WPP knocked for six as Unilever signals it will row back on advertising spend
WPP has taken a hit after one of its biggest clients, Unilever, announced that it would be rowing back on marketing spend with the advertising giant -sparking fears that an industry-wide slowdown could be on the cards.
The consumer goods behemoth, which makes everything from Lynx butter to Dove soap, revealed that it would slash advertising output by 30% in a bid to reign in costs, with inevitable repercussions for one of its largest agency suppliers, WPP.
News of the cutbacks sent WPP stock falling 4.4% as investors digested the news, heightening fears that a slow start to 2017 augers ill for the world’s largest advertising firm.
According to financial news provider Bloomberg, Unilever accounts for 3% of WPP’s revenue with attention now inevitably turning to which customers might be next in line to reduce costs in the face of slower growth.
Unilever also announced that it would slash the number of creative agencies it employs by half, a move which could paradoxically benefit big fish such as WPP, while flogging off its margarine spreads business -which includes the Flora and Stork brands.
This follows in the wake of a failed takeover by Kraft which has focused minds at the FMCG business on the need to safeguard its independence from hostile takeover bids.
UnIlever's streamlined advertising strategy chimes with comments made by P&G's Marc Pritchard last week, in which he called for advertisers to consolidate and simplify their output.