It’s no secret that ad agency groups are having a hard time: It’s a world where clients expect more efficient marketing, squeeze their agencies on fees and are even setting up their own internal marketing teams.
Ad giant Publicis posted poor third-quarter results in October and while Interpublic upped its third-quarter profit, U.S. sales were down. American media giant Omnicom fell short of Wall Street quarterly estimates.
One way that agency groups think they can win the battle for marketers’ money is by placing a renewed focus on the most imaginative and memorable ad campaigns, especially when many consumers are expressing frustration with advertising, particularly online. Gaining a reputation for being creative is also a way for ad groups to charge more.
When WPP-owned agency Grey Europe needed a new chief executive, it moved its Latin American chief executive Eduardo Maruri over to London in December 2018. He had previously turned around his own Ecuador-based agency, Maruri Publicidad, winning the country’s first award at the prestigious Cannes Lions event in 2012.
One of the first things Maruri did at Grey was bring the group’s creative heads together. “I said, this is very simple business … I made an analogy: if you are an actor, and you’re a famous actor because you do good work and you win Oscars and Baftas, you get more calls, people will call you and you can charge more.”
Since then he’s hired Javier Campopiano, the ad exec behind “It’s a Tide Ad,” the award-winning campaign for Procter & Gamble’s flagship detergent brand, as chief creative officer of Grey Europe. The company has also poached high-profile creative teams from rival agencies, although last month Grey London’s Creative Chairman Adrian Rossi stepped down from his role after less than a year.
Procter & Gamble has one of the world’s largest ad budgets and works with Grey Europe on commercials for its Gillette, Braun and Herbal Essences brands — Grey was behind Gillette’s much discussed “The best men can be” commercial.
In 2018, Procter & Gamble’s Chief Brand Officer Marc Pritchard criticized agencies for wasting time and money on “excess management, buildings and overhead.”
Maruri believes the observations have merit.
“I think we need people like Pritchard. He said something that I always remember, he said: ‘Your complexity is not our problem.’ It’s true. I think sometimes we have created these structures, complex structures around the clients, which they have to pay for and then not necessarily every single part of the structure is adding value.”
Maruri had more to bring to Grey than imagination, having done two things that are not on an ad exec’s regular path: managed Ecuador’s popular Barcelona Sporting Club soccer team and been a politician who considered running for the country’s president.
In 2004, Maruri was elected as the youngest president of the Chamber of Commerce for the Ecuadorian city of Guayaquil. In April that year, he was part of a group of opposition delegates who met to discuss taking action against Ecuador’s corrupt president, Lucio Gutierrez. Maruri described a situation in which gunshots were fired outside the presidential palace as vice-president Alfredo Palacio was being held by the military.
After a campaign led by Guayaquil’s mayor, Palacio was eventually released and became president. By the time his term ended in 2007, Maruri had gained popularity and considered running for the presidency himself but realized he ultimately didn’t have enough congressional or military support.
Maruri thanks his time in politics for helping him in business. “I think (I learnt) … a little bit of both freshness and trying to separate myself from the rest … how do you make yourself different. It’s all about relevance,” Maruri told CNBC. He’s taken that experience to Grey, he said. “I try to be different because I bring more creative ambition.”
Instead of running for president of Ecuador, he took over the management of Guayaquil-based soccer team Barcelona SC, historically the country’s most successful club. But in 2007, it was in the doldrums, not having won a national title for a decade. Maruri was president of the team for four years but was unable to turn the club’s fortunes around. Such were the passions of Barcelona’s fans that his family received death threats, and in 2010 he resigned.
“Sports is a bit of a trap in the sense that it is something that’s not up to you, it’s a game. So, the ball goes in or it doesn’t go in. If it goes in, you’re a hero, if it doesn’t, you’re not a hero,” he said.
“Politics could be also very deceiving in a way that makes you think you are this powerful person … And then when I went to Barcelona, it was a very humbling experience to learn … about failure in a big way.”
