senior executive. "DDB desperately needs a presence in India to service Philips." He is of the opinion that if Mudra plays hardball it can come up trumps. "If Mudra embraces Philips without ado, it would only amount to cementing its relationship with DDB, which can then dictate terms."
But DDB isn't wet behind the ears either. If pushed into a corner, DDB might just junk Mudra and decide to either acquire another agency or set up shop all by itself. And DDB has a full six months to do it. Unlike, say, a Nestle, that demands full infrastructure before handing over an account, Philips is open to its agency setting up greenfield operations. Euro RSCG started in India that way.
Strangely, with so much happening, no one seems to be sparing a thought for Euro. The agency, which closed 1999-2000 with billings of Rs 152 crore, will see its size slashed by almost half. And things could turn ugly, unless it pitches and wins new accounts in large numbers.
One more point. The Samsung-Philips developments are likely to have put a premature end to the budding relationship between Mudra and Videocon International. Mudra, which won Videocon's Internet TV account in October, will now have to resign the account, paving the way for fresh pitches.
All said and done, a clearer picture should emerge in a short while. But not before a fair share of backroom politics gets enacted many times over.
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