After leaving the soccer team, Maruri went back to advertising, taking an executive MBA at the Berlin School of Creative Leadership to kickstart his own ad agency.
Now Maruri’s challenge is to help Grey adapt to a world where clients are more inclined to pay for work on a campaign-by-campaign basis. “I think in five years we’ll think about it and we’ll say: ‘Remember we had this client who paid … these fees for endless work?’ No, there’s this project… so the agencies have to evolve and the agencies that can evolve faster and better are the ones who will survive.”
A younger workforce may be happy to work on a more flexible basis, while creative department heads will be the “rocks,” Maruri said.
“When I was at the Chamber of Commerce, I said: ‘I want to take some measurements that may not be popular for everyone, but they are good for the people that I represent, my constituents’ … It’s the same (here). I do what I think is best. I’m not thinking, maybe this is good for (the) holding company. So, not being afraid … You take the fear factor out of it and just do things.”
Boeing’s 777X, largest-ever twin-engine jet, completes maiden flight
A Boeing 777X airliner lifts off for its first flight at Paine Field on January 25, 2020 in Everett, Washington.
Boeing‘s 777X, a new generation of the wide-body aircraft, completed its maiden flight on Saturday — marking a milestone for the company struggling through the increasing fallout from two fatal crashes of its best-selling 737 Max. Bad weather postponed an attempt at the first flight on Thursday and again on Friday.
The first flight, which took off from Everett, Washington and landed about four hours later at Seattle’s Boeing Field is part of testing that will occur throughout the year as the company works toward winning regulatory approval. That process promises receive more scrutiny after the two crashes of the 737 Max.
Boeing’s 737 Max single-aisle jetliners have been grounded since March after the second of two crashes, which together killed 346 people. The crisis hurt its reputation and has deepened in recent months, with the release of internal emails revealing employees boasted about convincing regulators and airlines to approve the 737 Max without costly simulator training and others expressing safety concerns. Earlier this month Boeing suspended production of the planes, a move that has rippled through its supply chain, costing close to 3,000 jobs at one manufacturer.
In remarks after the 777X landed, Stan Deal, who now leads Boeing’s important commercial airplane business after his predecessor was ousted in the Max crisis last year, thanked the company’s employees and said: “I want them to know we have your back.”
Deal said the company is trying to regain the public’s confidence and that putting a plane like the 777X “through its paces” shows the world “we know what we’re doing” and that it knows how to design safe airplanes.
Boeing had aimed to first fly the 777X, a plane it launched at the 2013 Dubai Air Show, last year but the company faced delays because of snags with the General Electric GE9X engines, the largest aircraft engine in the world. The diameter of the engine fan is 11 feet, a foot wider than a NBA basketball hoop is high off the ground.
The plane is the largest twin-engine jet ever built and has a wingspan so wide — more than 235 feet — it features folding wingtips that reduce that width by more than 20 feet so the plane can fit into various airport taxiways and gates. The 777X-9 is slightly longer than Boeing’s most iconic plane: the hump-backed 747, which is fading away as airlines opt for twin-engine aircraft that require less fuel.
The 777X, an updated version of the 777 that first flew commercially in 1995, faces its own challenges. Orders for wide-body jets have slowed and several airlines have signed up for rival Airbus’ long-range single-aisle A321XLR planes. The 777X, which lists for $422.2 million although airlines usually receive discounts, can fit up to 426 passengers in a two-class configuration. Boeing had 344 firm orders for the 777X at the end of the third quarter, according to a company filing, and Emirates is its biggest single customer.
‘It is our responsibility to prevent and control it’
Health care members make first aid to people as they cover their faces with sanitary masks after the first cases of coronavirus have been confirmed in Hong Kong.
Miguel Candela | Getty Images
President Xi Jinping on Saturday warned that the spread of the coronavirus presents a “grave situation,” as officials from central China to Hong Kong struggle to stop the spread of the disease that has so far infected more than 1,400 people worldwide and killed 42.
“Life is of paramount importance. When an epidemic breaks out, a command is issued. It is our responsibility to prevent and control it,” Xi said at a meeting of the leaders of the Communist Party of China, according to state-run outlet Xinhua News Agency.
The party meeting, chaired by Xi, set up a central committee to oversee work to contain the virus, according to Xinhua. Groups will be sent to Hubei province, the center of the outbreak, to work directly on the ground. Xi ordered all levels of government to “put people’s life and health as top priority,” according to Xinhua.
China has already quarantined multiple cities, encompassing about 35 million people, to try to contain the spread of the virus.
Hong Kong has declared a citywide emergency, closing primary and secondary schools for several weeks and halting flights and trains between Hong Kong and the Chinese city of Wuhan, where the disease was first detected.
U.S. companies like Ford, General Motors and Fiat have started restricting employee travel to Wuhan, and French automaker PSA group said it plans to evacuate its employees and their families from the locked-down city. The State Department also plans to evacuate Wuhan consulate employees.
Cases have also been confirmed in Australia, Malaysia, France and the U.S. The World Health Organization has declined to declare the virus a global health emergency as of yet, but said the virus is spreading from human-to-human contact.
Most of the deaths have been in older patients, although a 36-year-old man died this week. Officials also said a 2-year-old girl has been infected.
Resources and experts will be located at designated hospitals, and supplies of materials to the Hubei province and Wuhan will be guaranteed, state television reported.
US-UK deal a priority for Trump, but food and health concerns remain
U.S. President Donald Trump and Britain’s Prime Minister Boris Johnson arrive for a bilateral meeting during the G7 summit on August 25, 2019 in Biarritz, France.
Stefan Rousseau | Pool | Getty Images
With the China “phase one” deal and the United States-Mexico-Canada Agreement signed, the Trump trade team is now turning its attention to a deal with post-Brexit U.K. and the ongoing stalemate at the World Trade Organization.
Questions also remain over the direction of trade discussions between the U.S. and the European Union as the American trade front shifts to targets across the Atlantic. President Donald Trump highlighted the less-than-rosy relations earlier this week from the World Economic Forum in Davos, Switzerland.
Trump said that the European bloc has been “very tough to deal with” and had “taken advantage” of the U.S., but said the EU has “no choice” but to make a deal.
But separate and apart from the tricky talks between the Office of the United States Trade Representative, the EU and the WTO, many investors expect the U.S. to prioritize bilateral talks with the U.K.
At first, it might be tempting to believe the U.S. and U.K. could whisk through a comprehensive deal in contrast to the months of strenuous debate and tariff tit for tat with China. The two nations have for decades defended each other’s interests, whether across military theaters in the Middle East or through generous trade dialogue.
But trade officials on both sides are starting to warn that there may be a few hurdles preventing London and Washington from sailing straight into a photo op.
Formal talks between London and Washington cannot begin until after Britain leaves the EU later this month, but some of the sticking points are already clear. And there’s perhaps no greater barrier to an easy deal between London and Washington if U.S. negotiators insist on greater access to Britain’s National Health Service.
Considered a crown jewel of the U.K., the NHS provides free public health care at the point of use and, as such, holds a place of utmost importance to both the Conservative and Labour Parties.
Though Prime Minister Boris Johnson has repeatedly said the NHS “is not for sale,” comments from Trump last year that the program would be part of a “magnificent” deal scared some in the U.K.
Their angst is that granting outside pharmaceutical companies greater access to health-care contracts could lead the private sector to squeeze even more profit out of the already-cash-strapped program.
“If bipartisan translates over to the U.K., there’s at least a rough bipartisan consensus that the NHS is sort of a national treasure of the U.K. even if Tories might think that there is room for improvement,” said Anthony Rapa, a trade attorney at Kirkland & Ellis.
A second hurdle to a U.S.-U.K. deal is Britain’s commitment to EU food safety standards.
Some of the EU rules most popular among U.K. politicians are those pertaining to food safety. The U.K. has promised in particular to resist U.S. calls for London to purchase its exports of certain farm products. For years, the EU has blocked members from importing U.S. hormone-treated beef and chicken washed with chlorinated water to kill bacteria.
And while meat treated with chlorine washes is deemed safe by the U.S. government, many U.K. officials remain unconvinced. London’s Environment Secretary Theresa Villiers, for example, told the BBC earlier this month that “there are legal barriers to the imports and those are going to stay in place.”
That could pose a headache to U.S. Trade Representative Robert Lighthizer, who will represent both one of the world’s largest exporters of agricultural goods as well as a president who’s eager to notch another deal ahead of the 2020 election.
For Lighthizer, Congress, and Trump, striking a comprehensive deal with the U.K. devoid of the “phases” that now mar discussion with China would be welcome relief both as a matter of logistics and of optics. In the aftermath of Johnson’s election victory last month, Trump offered his congratulations and hopes for a “massive” deal.
“Britain and the United States will now be free to strike a massive new trade deal after Brexit,” Trump said. “This deal has the potential to be far bigger and more lucrative than any deal that could be made with the E.U. Celebrate Boris!”
The National Farmers Union (NFU) believes there are “justifiable fears,” both inside and outside the farming community that, after leaving the European Union, Britain could allow the import of food produced to lower standards.
John Taggart | Bloomberg | Getty Images
The stricter food safety standards imposed by the EU are evident in recent U.S. export data to the U.K. Though the U.K. was the United States’ fifth-largest goods export market in 2018, agricultural purchases were a fraction of the total.
U.S. goods exports to the U.K. in 2018 were $66.3 billion, with aircraft ($12 billion) and precious metals and stone ($8.5 billion) the leading components. Total exports of all agricultural products to the U.K. in 2018 were worth just $2 billion, with $261 million of wine and beer, $197 million of tree nuts and $109 million of soybeans.
But to Kirkland lawyer Rapa, Britain may be flexible on food safety issues and instead opt to use its stated position to stand by the EU standards as a sort-of bargaining chip in discussions with Washington.
Something similar could be said of London’s threats to impose digital taxes against U.S. tech giants, he said, as the U.K. looks to extract the most it can from the EU and Washington.
“The U.K. seems to be sort of pivoting back and forth. Maybe as of a week ago or so, the reporting was that the U.K. was going to prioritize a U.S. trade deal as a way of gaining leverage with the EU. But then remarks that they made just, as of this morning, were that they’re now prioritizing the EU over a US trade deal,” Rapa said.
“On some level, it’s probably kind-of ‘Art of the Deal,'” he added.
U.S. discussions with the EU have yet to find resolution, either.
Trump’s recent trip to Davos showed the president’s characteristic negotiating style. While the president noted his “great talk” with European Commission President Ursula von der Leyen, he quickly pivoted to threaten to levy huge tariffs on European cars.
“They’ve taken advantage of our country, the European Union, for many, many years,” Trump told CNBC’s Joe Kernen on Wednesday. “But I said, look, if we don’t get something, I’m going to have to take action, and the action will be very high tariffs on their cars and other things that come into our country.”
“Now, saying that, I don’t want your audience to get nervous,” the president cautioned. “They’re going to make a deal, because they have to. They have to. They have no choice.”
Despite Trump’s conviction of Europe’s desperation, multiple EU member states have in recent months threatened, if not imposed, digital services taxes on some of the largest U.S. tech conglomerates. French lawmakers in July approved a new tax on large tech companies like Alphabet and Amazon, sparking outrage from the White House.
“France just put a digital tax on our great American technology companies. If anybody taxes them, it should be their home Country, the USA,” Trump tweeted on July 26.
“We will announce a substantial reciprocal action on Macron’s foolishness shortly,” he promised. “I’ve always said American wine is better than French wine!”
Though Trump and Macron appeared to reach an agreement to postpone those levies this week, the current threat of auto tariffs looms large for Wall Street on top of the billions of dollars’ worth of duties already imposed.
“President Trump’s desire for more trade wins is going to continue to bump up against the EU’s unwillingness to put agriculture on the table,” wrote Bruce Hirsh, principal with Tailwind Global Strategies.
Hirsh, whose previous work includes time as chief international trade counsel on the Senate Finance Committee and deputy assistant USTR for WTO and Multilateral Affairs, added that the EU may try to appease Trump with a flurry of incremental deals but ultimately stick by its food safety rules.
“The EU appears to be trying to appeal to Trump’s willingness to settle for quick, small deals by dangling a small regulatory package with a trace of agriculture, but that may not be enough for farmers,” he wrote. “Plenty could still go wrong with the Airbus dispute and autos, but the truce over the digital services tax shows the administration is interested in calming the trade waters before the U.S. election.”
The Trump administration has already imposed tariffs on billions of dollars’ worth of European products.
The USTR earlier this year published multiple lists of European goods worth more than $10 billion that it had hoped to target amid its high-profile dispute with Airbus. In October, Washington moved ahead and imposed tariffs of 10% on large civil aircraft and 25% on agricultural goods from Europe.
That round of sanctions targeted emblematic goods such as French wine and Italian cheese.
Later, CNBC first reported in December that the USTR was weighing tariffs of up to 100% on European products the administration had previously absolved from such duties, including Irish and Scotch whiskies and Cognac.
President Donald Trump, with (L-R) Vice President Mike Pence, Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer, speaks during a press conference with Chinas Vice Premier Liu He(not shown), the countrys top trade negotiator, before they sign a trade agreement between the US and China during a ceremony in the East Room of the White House in Washington, DC on January 15, 2020.
Mandel Ngan | Getty Images
“Trump also weighed the threat of auto tariffs…again. We continue to believe that despite a temporary truce, subsidies and the DST will remain real issues — and useful rationales for tariffs,” wrote Cowen analyst Chris Krueger. “As tariffs halt on the edges of the Pacific, the Atlantic theater is set to escalate — with aviation, consumer goods, agriculture, Big Tech, and energy in the crosshairs.”
But tariffs between the U.S. and the EU aren’t new to the Trump administration, which in 2018 announced tariffs of 25% on steel and 10% on aluminum imported into the States. The EU responded in kind with tariffs targeting more than $3 billion worth of U.S. goods including bourbon, yachts and motorcycles.
World Trade Organization
The U.S. also remains at odds at the WTO, where its efforts in Geneva have rendered the trade regulator’s highest court impotent. Lighthizer and his staff hope to remedy what they view as judicial overreach by the Geneva court, including rulings that limited the U.S.’s ability to protect its domestic manufacturers from imports.
“For far too long, wealthy countries have abused the WTO by exempting themselves from its rules through the use of special and differential treatment,” Lighthizer, a longtime lawyer for the steel industry, said in July.
“This unfairness disadvantages American who play by the rules, undermines negotiations at the WTO, and creates an unlevel playing field,” he added. “I applaud the President’s leadership in demanding fairness and accountability at the WTO, and I look forward to implementing the President’s directive.”
But those within the Beltway also say the battle at the WTO includes U.S. angst about the rapid rise of rivals like China that take advantage of preferential and outdated trade rules.
Top American trade officials argue they’re justified in their efforts to block the appointment of WTO judges and cripple the trade organization until it evolves to start addressing China’s market-distorting capitalism.
The American coalition wants to counter Beijing’s practice of “dumping” — whereby one state sells goods in the U.S. below cost — that has fanned the entrenched feud.
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